The Southeast Asia (SEA) region is home to some of the world’s fastest growing economies. Between 2022 and 2024, Indonesia, Malaysia, Thailand, the Philippines and Vietnam have recorded an average real gross domestic product (GDP) growth rate of 5.3 per cent. With growing GDP, energy demand in these countries is expected to rise by 41 per cent by 2030. Driven by rising demand and growing focus on clean energy, the region’s renewable energy capacity is expected to expand three to five times by 2035. Against this backdrop, the investment required to meet energy transition goals is significant. The ASEAN countries had set a target of achieving a 23 per cent share of renewable energy by 2025; however, they are projected to fall short, reaching only around 19-20 per cent by then. According to industry reports, meeting this target would have required annual investments of $27 billion, more than what the region has received. To bridge this investment gap, bilateral funding from key investment partners in the region, including China, Japan, South Korea and Australia, remains critical.
Mapping the progress in bilateral investment
Hydropower, geothermal, wind and solar are the primary segments attracting the bulk of bilateral investments in the region. Among the four key investing countries, China led clean energy investments, reaching a total investment of $2.7 billion between 2013 and 2023. Japan followed at approximately $2.45 billion, while South Korea and Australia recorded $583 million and $51 million respectively. On the recipient side, Indonesia attracted the highest share at around $3.54 billion, followed by Thailand at $1.3 billion, Vietnam at $694 million, the Philippines at $180 million and Malaysia at $73 million.
The hydropower sector attracted the highest investment at around $2.3 billion, followed by geothermal at $1.6 billion, wind energy at $1.4 billion, solar at $267 million, and others, including hydrogen, tidal generation, transmission, etc., at $243 million, Japan has led investment in the geothermal and solar sectors with an investment of around $1.3 billion and $142 million respectively. China led in wind and hydropower investments at $1.28 billion and $1.1 billion respectively.
While significant bilateral investment has been made over the past decade, there remains substantial scope to further boost investment in the region, particularly in the solar sector, which has continued to lag behind compared to the traction that other technologies have received. Despite the falling global costs of solar technology and the region’s high solar potential, much of it remains untapped. Declining costs, ranging from 55 to 81 per cent for solar and 35 to 53 per cent for wind between 2012 and 2024, present attractive opportunities for investors as well as for diversifying the region’s renewable energy mix.
Region-wise initiatives launched by investor countries
Vietnam
Vietnam has emerged as a major recipient of bilateral investment in clean energy, receiving the largest share of energy financing under Belt and Road Initiative (BRI) at around $975 million from China in 2024. All of China’s BRI investment was directed into wind, solar, waste-to-energy and transmission projects. Alongside, Japan is supporting Vietnam’s energy transition through the Just Energy Transition Partnership (JETP), a G7-led initiative to retire coal plants and expand renewables. South Korea is supporting Vietnam’s wind sector. For instance, Korea’s export credit agency (K-SURE) is financing a $100 million wind-tower manufacturing plant in Vietnam. Australia has also committed AUD 105 million ($68 million) for clean energy infrastructure in Vietnam to support sustainable economic development.
Indonesia
Indonesia has attracted the highest level of bilateral clean energy investment in SEA. In 2024, China has been a leading investor, with an investment of around $404 million in clean energy financing to Indonesia under the BRI while Japan is co-leading Indonesia’s $20 billion JETP, taking a leadership role following the US withdrawal in March 2025. Japan also supports coal plant retirement under the energy transition mechanism (ETM). Australia has committed AUD 200 million ($129 million) over a five-year period (2022-27) to promote energy transition, comprising AUD 50 million for clean energy-focused small and medium enterprises (SMEs), AUD 50 million to enhance project viability for public-private partnerships, and AUD 100 million to support sustainable finance and technical assistance.
Thailand
Under the BRI, China has made an approximately $89 million investment in Thailand’s renewable energy sector in 2024. Through the BRI-backed Mekong-Lancang cooperation framework, China partners with Thailand on clean power transmission lines, solar-powered wells and electric vehicle (EV) infrastructure. Japan has also engaged via its Asia Zero Emissions Community (AZEC) programme, under which Japan supports Thailand to build microgrids in the country’s northern region. South Korea’s contribution includes smart grid upgrades, with Korean firms involved in installing advanced grid systems in Thailand.
Philippines
The Philippines is attracting bilateral clean energy projects as it transitions away from coal. In 2024, it was the third-largest recipient of China’s BRI clean energy financing at $273.8 million. As of December 2024, the Chinese firm Power China partnered with Manila Electric Company for the development of SEA’s largest (1,050 MW) solar project in Manila. Japan is also partnering through AZEC and other schemes to promote clean energy. Under one of the initial AZEC agreements signed in January 2023, Shizen Energy and Ganubis Renewable Energy signed an agreement to develop 96 MW of onshore wind power, one of the largest onshore wind farms in SEA, in the Philippines.
Malaysia
Malaysia is leveraging international partnerships to develop its clean energy sector. Japan is planning advanced clean fuels sourcing from Malaysia. Under the AZEC initiative, Sumitomo Corporation is partnering with the Sarawak state government to produce green hydrogen for export to Japan. South Korea’s engagement includes clean-technology supply chains, with South Korea being the largest exporter of EV battery components to Malaysia. It also supports development via aid such as Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area – Republic of Korea Cooperation (BIMP-EAGA-ROK) fund for projects addressing water loss management.
To sum up
Despite growing investment momentum, SEA’s clean energy transition continues to face a considerable investment gap. While bilateral funding, particularly from China, Japan, South Korea and Australia, has played a critical role, the region still falls short of its renewable energy targets. China remains a dominant player, contributing over $1.8 billion under the BRI in 2024 alone. However, with solar attracting only a fraction of total investment despite its vast potential and sharply declining costs, a strategic shift is needed. Going forward, bilateral funding partners must prioritise equitable distribution across technologies and geographies. Meeting ASEAN’s energy transition goals will critically depend on how effectively future bilateral investments are aligned with the region’s requirement and national policy frameworks to attract investment from international investors. Furthermore, geo-political stability in the region to attract this investment will remain a critical factor, as Thailand and Cambodia enter into military conflict.
This article is an extract from a report titled, “The race to invest in Southeast Asia’s green economy” by Zero Carbon Analytics.
