The transition to renewable energy (RE) is gaining momentum across Southeast Asia (SEA), with the region’s rising energy demand, climate change concerns and the potential for economic growth. SEA countries are increasingly focusing on reducing dependence on fossil fuels and diversifying their energy portfolios through significant investments in RE. Southeast Asia’s Energy Transition: Policy and Deployment report by the Southeast Asia Public Policy Institute examines the energy mix of a few SEA countries, viz. Vietnam, Thailand, Indonesia and the Philippines, and the evolution of their RE deployment since the early 2000s. It highlights the key policy shifts that have catalysed solar and wind capacity development and supported the region’s broader energy transition. It also discusses the future RE growth potential in these nations and the necessary steps required to achieve it. This analysis is informed by data from the International Energy Agency, supplemented by findings from various research studies.
Vietnam: Solar and wind capacity development
Vietnam has emerged as a regional leader in RE, consistently outperforming other SEA countries in terms of annual RE capacity additions. The current forecasts suggest that this position will be sustained through 2030, both in terms of net annual additions and total installed capacity. Although the pace of Vietnam’s RE capacity expansion has moderated since 2022, annual additions remain well above the regional average. The growth is expected to accelerate again from 2025 onward.
The trajectory of RE development in Vietnam has been marked by two significant surges in capacity expansion. The first occurred in 2012, which was largely driven by major hydropower developments, including the commissioning of SEA’s largest hydropower facility at the Son La Dam. The second wave was catalysed by large-scale investments in solar power between 2019 and 2021. It spanned across both distributed photovoltaic (PV) systems and utility-scale projects. The government’s feed-in tariff (FiT) schemes for solar and onshore wind, introduced between 2017 and 2020, were instrumental in this growth. It propelled installed solar capacity from zero to 6.5 GW in 2019 and over 12 GW of utility-scale solar had been brought online by 2021. This rapid solar roll-out transformed Vietnam’s renewable output massively, from 997 GWh in 2018 to nearly 37,865 GWh by 2022. Similarly, wind power has also gained momentum, with combined onshore and offshore capacity jumping from 0.6 GW in 2020 to 3.9 GW in 2021.
The key policy enablers in this growth included favourable net metering arrangements, corporate income tax exemptions for the initial project years and land lease payment waivers. Simultaneously, delays in traditional coal and thermal power projects amid rising electricity demand have also pushed the government to prioritise renewables as a critical component of energy security.
However, Vietnam’s rapid RE expansion faces several infrastructure and grid management challenges. The surge in solar installations, particularly rooftop and utility-scale projects, has outpaced the capacity of the national transmission grid, leading to regional imbalances. While some provinces face an electricity surplus, others continue to experience shortage due to limited inter-regional transmission capacity. This is especially true of the power-generating regions in the Central and South Vietnam, and high demand areas in North Vietnam.
Capacity addition projections
The wind energy sector in Vietnam is expected to witness significant long-term growth, supported by favourable geographic conditions, a maturing investment environment and growing demand for clean energy. However, realising this potential, particularly in offshore wind, will require decisive regulatory reforms and enhanced investor support.
Currently, Vietnam hosts an impressive pipeline of proposed wind projects totalling 156 GW, far surpassing the government’s official target of 6 GW for offshore wind capacity by 2030. This discrepancy highlights the country’s immense untapped potential and investor appetite, as well as the urgent need for enabling frameworks to translate proposals into operational assets.
Vietnam’s progress to date has been driven by the early adoption of competitive FiTs, which catalysed both solar and wind development. As a result, the country now accounts for approximately 69 per cent of SEA’s combined solar and wind power generation. Strong fundamentals such as domestic financing efforts, foreign investment inflows and a skilled labour base support Vietnam’s positioning as a regional leader in renewables.
However, the rapid early growth in RE capacity also exposed gaps in planning and infrastructure. The lack of a coordinated roll-out strategy led to grid congestion and curtailment, particularly as solar and wind projects rushed to meet FiT deadlines. Many developers, often with limited experience in RE, faced operational delays. In line with this, 62 wind projects missed commissioning deadlines during the COVID-19 pandemic, forfeiting FiT eligibility.
Going forward, offshore wind, despite its strategic importance, faces considerable headwinds. Regulatory ambiguity, opaque pricing frameworks and the lack of developer incentives have stalled project progress. With an estimated development timeline of six to eight years, Vietnam’s first operational offshore wind project may not materialise until 2032. As the government pivots towards onshore wind and other RE sectors, project viability will increasingly hinge on supportive legislation and robust infrastructure investment.
Moreover, the funding requirements are significant. Vietnam will need approximately $134.7 billion to expand power generation and grid infrastructure, a portion of which is expected to come from international investors. To mobilise this capital, the government must enhance policy certainty and streamline administrative processes.
In this direction, the recent developments indicate a willingness to reform. In a landmark policy shift, the government enacted a decree in July 2024 enabling large corporations to directly purchase electricity from renewable generators through direct power purchase agreements, a move expected to boost investor confidence and corporate renewable uptake. Despite these advancements, sustained growth in onshore wind will depend on broader structural reforms.
Thailand: Transition from bioenergy to solar
Thailand experienced steady growth in RE capacity between 2012 and 2018. It can be attributed to simultaneous advancements in bioenergy, utility-scale PV systems and onshore wind. Among these, bioenergy, particularly biomass, has played a dominant role. It represents nearly one-third of the country’s RE mix. There has been consistent growth in the use of biomass since 2000, and this trend is expected to continue at least till 2028.
The commitment to bioenergy in Thailand is also reinforced by several policy frameworks. The country’s inaugural National Alternative Energy Development Plan (2004-2011), the 2005 biodiesel promotion campaign and the 2008 mandate on B2 biodiesel production laid the foundation for sustained bioenergy deployment. Additionally, the establishment of the Committee on Biofuel Development and Promotion was a strategic move to boost domestic palm oil production and strengthen biofuel supply chains. The second phase of the Alternative Energy Development Plan (2008-2022) also intensified this momentum, introducing a suite of fiscal incentives, including tax breaks and subsidies targeting ethanol producers, gasohol refineries and automotive manufacturers.
In parallel, Thailand’s solar energy industry began gaining significant traction in 2012. It added over 2.5 GW of utility-scale PV capacity between 2012 and 2017. Similarly, the onshore wind capacity has expanded by 1.5 GW between 2014 and 2019. This growth has been supported by a mix of policy mechanisms, including favourable power purchase agreements, tax incentives and financing through clean energy development funds. Similarly, introducing Thailand’s “Adder” scheme, an FiT initiative active from 2006 to 2010, helped catalyse early PV market development.
The Philippines: Regulatory landscape supporting solar and wind capacity growth
ASEAN’s solar and wind capacity increased by 20 per cent in 2023, reaching over 28 GW and accounting for approximately 9 per cent of the region’s total electricity generation capacity. Amid this momentum, the Philippines is emerging as a front runner in future RE development, particularly in solar and wind.
The Philippines is rapidly closing the gap with regional leaders, Vietnam and Thailand. It is currently ranked third in ASEAN for operational utility-scale solar and wind capacity, with 3 GW in each segment. Of the 222 GW in planned, pre-construction, and under-construction utility-scale RE capacity across ASEAN, over 185 GW (approximately 80 per cent) is concentrated in the Philippines and Vietnam, highlighting the two nations’ pivotal roles in shaping the region’s clean energy future.
The Philippines’ growth can be attributed to a series of progressive regulatory and investment reforms. In contrast to other ASEAN markets, the country has liberalised foreign ownership in the renewables sector, enabling increased capital inflows. It has also enacted policies that encourage private sector participation in power generation, unlike countries such as Vietnam, where national utilities play a central role. Its key enabling policies include the following:
l The Renewable Energy Act of 2008, which introduced a robust incentive structure for clean energy investments.
l The establishment of “Green Lanes”, designed to streamline licensing and permitting processes for strategic sustainability projects.
l The forthcoming Blue Economy Act, which aims to simplify approval procedures for offshore wind development and provide additional tax benefits for marine energy projects.
l The Green Energy Auction Programme (GEAP), which facilitates competitive bidding to attract investors into the RE space.
In terms of offshore wind, the Department of Energy (DOE) has already awarded wind energy service contracts amounting to over 20 GW in potential capacity. This signals a strategic pivot towards unlocking the country’s offshore wind potential, which remains largely untapped.
To support the integration of these new energy sources, efforts are also under way to improve national grid connectivity. The National Grid Corporation of the Philippines (NGCP) has been investing in infrastructure upgrades, aligning with President Marcos’s vision of a fully interconnected power system linking Luzon, Visayas and Mindanao.
Further reinforcing investor confidence, the DOE has pledged comprehensive support for power plant developers. It is actively coordinating with national government agencies and local government units to fast-track the permitting process and ensure that the PhP 1.29 trillion ($22.8 billion) in energy projects identified by the Board of Investments is advanced to commercial deployment.
Indonesia: Varied energy mix
Unlike the more dynamic growth observed in Thailand and the Philippines, Indonesia’s RE capacity expansion has remained modest but steady. However, the country reflects a strong intent for energy transition since the start of this decade. In its RE mix, hydropower continues to be the main part, accounting for approximately 50 per cent of total RE generation. Unlike many neighbouring countries, Indonesia has maintained consistent growth in this sector and is poised to contribute significantly to future capacity additions. With more than five decades of infrastructure development and vast untapped hydropower potential, especially in remote and underserved regions, the country is well positioned to further leverage this resource.
Besides, bioenergy and geothermal energy also form substantial components of the energy mix, each
projected to reach around 3 GW in installed capacity by 2024. Between 2018 and 2023, Indonesia added a total of 3.3 GW in RE capacity. The key contributors included bioenergy (+1.3 GW), hydropower (+1 GW), solar (+0.5 GW), geothermal (+0.5 GW) and wind (+0.01 GW). However, these gains were overshadowed by a 26 GW increase in fossil fuel capacity over the same period.
Despite this growth, Indonesia’s RE development has been challenged by structural and policy-related issues. Unlike its regional peers, Indonesia is yet to implement a comprehensive set of supportive policies that foster large-scale investment in solar and wind. Although the country possesses considerable potential in both technologies, this remains largely untapped. Further, a major barrier is the dominant role of the state-owned utility, PLN, whose constitutionally enshrined monopoly limits market competition. Due to its constrained financial position, PLN is unable to offer premium pricing or implement FiT mechanisms that have catalysed RE development elsewhere in SEA.
To realise its RE ambitions, Indonesia will need to enact bold policy reforms, strengthen market incentives, and create a more competitive and investor-friendly environment. Without these steps, the country risks falling behind in the regional energy transition.
Future of renewables
Indonesia’s Electricity Supply Business Plan (2021-2030), developed by the state-owned utility PLN, outlines the country’s strategy to achieve its RE targets. The plan prioritises the development of new hydropower, geothermal and biofuel capacities. Despite the growing competitiveness of solar PV in the region, Indonesia’s projections show limited reliance on solar PV due to its relatively higher costs within the country. However, global advancements and cost reductions in solar PV technologies have prompted the government to draft new regulations to incentivise rooftop solar installations.
Despite these strategic ambitions, Indonesia faces significant financial challenges in meeting its 2030 climate goals. The country requires an estimated $285 billion in investments to achieve its RE targets, with private sector investments expected to contribute approximately $146 billion. In 2023, however, investment in RE stagnated, attracting only $1.5 billion.
Meanwhile, Indonesia is progressing with ambitious hydropower projects, albeit with challenges. The country aims to expand its hydropower capacity from 6.6 GW to 10 GW by 2030. This includes the construction of 61 dams by 2025. One flagship project is the Kayan Cascade in North Kalimantan, which, at a cost of $17.8 billion, aims to generate 9 GW of electricity, potentially SEA’s largest hydroelectric project. However, the project has faced setbacks, as Kayan Hydro Energy, the project developer, seeks new partnerships following a stalled agreement with Japan’s Sumitomo Corporation.
It is critical for Indonesia to address policy gaps to stay on track with its RE goals. These include the overlapping regulatory frameworks at national and local levels, which can impede the timely development of RE projects. The new administration must also work to create a more favourable investment climate by enhancing regulatory transparency, offering incentives and relaxing local content requirements.
The way forward
SEA has made notable progress in the expansion of RE capacity, with diverse growth trajectories and challenges across the region. Countries such as Vietnam and the Philippines, an emerging leader, owe much of their success to not only favourable geography and delays in coal and conventional power projects but also strategic policy reforms and an enabling investment climate.
The region’s development underscores the critical role of political will in driving RE growth. While Indonesia has faced setbacks due to insufficient political commitment and a lack of incentives, Vietnam’s proactive approach has enabled significant strides. The Philippines’ recent improvements in its investment framework for clean energy projects, along with potential support from Indonesia’s incoming Prabowo administration, provide optimism for future progress.
The growth potential of traditional energy giants like Indonesia and Thailand will depend largely on addressing existing policy gaps and reducing investment costs. For all countries, ensuring timely investment in grid infrastructure will be crucial to meeting 2030 targets.
Extract from “Southeast Asia’s Energy Transition: Policy and Deployment “report by the Southeast Asia Public Policy Institute.
