Energy Transition in Asia-Pacific: Opportunities in 2025

Тhe energy transition of the countries in the Asia-Pacific region is a story of extremes. While Asia remains home to 82% of the global coal power and has the biggest gas expansion plans, it is also the only region on track with the goal of tripling renewable energy capacity by 2030. 

According to Fitch Ratings, in 2025, the Asia Pacific will account for half of the world’s electricity consumption. The growth in power demand will also be higher than the global average. The majority will be met by renewables, with countries prioritising larger, more complex hybrid and round-the-clock renewable projects. 

However, if the region is to get back on track with a Paris Agreement-aligned energy transition scenario, it would need to demonstrate increased ambition and policy readiness. The NDC updates due in 2025 offer the prime opportunity for this.

China

In October 2024, the government unveiled a new clean energy plan with interim targets for 2025 and 2030. The goals include increasing annual renewables consumption to 1 billion tonnes of standard coal equivalent (SCE) by 2025, a 30% jump from 2023 levels, and 5 billion tonnes of SCE by 2030, another 36% increase from 2025. The focus would be on solar and wind power and investments in grid expansion and modernisation, EVs and emerging green technologies.

The country is on course to reach 1,500 GW of renewables in 2025, surpassing its 2030 target of 1,200 GW. According to experts, China’s CO₂ emissions have already peaked or will do so in 2025. Furthermore, starting in 2026, the country plans to phase down coal use gradually.

The IEA projects that China will meet all of the electricity demand growth between 2024 and 2026 with renewables and nuclear. While it will add 40 to 50 GW of new coal capacity annually in the same period, coal’s dominance as a power source will weaken. As a result, coal will serve to complement renewables and enhance energy security. By 2030, China will account for nearly 60% of all renewable energy capacity installed worldwide. 

Japan

Japan plans to continue reviving nuclear energy with current goals indicating a steady increase in operating capacity between 2024 and 2026 and a 20% eventual share of nuclear power in the 2030 energy mix.

In early 2025, Japan will finalize its 7th Strategic Energy Plan. The plan opens up an opportunity to significantly strengthen Japan’s emission reduction targets, strengthen its energy security and affordability and improve its image as a climate laggard among the G7. International partners and investor groups already urged the government to pledge to ambitious national targets, extending beyond marginal carbon emissions decreases and promoting actionable pathways for substantially scaling up renewable energy.

The plan’s draft indicates that Japan would aim to reduce dependence on fossil fuels while focusing on nuclear (a 20% share by FY2040) and renewables (a 40-50% share by FY2040).

South Korea

South Korea is drafting its 11th Basic Plan for Supply and Demand of Power with an outlook for 2038. The working version reveals plans to rely strongly on nuclear power, with up to four new reactors in the pipeline. By 2038, the country plans to have 30 operational nuclear plants. LNG for heat and power generation is another focus area. Most coal plants are expected to be converted into LNG power plants. However, 12 will be transformed into pumped storage hydro or hydrogen power plants.

Regarding renewables, the country plans to expand capacity from 23 GW in 2022 to 72 GW by 2030. By 2038, Korea plans to build up to 115.5 GW of solar and wind power capacity alongside around 4 GW of hydropower and biomass.

The draft received criticism for lack of ambition, with experts pointing out that the weak targets won’t help Korea improve its lacking renewables deployment rate, low energy efficiency and slow fossil fuel phaseout progress – all areas where Korea lags behind its peers. 

While the government initially aimed to complete the plan’s review by the end of 2024, the martial law and impeachment crisis delayed the process. At the start of 2025, Korea’s Democratic Party criticised the plan’s excessive focus on nuclear at the expense of renewables. In response, on Jan. 7, the government decided to reduce the number of new nuclear power plants and increase solar power generation.

India

According to the IEA, coal-fired supply will remain the mainstay in India. However, the share of renewables in electricity generation will reach 25% by 2026. The government will also prioritise hydropower, nuclear energy storage and increased power system efficiency and improve the national grid and electricity market designs.

By 2030, India plans to have 319 GW of solar, 110 GW of wind and 80 GW of hydro, bio and other renewables. As a result, their share in total generation will reach 42%. However, the government plans to double its coal production by 2030, while the retirement of ageing and inefficient coal plants remains near zero. 

India’s NDC submission will be among the hottest topics in the energy world in 2025. The government needs to show stronger ambition in reducing coal dependence and strengthening targets for sectors beyond electricity, such as transport and industry. 

Bangladesh

Climate change adaptation costs Bangladesh 6-7% of its annual budget each year due to the reliance on fossil fuels, which increases costs and drives up inflation, as well as the health costs of having the worst air quality in the world. At the same time, the country could immediately deploy around 12.5 GW of solar power on rooftops and other available areas. 

The country’s leadership has recognised the problem that fossil fuels pose to its economic and societal well-being, and it is seeing renewables as a potential way out. In November 2024, Bangladesh unveiled a 10-year tax break package for renewable energy projects, which will apply to power plants beginning commercial operation between July 1, 2025, and June 30, 2030. 

Indonesia

In 2024, Indonesia made one of its strongest climate promises. First, the president announced the country would phase out coal by 2040. During COP29, its special envoy confirmed Indonesia’s aim to add 75 GW of renewables by 2040, taking the country’s share in the total power mix to 65%. The country is also developing its carbon tax framework, with an implementation target this year.

The IEA notes that renewable generation in the country will rise by around 8% annually by 2026, compared to 5% for coal and 6% for gas. Under the Comprehensive Investment and Policy Plan, conditional on receiving financial support from the JETP, Indonesia will pursue a rapid solar and wind expansion, reaching 7.3 GW by 2025 and 72 GW by 2030.

Under new leadership, Indonesia aims to continue marching toward becoming a nickel mining centre for EV batteries and a global carbon capture and storage hub. Other priority areas include increased focus on biofuels and natural resource exploitation. 

Vietnam

Vietnam has emerged as the green leader of Southeast Asia, mainly due to the country’s efforts to create one of the most enabling and supportive environments regarding green technology and renewable energy development in ASEAN. 

According to the IEA, new renewable capacity additions will bring the share of non-hydro renewable electricity in total generation to 19% in 2026, up from 16% in 2023. The share of gas will increase to 11%, up from 9%, while coal will drop to 43%, from 46% in 2023.

In October 2024, the country signed a decree with policy guidelines for the rooftop solar market to stimulate self-produced and self-consumed solar energy. With the draft, the government hopes to create favourable conditions and open viable commercial opportunities to foreign investors in Vietnam’s renewable sector. Alongside the country’s efforts to equip half of the office buildings and homes with rooftop solar panels, it would boost the local solar panel manufacturing industry.

The country also plans to capitalise on the fact that it holds the world’s second-largest rare earth resources by increasing domestic production and becoming a key cog in the global critical minerals supply chain.

Meanwhile, Vietnam plans to enter a pilot phase of its emissions trading system from 2025 to 2027, aiming for official operation by 2028.

The Philippines

Around 3.5 GW of new coal power is expected to come online by 2026. Gas-fired output will increase by almost 9% between 2024 and 2026 due to local and external efforts to promote natural gas as a transition fuel, including offering tax incentives for gas development.

As per the National Renewable Energy Program 2020-2040, the country targets a 35% share of renewable energy in the generation mix by 2030 and 50% by 2040. In recent years, the government has introduced various incentives and policy measures to encourage more renewable energy investments. Among them are auction schemes, feed-in tariffs with guaranteed payments for 20 years, net metering, tax holidays and exemptions and more. 

According to the IEA’s Southeast Asia Energy Outlook 2024, the Philippines will demonstrate the highest growth rate in the renewable power market in Southeast Asia by 2030.

In 2025, the Philippines will have its mid-term elections, with the current president and his predecessor the most likely to emerge as victors. Political analysts don’t expect major changes in the direction the country has taken in the past.    

Thailand

The IEA notes that by 2026, the country will boost domestic natural gas production due to energy security concerns. Coal’s share is expected to rise by two percentage points while renewables will grow slightly. However, in 2025, the government plans to introduce a carbon tax. 

In September 2024, Thailand launched its updated Power Development Plan. It aims for renewables to reach a 51% share in final energy consumption by 2037, up from the previous target of 36%. The plan focuses specifically on solar, wind and biomass. It also proposes renewable energy PPAs in energy-intensive sectors like data centres to ease foreign investors in the renewable electricity market.

There are also efforts to advance the EV transition, with the country recently introducing tax incentives for the purchase of EVs and subsidies for domestic manufacturing. 

However, according to the IEA, for Thailand’s energy transition to leap even further, the country needs higher investments in power grid system flexibility and must streamline permitting procedures for new project developers.  

Malaysia

Malaysia is lagging behind the rest of ASEAN in deploying clean energy sources. Its 1.5% share of solar and wind in its electricity generation is far below the 4.4% average in the region. 

The National Energy Transition Roadmap aims to reduce reliance on coal by increasing the use of gas and renewables. While gas-fired power generation will overtake coal by 2026, hydropower will dominate the growth in renewables. 

Malaysia is also advancing towards introducing direct renewable power purchases for corporate customers. In 2024, the government introduced a third-party access scheme, allowing renewable energy producers to use the national grid to deliver clean electricity to regional buyers. Tax incentives and favourable loans for the renewable energy industry are other measures the government is considering or already implementing.

Under its National Carbon Market Policy, which is expected to be finalised this year, the country aims to support mandatory and voluntary carbon market mechanisms. Recently, the government proposed a tax incentive for companies implementing CCS.

2025 as an Opportunity to Accelerate APAC’s Energy Transition

Globally, the share of renewables in the global electricity supply will rise to 35% in 2025 from 30% in 2023. Clean electricity generation is also on course to eclipse that of coal. Yet, Asian countries will continue looking toward fossil fuels, driving global demand for gas in 2025. According to the IEA, while demand for coal will decrease in China, it will continue to grow in India and ASEAN countries. However, the agency also finds that investments in Asia’s clean electricity sector significantly outweigh those in fossil fuels, and the growth of coal power is declining.

This will further strengthen the momentum behind Asia’s energy transition in 2025. To stay on track with the Paris Agreement, BloombergNEF estimates that Asia-Pacific countries would need USD 88.7 trillion in investments. However, KPMG finds that most energy transition investors (54%) have prioritised East Asia as their preferred region over the past two years. The favourable investment conditions and the regulatory advancements, which have brought much-needed clarity and transparency, are among the reasons it will continue to be the most preferred region for energy transition investors in 2025.

However, SP Global notes that in the short term, governments will have to play a bigger role in defining the energy transition progress across the region. This is especially important in the context of two main developments we will see in 2025. First, Donald Trump is getting back into office, which will shake up the geopolitical situation and significantly influence the green technology markets and energy transition pace in Asia.

Next, countries must submit their NDCs by February, outlining climate actions through 2035. According to BloombergNEF, Asian countries should show more ambition in the new NDCs and improve their targets’ transparency and credibility.

Furthermore, experts warn governments that to accelerate their energy transitions, they should prioritise proven green technologies that are ready for deployment and give less focus to solutions that are expensive, not available at scale or have limited decarbonisation efficiency.