Despite multi-billion-dollar energy transition deals agreed with wealthy nations and development banks in 2022, coal use in Indonesia and Vietnam will continue to grow until at least 2030, the International Energy Agency (IEA) forecasts.
In its annual coal report, the Paris-based agency estimates that coal use will rise 4.5% a year between 2025 and 2030 in Southeast Asia, with Indonesia, Vietnam and the Philippines largely responsible for the increase. Coal-heavy India is also set for a 3.3% rise this decade.
Growth in these nations will offset large declines in coal use in developed countries and a smaller fall in China, the IEA said, causing global coal demand to plateau and edge down only slightly by 2030.
For this year, the report finds that global coal demand is set to rise by 0.5%, reaching a record 8.85 billion tonnes. In the US, higher natural gas prices and policy measures slowing the retirement of coal plants lifted consumption, which had been on a downward trend for the previous 15 years, it notes.
Big banks’ lending to coal backers undermines Indonesia’s green plans
When burned, coal’s planet-heating emissions are far larger than other fossil fuels like oil and gas. Quickly reducing the use of coal is critical to meet climate goals, experts say, and countries agreed to phase it down at the COP26 climate summit in Glasgow in 2021.
A group of donor nations launched Just Energy Transition Partnerships (JETPs) in 2021 and 2022 to help accelerate a transition away from coal in key countries like South Africa, Vietnam and Indonesia.
But responding to a question from Climate Home News, Keisuke Sadamori, the IEA’s director of energy markets and security, told a press briefing this week that the JETPs in Indonesia and Vietnam had so far failed to “bend the curve”.
Fabby Tumiwa, head of the Institute for Essential Services Reform (IESR) who advised the Indonesian government on the JETP deal, said the country’s JETP is “stalling” partly because the wealthy country partners have not funded the early retirement of coal-fired power plants.
A draft Indonesian energy plan seen by Climate Home News in August 2023 said Indonesia would retire a sixth of its coal-fired power plant capacity by 2030.
But, after a row over finance with rich nations, that target was dropped from the final version published later that year. Instead, the plan said Indonesia would start shutting down coal plants before their scheduled closure no earlier than 2035.
Tumiwa told Climate Home News that the lack of international funding for early retirement has made it harder for JETP partner countries – including Germany, Japan and the UK – to ask Indonesia to stop building new coal-fired power plants.
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After its pleas for grants not loans fell mostly on deaf ears, Indonesia has watered down its plans to shut coal power plants early
Even beyond 2030, early closures look in doubt. Recently, PLN cancelled a plan to shut down the Cirebon-1 coal-fired power plant seven years early in 2035, citing the high cost of compensating the plant’s owner – despite promised financial support from the Asian Development Bank under its Energy Transition Mechanism.
Think-tank IESR argues that the health benefits from shutting down the polluting plant early would outweigh the financial costs, and that keeping the plant open is a sign that the government’s commitment to the energy transition is weakening.
Indonesia’s Chief Economic Minister Airlangga Hartarto said earlier this month that the Cirebon-1 plant is less polluting than others in Indonesia so it would be better to shut down those dirtier, older facilities first.
“Captive” coal growing
Tumiwa said another flaw in the JETP was its focus on coal power stations that provide electricity to the grid rather than “captive” coal power plants which directly power nearby industrial facilities including nickel and aluminium smelters.
By the time those working on the JETP realised that captive coal accounted for a significant chunk of capacity, it was too late to change the JETP’s design, Tumiwa said.
The IEA report said that coal use in Indonesia and Vietnam will rise mainly because of expanding electricity demand driven by economic and population growth. In Indonesia, in particular, the use of coal in industries like nickel and aluminium is increasing, the report added. In Vietnam, the power-hungry manufacturing sector has driven the surge in coal consumption.
In both countries, JETP funding for clean energy has trickled in only slowly. Indonesia’s JETP, which promised to mobilise $20 billion by 2027, has delivered $3 billion so far, mostly as concessional loans. Japan has been by far the largest donor, providing almost $2 billion. In Vietnam, only three projects have progressed to funding arrangements, totaling less than $1 billion.
The IEA report said discussions have “intensified” in Indonesia around energy security, affordability and orderly transition pathways. The country has large reserves of relatively cheap coal and the country’s state-owned electricity company PLN has encouraged investment in coal mining and transportation.
Vietnam has also watered down its plans to shut coal plants and has imprisoned environmental campaigners. In May, European governments announced loans for a transmission line and two hydropower plants under the JETP, but no plans for early coal plant closures.
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Indonesia and Vietnam set for surge in coal use this decade despite transition deals
When oil and gas shipments stopped flowing through the Strait of Hormuz at the start of the Iran war, Southeast Asian nations were left reeling as the supply crunch laid bare their acute reliance on fossil fuel imports.
As prices soared, governments in the region scrambled to introduce emergency energy-saving measures – from a four-day working week to curbs on air conditioning. Thailand revived decommissioned coal plants while the Philippines, which imports nearly all of its oil, declared a “national energy emergency”.
But the crisis has also prompted renewed resolve to find a long-term solution to their vulnerability at a time when electricity demand is booming to power the region’s growing industry, cooling needs and the mushrooming of energy-hungry data centres.
At the heart of Southeast Asian nations’ response is a longstanding infrastructure project to connect the region’s power grids by 2045 and enable cross-border trading of clean electricity through a network of underground and subsea interconnectors.
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The plans will allow nations with high renewable energy generation potential to trade surplus power to their neighbours and major demand centres like Singapore, helping to integrate more renewables into the power mix and reduce reliance on fossil fuel imports.
“[It] will give us more energy security,” the Philippines’ energy secretary, Sharon Garin, told a press conference after a meeting of the Association of Southeast Asian Nations’ (ASEAN) energy ministers last week, when they discussed accelerating the delivery of the regional grid as part of measures to respond to the energy crisis.
“The Philippines is rich in solar power, Malaysia is rich in hydropower and Indonesia has geothermal: different countries have different resources. [The ASEAN Power Grid] will optimise the utilisation of renewables to the benefits of each member state,” said Garin.
But turning this decade-old political vision into a reality has been slow, held up by painstaking work to harmonise a patchwork of regulatory and legal frameworks and mobilise the private capital needed to build cross-border infrastructure.
More than $300 billion is needed to expand and modernise the region’s fragile grids to support the projected energy demand increase by 2050. This includes $27 billion required to deliver the cross-border interconnections by 2040, according to the International Energy Agency (IEA).
Every year of delay could cost the region billions of dollars in additional fuel costs and lock in new gas infrastructure for decades to come, according to analysis by global energy think-tank Ember.
The building block for energy security
With electrification high on the agenda of the COP31 climate talks in Türkiye next month, there is growing attention on the need to modernise and expand grid infrastructure to cope with growing electricity use and more renewables in the power mix.
Clean electrification and energy efficiency could deliver about a third of cumulative carbon emission reductions between 2026 and 2050, according to the International Renewable Energy Agency’s World Energy Outlook. But delivering that would require doubling annual global grid investment to $1 trillion between now and 2035.
Last month, the UN launched an initiative to accelerate investment into expanding and modernising grids in Southeast Asia and Africa.
First conceptualised in 1997, the ASEAN Power Grid has gained fresh impetus in recent years as countries turn to renewables to cut their emissions and move away from volatile fossil fuel markets.
Energy supply disruption caused by wars in Ukraine and the Middle East has strengthened the case for regional grid connections. Before this year’s conflict began, the Middle East accounted for 60% of Southeast Asia’s crude oil imports. Competition for fewer, more expensive oil and gas shipments has left Southeast Asia facing a $160 billion energy import bill this year. Based on current policies, this could rise to $400 billion by mid-century.
In the Philippines last week, energy ministers agreed on an enhanced planning framework to deliver the ASEAN Power Grid and made progress on regulatory guidelines.
Garin said ministers were considering accelerating the project’s delivery. “The first study was to connect [by] 2045 – that’s too far,” she said.
A strong business case
The economic benefits of the plan have “captured the political imagination” of leaders in the region, Robert Cooke, grids advocacy lead at the Global Renewables Alliance, told Climate Home News. “The business case is stronger than ever,” he said.
“If countries were to go about building their own separate grids, of course that would be an expensive endeavour. But the discussion around the ASEAN Power Grid includes what costs could we share in building out this grid,” added Tiza Mafira, director of the Indonesia office for the Climate Policy Initiative.
Stronger grids would help the region meet collective targets to increase the share of renewable energy in total primary energy supply from 14% to 30% and in installed power capacity from 34% to 45% by 2030.
Connecting and pooling dispersed renewable resources would also help smooth local power shortages caused by daily and seasonal variations, reducing the need for backup gas plants and battery storage.
The IEA found the ASEAN Power Grid could help unlock some of the 20 terawatts of untapped solar and wind potential across Southeast Asia – an amount around 55 times the region’s current total power capacity.
From lines on a map to shovels in the ground
Rather than building a single unified network, the ASEAN Power Grid is developing cross-border links between neighbouring countries and smaller groups of nations.
As of 2025, nine of 18 priority interconnection projects are operational – accounting for around 10 GW of capacity with an additional 13.7 GW planned by 2040.
Source: Ember
A power line channelling up to 200 MW of clean electricity generated from hydropower in Laos to Singapore via Thailand and Malaysia has emerged as a key building block for grid-to-grid trading.
Progress on technical discussions will also help provide the clarity the private sector needs to invest in bankable projects, said Cooke.
In 2025, the Asian Development Bank and the World Bank announced a dedicated funding initiative to support the project.
“The enabling pieces are emerging,” said Monalisa Dimalanta, former chair of the Philippine Energy Regulatory Commission and the National Renewable Energy Board. “But the timelines remain unclear and a 2045 vision cannot answer today’s emergency,” she said.
“A power grid… that exists only on paper will not keep the lights on.”
Singapore: the delivery test
The implications of failing to deliver the ASEAN Power Grid are most acute in Singapore.
Constrained by space, with few renewable energy resources and dependent on gas for more than 90% of its electricity mix, Singapore has emerged as a leading proponent of a regional power grid as it seeks to achieve net-zero emissions by 2050.
To meet its power needs, the city-state aims to import 6 GW of low-carbon electricity by 2035, around one-third of its energy demand – a target which it is set to miss, however.
The plans heavily rely on building interconnectors to import solar power from Indonesia across the South China Sea. Around 40% of the ASEAN Power Grid’s planned interconnections are directed towards Singapore.
Ember’s analysis found that delivering the planned interconnectors by 2035 could enable renewables to meet nearly half of Singapore’s electricity demand. Delays could drop this to only a fraction of the country’s needs, and risk locking in new gas capacity until the 2050s. Without the ASEAN Power Grid, Singapore would need to install an additional 300 MW of gas-fired power capacity to bridge the gap by 2035.
Already home to the largest data centre capacity in Southeast Asia, Singapore’s electricity demand keeps rising, driven by the boom in AI infrastructure. “At one point, [it] either has to build a new gas plant, or it has to get the interconnection to supply that demand,” Lam Pham, an Ember energy analyst and the report’s author, told Climate Home News.
A region at a crossroads
With capital increasingly available, political will is now the biggest risk standing in the way of timely execution, said Pham.
But there are other challenges too, including the lack of frameworks on transmission tariffs and how to share the benefits of clean power trading. “It’s really hard to justify projects without that,” he said.
In addition, climate-fuelled weather events, including extreme heat and tropical storms, pose major threats to the region’s grid infrastructure. Experts say stronger grid interconnection can isolate damage and build the system’s resilience.
Efforts to deliver on the ASEAN Power Grid also come as ministers stressed the “continued importance of oil and gas” for economic development and seek to secure fossil fuel supplies and stockpile oil to prepare for the next crisis.
Despite an acceleration of renewable deployment, particularly solar, coal still generates nearly half the electricity supply in ASEAN member states and dominates the power mix in Indonesia, the Philippines and Vietnam, while Singapore and Thailand rely on gas.
While these measures might help the region with the immediate crisis, “the long-term answer is more domestic renewable energy, electrification, storage, efficiency and regional power trade”, Dimalanta said.
Main image: An aerial view of the MTerra solar project in the Philippines, set to become one of the world’s largest solar-and-battery developments (Photo by Ezra Acayan/Getty Images)
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SE Asia speeds up plan for connected clean power grid after oil shock
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