The International Energy Agency projects Southeast Asia’s net energy import bill could reach about USD 250 billion by 2035, up from roughly USD 90 billion in 2023, driven mainly by oil import growth. The June 2025 Iran war disrupted supply routes through the Strait of Hormuz, exposing how exposed the region is to a single chokepoint. IEA Executive Director Fatih Birol called diversification of energy sources and supply routes a central priority.
The same shock is accelerating a shift the region had been delaying. EV sales across ASEAN passed half a million units in 2025, and rooftop solar imports are climbing fast.
The price shock did not just raise bills. It rewrote investment plans across Indonesia, Vietnam and the Philippines almost overnight.
When the Iran war squeezed the oil and gas that moves through the Strait of Hormuz in June 2025, Southeast Asia felt it as inflation and fuel costs. The IEA called it a wake-up call. But the more telling response was not panic over supply. It was the speed at which governments and households reached for alternatives.
Battery and plug-in hybrid sales across ASEAN passed 500,000 units in 2025, more than double the 2023 figure. In the Philippines, a declared energy emergency triggered a record run on rooftop solar. The reflex was not to lock in more imported fuel. It was to cut the exposure that made the shock hurt.
That is the part worth watching. A crisis built on fossil dependence is now funding the exit from it.
A crisis that funds its own way out
The headline number comes from the IEA’s Southeast Asia Energy Outlook 2025. Under stated policies, the net energy import bill nearly triples by 2035, with oil the main driver. The projection is a model, not a measurement — it assumes current policy holds and diversification stays slow.
What is measured is the clean-energy uptake already underway. Installed solar capacity in the region has more than tripled since 2018 to exceed 35 GW, according to data from the International Renewable Energy Agency. The Philippines became the second-largest destination for Chinese solar exports in the first quarter of 2026, with imports tripling year-on-year.
Ivan Cano of the Manila solar firm EcoSolutions described the rooftop boom plainly. “This is the first time I’ve seen a demand shock of this magnitude,” he said.
The trade-off underneath this is sharp. When LNG spot prices spiked in 2022 to 2024, several ASEAN states reverted to coal to avoid blackouts, locking in plants with 30 to 40-year lifetimes. Utilities and consumers absorb the higher fuel bills. Governments carry the subsidy cost and the climate risk. The faster path to renewables demands large upfront capital, and that burden often falls on domestic taxpayers even when the long-run gain is shared.
Sam Reynolds, an energy finance analyst at the Institute for Energy Economics and Financial Analysis, argues that sustained high fossil fuel prices strengthen the case for faster renewables and storage, especially in markets exposed to imported gas. The economics, in other words, now point the same direction as the politics. What is less settled is whether the build-out can move fast enough to bend the import curve.
The shock is being written into the rules
The reflex toward clean power is real. Whether it sticks depends on what gets locked into law and contracts now. Several countries are moving fast on both renewables and a harder option: nuclear.
Indonesia has the clearest framework. Government Regulation No. 42 of 2023 allows civilian nuclear plants and sets the rules under its BAPETEN regulator. Vietnam and the Philippines are pursuing their own plans. None will produce power soon — construction and licensing run a decade or more, so nuclear answers the 2040s, not this decade’s bills.
The harder constraint is the grid. Aldo Wu, a senior grid integration specialist at the Asian Development Bank, warns that large solar and wind expansion will stall without major spending on transmission and cross-border links like the ASEAN Power Grid. The region’s own targets show the gap. APAEC Phase II set a 23% renewables share in primary energy by 2025, and current trajectories put that goal at risk.
So the crisis cuts two ways at once. The Iran war made fossil dependence painful enough to act on, but the window to encode that into 15-year planning documents is open only briefly. What the region builds in 2026 and 2027 decides whether the next shock lands the same way.
Beyond the headline
The bigger picture
Southeast Asia’s import shock is not just about volatile oil routes. It is the collision of three structural trends: surging power demand from industrialisation and digital growth, falling domestic gas reserves, and delayed investment in grids and storage. Under acute pressure, governments must choose between doubling down on legacy coal and gas or accelerating a far more complex build-out of flexible, connected clean power.
The timing
The Iran conflict hit just as ASEAN governments were updating medium-term power plans and negotiating major climate-finance packages. That coincidence means price and security fears are now being written into contracts and regional agreements that will shape investment flows for the next 10 to 15 years, locking in either a cleaner system or a more expensive, fossil-heavy status quo.
The reach
For European and North American utilities and asset managers, this pivot is more than a distant climate story. It is a potential reallocation of billions in global capital. Decisions on grids, nuclear and cross-border hydropower will shape where Western firms win engineering, equipment and financing mandates, and whether their own net-zero portfolios help displace imported fossil-fuel demand in one of the world’s fastest-growing power markets.
Where the money and risk now sit
With planning documents and climate-finance deals being rewritten through 2026 and 2027, the next two years set the direction. Here is how that lands for three groups.
- Investors in renewable and EV sectors
Track the ASEAN Centre for Energy’s APAEC framework at aseanenergy.org for concrete regional targets on renewables and interconnection. These shape which project pipelines open. The Philippines solar surge and Thailand-led EV uptake mark where demand is already running ahead of policy.
- Energy and commodity analysts
Monitor the IEA’s Southeast Asia Energy Outlook country dashboards at iea.org for updates on import bills and fuel mix. A faster regional shift away from oil and gas would register in global fuel demand. Watch Indonesia’s first formal nuclear site decision, expected by late 2027, as the clearest signal of intent.
- Western firms with regional supply chains
If your manufacturing sits in Indonesia or Vietnam, your electricity is still roughly 70% fossil-fuelled, and your emissions footprint moves with the regional grid. Cross-border grid and hydropower deals at upcoming ASEAN energy ministerials are the variable to watch on supply security and carbon cost.
Explainer
- ASEAN Power Grid
- A long-planned network of cross-border transmission links connecting the ten ASEAN member states. It aims to let countries share surplus hydropower and renewable output rather than each building standalone fossil capacity. The Asian Development Bank treats it as the precondition for large-scale solar and wind, since without it much renewable output would be wasted for lack of transmission.
- APAEC Phase II
- The ASEAN Plan of Action for Energy Cooperation, the bloc’s energy roadmap for 2021 to 2025. It set a 23% renewables share in total primary energy supply and 35% in installed power capacity as regional goals. The primary energy target is currently at risk, with member trajectories falling short of the 2025 deadline.
- BAPETEN
- Indonesia’s Nuclear Energy Regulatory Agency, responsible for licensing and safety oversight of nuclear facilities. It gained an expanded mandate under Government Regulation No. 42 of 2023, which formally permits civilian nuclear plants. Its readiness is one gauge of how seriously Jakarta intends to bring nuclear into its 2040s power mix.
- Strait of Hormuz
- A narrow shipping chokepoint between the Persian Gulf and the open ocean, carrying a large share of the world’s seaborne oil and gas. Much of Southeast Asia’s imported fuel transits this single route. The June 2025 Iran war disrupted those flows, turning a distant conflict into immediate inflation and fuel costs across ASEAN.
RELATED STORIES
