Global energy investment hits record as ASEAN power grids face strain

Global investment in the energy sector continued to expand, with total investment reaching US$3.3 trillion in 2025, the highest level on record.

Of this, US$2.3 trillion went into clean energy, helping lift the share of renewables and nuclear power in global electricity generation to 42%.

Despite the rise in investment, the World Economic Forum's (WEF) 2026 Energy Transition Index (ETI) report found that transition readiness fell for the first time in a decade to 0.76.

This shows that investment alone is not enough to drive the energy transition if policy stability, legal frameworks that support investment and efficient electricity transmission infrastructure are lacking.

Another factor putting pressure on the global energy sector is unrest and disruption to shipping routes through the Strait of Hormuz, which has caused liquefied natural gas (LNG) and crude oil prices to rise rapidly, affecting developing countries that rely on energy imports and have limited fiscal space.

At the same time, electricity demand continues to rise, growing by 4.4% in 2024 and 3.0% in 2025.

The increase has been driven by energy use in cooling systems, electric vehicles, and the expansion of data centres and artificial intelligence (AI).

These drew more than US$1.5 trillion in global investment in 2025, while data centres consumed a total of 486 terawatt-hours of electricity.

Thailand ranks 50th globally as Singapore leads ASEAN

The 2026 Energy Transition Index (ETI) rankings reflect differences in potential among ASEAN countries.

Singapore ranked first in the region and 42nd globally, followed by Malaysia at 45th globally, Vietnam at 48th, and Thailand at 50th, or fourth in ASEAN.

The report said each country had a different approach to driving the energy transition, depending on its own constraints and economic structure.

Singapore moved up 10 places, driven by progress in proactive regulation and green finance mobilisation.

Although the country depends on oil and natural gas imports for 95% of its needs, it has been able to manage this constraint through carbon tax policy and its development as a sustainable finance hub.

Malaysia maintained its ranking through the development of power transmission infrastructure and the application of digital technology, although it still faces challenges in managing fossil-fuel energy price subsidies, which hinder the reflection of the true cost of renewable energy.

Vietnam moved up the ranking on the back of industrial growth and the expansion of the global supply chain for solar panel production.

At the same time, rising energy demand from manufacturing means the country still needs to expand the use of coal-fired power plants in parallel, with coal consumption expected to grow by an average of 4.5% a year until 2030.

For Thailand, the report said the fragility of its power generation fuel structure, which relies heavily on imported LNG, means it is directly affected when LNG prices in global markets rise, pushing electricity tariffs higher as a result.

To reduce this risk, Thailand is accelerating support for rooftop solar installations in the private and household sectors.

However, it still faces policy constraints in liberalising access to the electricity transmission system and developing energy storage technology to support the future use of renewable energy.

However, although Thailand and Vietnam are only two places apart in the rankings, the report noted that the two countries' economic, fiscal and demographic structures differ significantly in ways that affect their energy transition.

Electricity grids pose a major challenge for the ASEAN transition

Although many ASEAN countries are accelerating investment in renewable energy, the ETI 2026 report said the main obstacle to the region's energy transition is not clean power generation technology but grid integration bottlenecks, with transmission systems still unable to keep pace with rapidly rising generation capacity.

These constraints mean some renewable energy projects still cannot connect to the transmission system even though they are ready to generate electricity.

As a result, clean energy cannot be fed into the system to its full potential, while the development of transmission systems capable of handling the volatility of solar and wind power remains a major challenge for many countries in the region.

The report also said reliance on fossil fuels remains another challenge for ASEAN.

Coal use in Indonesia, Vietnam and the Philippines is still growing by an average of 4.5% a year, increasing accumulated greenhouse gas emissions and posing a challenge to the region's energy transition targets.

In addition, demand for critical minerals for the clean energy industry continues to rise, particularly nickel, a key raw material for lithium battery production.

Indonesia continues to control more than 60% of the global nickel supply chain, giving ASEAN an important role in the global clean energy supply chain.

ASEAN Power Grid pushed to expand cross-border clean power trade

The report said Indonesia, the Philippines and Thailand still face limitations from electricity transmission systems that lack sufficient flexibility, delaying the development of large-scale solar and wind power projects in several areas.

To reduce these constraints, ASEAN member states are pressing ahead with the ASEAN Power Grid (APG) under the ASEAN Plan of Action for Energy Cooperation, 2026-2030, with the aim of expanding cross-border clean electricity trading to improve the efficiency of the region's energy resource use.

The regional power interconnection is expected to help cut ASEAN's electricity generation costs and save up to US$67 billion by reducing reliance on imports of high-priced liquefied natural gas (LNG) during energy crises.

ASEAN expands role as a critical minerals base for clean energy

In addition to power grid integration, the report said ASEAN plays an important role as a supplier of critical minerals for the green energy transition, particularly Indonesia, which supplies more than 60% of the world's nickel.

Investment in Indonesia's upstream industry and mineral refineries, supported by foreign capital groups such as those from China, reflects ASEAN's potential to become part of the supply chain for low-carbon transport systems in the future.

The report also proposed that the region jointly develop pricing and investment mechanisms across the battery industry chain, while upgrading smart grids, installing battery energy storage systems and using carbon credit mechanisms to support ASEAN's long-term energy transition.

Source: TheNation