Coal's return does not signal the end of Southeast Asia's energy transition

Southeast Asia never intended to abandon coal phaseout, but the plan is building flexibility together as a region. 

Southeast Asia poured a record US$17b ($21b) into renewables last year, adding 8GW of renewable energy capacity whilst clean-energy spending was set to outpace investments in fossil-fuel generation by a two-to-one ratio.

Thailand’s decision to begin reactivating its dormant coal plants in March has raised questions about the region’s energy transition. Vietnam and the Philippines are also burning more coal. To a casual observer, the region looks like it is backsliding on a phase-out that has been promised for a decade.

Was it all just a fake-out? No.

The recent return to coal reflects the realities of an extraordinary disruption in LNG supply chains rather than a change in the region's long-term direction. Misreading that distinction could lead investors and policymakers to make the wrong investment and policy decisions.

Before the disruption, it was clear that the region was disciplined in phasing out coal. The pipeline in ASEAN had shrunk to near-record lows, with around 12GW of planned capacity cancelled in 2024. Countries like Indonesia pledged to end coal power entirely by 2040 whilst the Philippines maintained its freeze on new coal plants.

The coal uptick occurred for several reasons because utilities fell back on coal as the spare capacity they could dispatch quickly. Rystad Energy projected the supply disruption could add around 100 million tonnes to Asia's coal demand in the near term as countries relied on coal to offset tighter energy supplies.

For instance, Thailand, the region’s largest LNG importer, leans heavily on the spot market, so it felt the price changes from the disruption immediately. Vietnam received its first commercial LNG deliveries into power plants only in January, which means that its fallback plan on gas was just beginning to take root when the crisis hit. 

Singapore does not burn coal, but the country is not insulated. About 95% of its electricity comes from imported gas, so when the LNG market tightens, it is unable to switch fuels and is therefore exposed to the sharp rise in prices.

But the coal revival is only temporary. The International Energy Agency (IEA) expects energy investment in Southeast Asia to reach a record US$57b ($72b) in 2026, with spending continuing to grow across renewables, electricity grids, and end-use sectors. Despite the recent increase in coal use, governments, and investors continue to back the infrastructure needed for the region's longer-term transition.

As confirmation, heads of government at the ASEAN Summit in Cebu, Philippines, emphatically backed the acceleration of renewable deployment, with Indonesia’s President Prabowo saying that energy diversification is ‘no longer optional’. Both capital and policy seem to be clearly moving towards renewables despite rising coal use.

That said, the crisis has exposed where the region remains vulnerable. Southeast Asia lacks the flexibility needed to respond effectively to supply shocks, with too little energy storage, limited interconnections between national grids, and insufficient ability to manage demand when supplies tighten. Addressing these gaps will help ensure future crises do not trigger a renewed reliance on coal.

The silver lining is that Southeast Asia has already kickstarted this work. 

Examples include how Singapore has raised targets for low-carbon electricity imports to 6GW by 2035 and established Singapore Energy Interconnections to build the cables, including a 1,000km subsea link to bring in Vietnamese offshore wind energy by 2033. Indonesia has also advanced cross-border electricity projects with Singapore, with six low-carbon electricity import projects progressing to Conditional Licences.

The ASEAN Power Grid, which is now formalised under the 2026 to 2030 energy cooperation plan, could save the region up to US$67b ($85b), helping Southeast Asia avoid the trap of hiked-up LNG prices caused by disruptions.

Regional electricity trade will also give countries more options when domestic supply comes under pressure. Instead of relying on existing coal plants during fuel shortages, Southeast Asian countries will be able to import lower-carbon electricity from neighbouring markets, improving both energy security, and system resilience.

The greater risk is that the recent return to coal distracts from the investment the region still needs in renewables, energy storage, and electricity grids. Southeast Asia never intended to abandon its coal phase-out, but putting the plan back on track means building flexibility together as a region, with storage, interconnections, and the ability to manage demand when supply runs short.

That is how you turn a strategic reversal back into a phaseout.