This time last year, Asean’s coal phase-out seemed to be progressing.
The pipeline had shrunk to near-record lows, with around 12GW of planned capacity cancelled in 2024.
Malaysia stopped greenfield coal development under its National Energy Transition Roadmap and set 2044 as the end of coal power.
The Philippines held the moratorium on new coal imposed in 2020 while running five rounds of its Green Energy Auction. Indonesia’s president had committed the country to a fossil-free power system by 2040.
Just a year later, Indonesia and the Philippines are burning more coal. To the casual observer, the region looks like it is reneging on a phase-out promised for over a decade. Was the coal phase-out just a cop-out?
Realities behind coal revival
No. New coal commissioning across South-East Asia, Indonesia aside, fell for a third consecutive year, and no major producer has sanctioned new mines or extended a mine’s lifecycle. Current coal generation is reserved as backup rather than to meet baseload demand.
What changed was the supply. The disruption to liquefied natural gas (LNG) earlier this year pushed Asian spot prices to near three-year highs and created a shortfall of roughly 35 million tonnes for 2026.
The region fell back on coal because it was spare capacity that countries could dispatch quickly. Rystad Energy estimates the disruption will add around 70 million tonnes to Asia’s coal demand this year as countries use it to offset tighter energy supplies.
On that measure, the region’s three largest power systems managed the disruption with different approaches.
Indonesia
Indonesia met the disruption with the deepest fuel reserves in the region. It produces nearly 90% of South-East Asia’s coal, and coal powers about 65% of its own electricity, so when LNG prices shot up, the abundance of coal became an immediate solution.
However, that made the exit from coal harder. The 10-year electricity plan issued last year adds 42.6GW of renewables alongside 16.6GW of new coal and gas, which seems contradictory until one accounts for the state utility’s heavy subsidy burden in supplying electricity to 280 million people.
Coal remains the cheapest way to do that.
The development of note is that Indonesia has begun to sell renewable power abroad. It has conditional licences to supply 3.4GW of low-carbon electricity to Singapore by 2035, with further agreements signed in July, drawing on a solar resource of around 7.7TW. For a country whose export earnings lean on coal, that is a significant step toward becoming a renewable exporter instead.
The Philippines
Scarcity then pushed the country toward clean energy. Households and small businesses turned to rooftop solar and electric vehicles as fuel costs rose, prompting the Department of Energy to fast-track small-scale solar while it continued expanding the Green Energy Auction programme, slated to bring at least 25GW of renewable capacity.
This year’s round opened the country’s first offshore wind tender, seeking 3.3GW of fixed-bottom capacity. Nuclear has also entered the conversation as a longer-term answer to import dependence, though the first units will only arrive after the supply risks of this decade have played out.
Malaysia
Malaysia had the reverse scenario. Petronas ships around 25 million tonnes of LNG a year from Bintulu, so when supply tightened, Malaysia redirected cargoes inward. Domestic gas also covered 40% to 45% of Peninsular Malaysia’s power through the period.
Coal retirements stayed on schedule because Malaysia had a supply of transitional fuel at hand. There are no new coal projects in the national pipeline and existing units totalling 13.3GW will halve generation by 2035, closing out in 2044. The World Economic Forum’s Beyond Coal study warns that the schedule holds only if clean capacity scales fast enough to replace those units as they retire.
Malaysia’s answer in the supply crisis was to continue building. Its sixth Large Scale Solar tender round allocated 2.65GW of solar and requires 1.25GW of battery storage as a condition of award.
Renewables are the common thread
The coal revival is temporary, and so are the cushions that let each country absorb the shock.
Indonesia’s coal advantage will erode as global demand shifts, while the costs of burning it at home may delay transition goals.
The Philippines is subject to import market prices for every increase in demand, which is why building renewable capacity is the best route forward.
Malaysia’s gas cushion, meanwhile, has an expiry date. LNG exports have fallen from the pre-2020 peak of about 32 million tonnes to roughly 25 million tonnes in 2024, while imports have risen from 2.1 to 3.3 million tonnes.
PETRONAS signed its first major long-term import agreement with Woodside for one million tonnes a year starting 2028, and Wood Mackenzie expects Malaysia to stay a net exporter into the 2040s as imports increase.
Across the three countries, renewables are the common answer. Bloomberg NEF already rates utility-scale solar as the cheapest source of bulk power in Malaysia, and the International Monetary Fund puts Philippine solar at around US$0.044 (RM0.18) per kilowatt-hour. Once a solar farm is built, its fuel costs nothing for the next 25 years and that provides a better buffer against disruption.
Solar and storage also reach commercial operation years before new thermal capacity, so they meet demand faster. Their construction also provides jobs. Indonesia’s export solar projects alone are estimated to need more than 80,000 workers to build 11GWp of capacity, which helps fuel the economy.
Investment-wise, clean energy supply has also become a condition of investors. Manufacturers and data centre operators now settle how a site gets electricity before they contract, and Google’s 21-year 1TWH agreement with TotalEnergies suggests corporate contracting will drive new capacity across the region.
The International Energy Agency expects renewables to overtake coal as the largest source of demand growth through to 2035, and Ember calculates that meeting new demand with solar rather than gas would save up to US$67bil (RM271bil) at current projected prices.
At the Sustainable Energy Association of Singapore, our renewable energy members have seen project queries doubling over the past two years, signalling appetite for renewables, especially with corporate offtake agreements and firm auction schedules.
What’s next?
Set side by side, the three countries highlight that one country’s weakness is another’s strength, which makes the case for a connected Asean grid.
Indonesia’s solar potential is greater than the sum of its exports. Malaysia already sells green electricity through Energy Exchange Malaysia, and is part of the Laos-Thailand-Malaysia-Singapore link, now trading up to 200MW in multiple directions. The Philippines chairs Asean this year and is carrying forward the submarine cable framework agreed under the Enhanced Asean Power Grid, with funding from the World Bank and Asian Development Bank.
Regional trade will give countries options when domestic supply comes under pressure. Instead of relying on coal plants during fuel shortages, Asean countries could import lower-carbon electricity from neighbouring markets, improving energy security and system resilience together.
The greater risk is that the return to coal might usurp investment for renewables, storage and connected grids. Completing planned interconnections will take an estimated US$27bil (RM109bil) to 2040, but the results would insulate us against future disruptions.
For Asean, reversing coal reliance means building flexibility as a region, with storage, interconnections and the ability to manage tightened supply. That is how you turn a temporary coal revival into a permanent coal phase-out.
