Executive summary

Southeast Asia is one of the world’s fastest-growing economic regions with a rapidly rising energy consumption. Since 2015, total final energy consumption has risen by more than 30%, driven mainly by industry and transport, followed by buildings. Electricity consumption grew nearly twice as fast as overall energy use.

Fossil fuels continue to dominate energy supply, with increasing reliance on fuel imports. Coal and oil each account for around 30% of total energy supply, while gas plays a key role in some countries. Prior to the recent conflict in the Strait of Hormuz, the region sourced around 60% of its crude oil imports and one-third of its natural gas imports from the Middle East. Growing dependence on fuel imports exposes economies to external energy shocks through supply disruptions and geopolitical risks, leading to higher energy prices.

Electricity is the region’s second-largest energy product after oil. The regional share of electricity in total final energy consumption rose from 12% in 2000 to 25% in 2025, higher than the global average of 23%. Most growth occurred in already electrified end uses, such as space cooling and appliances. Buildings are the most electrified sector at 56%, with data centres emerging as a fast-growing driver. Industry electrification has risen to 29%, but many industrial processes that require high-temperature heat continue to rely on fuels. Transport electrification stands at less than 0.5%. Country trends vary: Viet Nam is nearly 30% electrified, but some economies are at less than 20%.

Amid the current energy crisis and affordability concerns, momentum for electrification is growing. Energy security concerns have prompted countries to strengthen measures to reduce dependence on fuel imports and related exposure to price shocks. Policy support for electric mobility and biofuel blending, electric cooking, energy efficiency and industrial electrification is creating opportunities for replacement of fuel-based technologies. In 2025, regional electric car sales more than doubled year-on-year to account for nearly 20% of total car sales. In the first half of 2026, the share of electric cars jumped to around 30% of all car sales, bringing it to a level comparable to Europe. Use of electric two- and three-wheelers is expanding, particularly in Viet Nam. Electrification in end-use energy investment rose from 22% in 2015 to 34% in 2025, driven largely by investment in transport.  

Southeast Asia’s electrification rate would reach 37% if today’s cost-competitive electrification potential were fully realised. The largest opportunities are in road transport, cooking, water heating, industrial motors and low- and medium-temperature industrial heat, where commercially available technologies can already provide energy services efficiently and competitively.

Realising this potential depends on strengthening the economic case and addressing adoption barriers. Although electricity often costs more per unit of energy than fossil fuels, efficient electric technologies can reduce overall energy consumption and lower energy bills, depending on electricity-to-fuel price ratios. Across selected ASEAN countries, electricity prices range from 0.7 to 1.9 times gasoline and diesel prices per unit of energy. For transport, ratios below 2 are aligned with international observations on cost-parity between electric vehicles (EVs) and internal combustion engines. However, energy subsidies, taxes and tariffs can distort this economic picture. Consumers can face barriers financing upfront technology costs even when economically attractive. Some applications also require new infrastructure, such as EV charging points and grid upgrades.

Accelerated progress also depends on technology and supply chain development. In transport, expanding domestic EV manufacturing and battery supply chains in Thailand and Viet Nam, along with lowering import tariffs, has improved the affordability of EVs. Most electric technologies for buildings and industry, such as cooking and low- and medium-temperature heat, have reached a high maturity level, while high-temperature process heat for steel, cement and chemicals are at earlier stages. The role of critical minerals in electrification requires the management of potential risks related to geographic concentration.

Based on today’s policies and technology trends, Southeast Asia’s electrification rate is set to rise from 25% in 2025 to 32% by 2035. Energy consumption is expected to grow by 25% and fossil fuel consumption by 14% while fuel import dependence continues to expand. Under the Stated Policies Scenario, the region is projected to rely on imports to meet one-third of its natural gas demand and 80% of its oil demand by 2035, with fossil fuel import bills rising to more than USD 200 billion annually, from just over USD 100 billion in 2025. Direct emissions from final energy consumption are expected to expand from around 1.0 Gt CO2 in 2025 to 1.2 Gt CO2 in 2035.

Faster electrification can strengthen energy security through diversification, avoided fuel demand and lower fuel import bills. Under the High Electrification Scenario, the share of electricity increases to 41% by 2035. While electricity use expands by nearly 65% (900 terawatt-hours), energy consumption rises only 2%, despite delivering the same level of services. Buildings electrification rises to 80%, driven by all-electric uses and fuel switching to electric cooking and water heating. Industry electrification grows to 43% but continues to face constraints for high-temperature process heat. Transport electrification grows close to 9% by 2035, led by electric cars and two- and three-wheelers. Avoided oil demand from EV adoption climbs to almost 0.9 million barrels per day (mb/d). Increased reliance on domestic and regional sources of electricity generates annual fuel import savings by 2035 equivalent to almost 30% of the region’s fuel import bills in 2025, or nearly 1% of regional GDP in the High Electrification Scenario.

Electrification can support economic development and sustainability. Reduced reliance on fuel imports eases budgetary pressures with lower outlays for subsidies. Less exposure to elevated fuel prices can limit cost pressures on goods and services, enhancing affordability. Clean cooking, efficient appliances and electric mobility lower exposure to household and urban air pollution. In the High Electrification Scenario, switching to electricity, combined with energy efficiency and increased direct use of low-emission fuels, lowers CO2 emissions from end-uses by nearly 25% by 2035. Combining with a shift to cleaner power sources would further reduce overall energy-related emissions.

Regional power supply currently relies on fossil fuels, but growing use of renewables would magnify the positive impacts of electrification. Coal-fired power met over 60% of electricity demand growth over the past decade and currently accounts for almost half of generation, while gas comprises nearly a quarter. Renewables met around 40% of new demand and now account for over a quarter of generation, led by hydropower, accompanied by rapid growth in solar PV and wind. Expanding renewables can further reduce fuel imports, notably gas for power and diesel for microgrids in remote areas. This would lower the emissions intensity of power generation, enabling emission reductions beyond fuel switching. To fully meet new demand in the High Electrification Scenario, renewable generation would need to more than triple from today’s level by 2035.

Secure, reliable and affordable electrification requires the development of clean power, grids and flexibility resources in concert. Rapidly falling costs for solar PV, wind and batteries are making electrification more cost-competitive with direct fuel use. New demand and increased variable renewables will also reshape locational and temporal electricity profiles. This will require more effective system balancing, with better use of existing resources plus new investments.

Accelerating electrification requires an economy-wide and energy-systems approach. Electrification strategies should align demand growth with measures to strengthen power sector security and resilience while developing robust industrial supply chains. Co-ordinated planning across power and end-use sectors is essential, given the different lead times for the development of power generation and infrastructure and the adoption of electrified equipment. Strengthening the economics of electrification requires addressing energy price distortions through better-targeted subsidies, tariff reforms and balanced taxation between electricity and fossil fuels. It also requires tackling barriers that prevent consumers from financing upfront costs. Developing domestic supply chains around electrification can potentially reduce dependencies on imported technology.

End-use sectoral measures should focus on boosting adoption of efficient electrified technologies by strengthening energy performance standards, information programmes and economic incentives. Labour skills development and capacity building around supply chains and implementation are also essential. Widespread enabling infrastructure, such as EV charging points, distribution upgrades and grid-interactive buildings, will be key to supporting technology uptake and integration.

With a larger role in the economy, the power sector needs to evolve in a secure and sustainable manner while addressing greater exposure to weather and cybersecurity risks. Accelerating clean electrification depends on timely grid expansion and modernisation, well-designed policy, and market mechanisms to procure low-carbon power – including from renewables and nuclear – as well as mechanisms to unlock flexibility through storage and demand-side resources.

Expanding financing and promoting new business models will help unlock opportunities for all consumers, supporting service-based models and reducing costs for households and businesses. Targeted measures, such as lowering consumption taxes, fees and tariffs, and providing concessional finance, can catalyse uptake, especially for low-income groups and small businesses.

Regional co-operation can play an important role in tackling common technical, economic and integration challenges. This includes developing regional approaches to energy planning, appliance standards, interoperability and data sharing. Adopting common standards, testing procedures and labelling supports faster deployment of efficient electric technologies. The ASEAN Power Grid can enable affordable electrification with higher shares of renewables, while the ASEAN Plan of Action for Energy Cooperation can serve as a tool for aligning electrification, renewables, efficiency and grid priorities.