Southeast Asia is falling short of its ambitious projects to boost gas-fired power generation to meet growing electricity demand and replace some of the coal use. Fuel availability, volatile prices, and supply chain bottlenecks threaten to drive up costs and delay projects by years, energy consultancy Wood Mackenzie says.
Six of the biggest Southeast Asian economies and power markets – Indonesia, Malaysia, Vietnam, Singapore, Thailand, and the Philippines – are set to deliver only a third of their combined planned gas-fired power capacity by the end of the decade. This would be the result of project execution being hindered by a global shortage of gas turbines, volatile costs of LNG, financing constraints, and infrastructure and equipment bottlenecks, WoodMac reckons.
The project delays and the prospect of meeting only a fraction of the gas-power goals are forcing policymakers to reconsider the role of gas in both the near-term and long-term energy transition ambitions, Wei Han Tan, Southeast Asia power and renewables research analyst at Wood Mackenzie, said in the consultancy’s new report.
This suggests that coal in the near term and renewables in both the near and long term could play greater roles in Southeast Asia’s electricity mix than previously expected.
Delays and Bottlenecks
Combined, the six biggest Southeast Asian power markets have a goal of installing 53 gigawatts (GW) of new gas-fired power by 2030, per their respective government ambitions.
But WoodMac sees only a third, or just 14.9 GW, of this going into operation by the end of the decade. That’s because of supply chain bottlenecks, the volatile prices of LNG and tighter LNG markets amid the Middle East crisis, and financing constraints.
“The challenge today is not planning power projects but executing them,” said Alvin Tan, Southeast Asia power and renewables research analyst at Wood Mackenzie.
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“New gas-fired capacity depends on several critical enablers, including LNG infrastructure, project financing, and turbine availability. A bottleneck in any one of these areas can delay an entire project,” the analyst noted.
Moreover, only 11 GW of the planned gas-to-power pipeline in Southeast Asia has secured gas turbines amid a global shortage of the critical component for gas-fired power generation. The remaining planned capacity, which has yet to secure gas turbines, is likely to face delivery lead times of at least five years, WoodMac says.
Among the six individual power markets in Southeast Asia, Singapore appears on track to meet its gas capacity addition targets by 2030, as it has secured turbine supply for all major projects expected before 2030. That’s the only market in the Southeast Asian region on course to meet its goals; all others are falling behind, some by significant margins.
Vietnam, for example, faces the biggest gap between ambitions and project delivery—only 3.7 GW of the government’s 29.4 GW target of new gas power capacity are likely to start operations by 2030, according to WoodMac.
“Early LNG-to-power projects have exposed commercial challenges around fuel pricing and cost allocation, while uncertainty over domestic gas supply and project timing continues to delay development,” the consultancy’s analysts wrote.
Indonesia, Southeast Asia’s biggest economy, has secured turbine supply for only 200 MW of its planned 8.4 GW gas capacity pipeline. Domestic coal use could reduce near-term reliability risks in power supply, but it may also slow decarbonization.
“As a result, Indonesia is placing greater emphasis on accelerating solar deployment alongside selective gas development,” WoodMac said.
Iran War Unknown
The current crisis in the Middle East has thrown a curveball to Southeast Asia policymakers, who are scrambling to ensure near-term gas supplies amid soaring prices and tightening markets. Some governments have opted for increased use of coal for power generation. Coal cannot fully replace the lost gas supply, but it has created a welcome buffer to help Asia go through the biggest ever supply disruption in energy markets.
“The crisis is prompting a reassessment of policy and investment strategies amid a strong prioritisation of energy security,” the International Energy Agency (IEA) said in its new report Southeast Asia Energy Outlook 2026.
Despite an expected rise in coal demand in Asia Pacific, the crisis isn’t a coal comeback but a reality check for APAC's energy transition, said Tonmit Talukdar, Analyst, Coal Research at Rystad Energy.
Governments are staying the course on their goals, but many gas-fired power projects are likely to be delayed amid supply chain issues and volatile feedstock prices.
The Middle East crisis has made diversification a central priority for Southeast Asia, with clean energy, electrification, and efficiency as key levers to reduce import exposure and strengthen the resilience of the energy systems, the IEA said.
The agency expects Southeast Asia’s renewable capacity at 120 GW as of 2024 to nearly triple by 2035 under the current policy settings, and potentially jump fivefold if all announced targets are achieved.
Still, coal and gas-fired power plants will continue to play a role in all scenarios by 2050, supplying bulk electricity under scenarios based on current and stated policies, while pivoting more quickly to flexible operation under announced pledges, the IEA reckons.
By Tsvetana Paraskova for Oilprice.com
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