This article was co-authored with Daniel Kurniawan from Mission Possible Partnership.
Growing dependence on imported energy could push Southeast Asia's import bill to US$245 billion by 2035, compared with US$80 billion in 2024, according to the released data from the International Energy Agency.
Most ASEAN countries are already net oil importers and are on track to become net gas importers this decade. Yet the region's manufacturing sector, a key driver of export and economic growth, remains heavily dependent on fossil fuels. Rapid expansion in energy-intensive industries such as steel, cement and metals and non-intensive industries such as food and textile, has pushed industrial coal demand up nearly 90 per cent over the past decade, while electricity consumption rose 75 per cent and natural gas demand increased 45 per cent.
Fluctuating oil and petrol prices can impact on logistics costs especially for long haul transports, which are crucial for the manufacturing sector. Food systems are also affected. Fertiliser production relies heavily on ammonia, which is typically produced using natural gas. Many ASEAN countries – except for Indonesia and Malaysia – remain major fertiliser importers, making food production vulnerable to both fuel price volatility and supply disruptions.
Governments can respond to large volatility with measures to shield consumers and industries through subsidies and price controls. But this approach is becoming difficult to sustain as it puts additional burden on the constrained public budget. Fossil fuel subsidies in the region already exceeded US$40 billion before the crisis earlier this year and are likely to rise sharply in 2026.
For ASEAN, energy security is now an industrial competitiveness challenge, with three key trends emerging in the region:
- Industrial electrification becomes a competitiveness strategy
Mission Possible Partnership’s calculation shows that together renewable energy, electrification and energy efficiency can deliver approximately 70 per cent of the emissions reductions needed for a near-zero manufacturing pathway across ASEAN. Reducing dependence on imported fuels through these measures has long been framed as a climate issue, but it is increasingly becoming an industrial strategy.
Sectors such as textiles, electronics and food processing are well placed to electrify many industrial processes using technologies such as heat pumps and electric boilers. But electrification alone will not significantly reduce emissions unless ASEAN’s power systems themselves decarbonise. For sectors that already rely heavily on electricity, such as nickel and aluminium, there is a vast opportunity to deploy abundant renewable electricity.
Southeast Asia possesses enormous untapped renewable energy potential. The region has around 20 terawatts of untapped solar and wind potential – roughly 55 times its current electricity generation capacity.
Renewable energy is also becoming substantially more affordable. In many parts of Southeast Asia, renewable and storage are now among the cheapest sources of new electricity generation.
- New clean industrial sectors begin to emerge
The second trend to watch is building competitive clean industrial sectors, particularly around clean fuels such as low-carbon ammonia, methanol, and sustainable aviation fuel.
Clean ammonia, produced using low-emissions hydrogen and renewable electricity, could become a major regional industry. It offers opportunities not only for fertiliser production, but also for shipping fuels, industrial feedstocks and energy trade.
Indonesia and Vietnam are already seeing a growing pipeline with 21 announced projects of varying categories and development stages, totalling 9.5 Mtpa (million tonnes per annum) in capacity and USD$44 billion in investments.
The opportunity here is not simply commodity exports. ASEAN could move higher up future clean industrial value chains by developing regional capabilities in processing, engineering, shipping and advanced manufacturing linked to clean energy industries.
Many clean ammonia projects globally still face high costs and uncertain demand. Success will depend on whether global zero emission fuel standards take place, but also on whether ASEAN can secure abundant low-cost renewable electricity, develop clear long-term industrial strategies and establish the value chain needed for future industries.
- Regional electricity integration gains momentum
Cross-border electricity trade has long been discussed within ASEAN, but progress has been somewhat stalled. The ongoing fuel crisis might inject greater urgency. Indonesia, which has occasionally been seen as being cautious about grid integration partly because of sovereignty concerns, has announced its target to year-end start for US$30 billion clean power exports to Singapore.
This matters because energy integration can support industrial integration. More reliable and affordable electricity would help ASEAN manufacturers remain competitive while reducing vulnerability to external fuel shocks. With Singapore set to chair ASEAN next year, we may see further momentum on this agenda.
With the fuel crisis now somewhat easing, the region now has a narrow but critical window to move beyond short-term crisis management and build a more resilient manufacturing base.
