Why South-east Asia is a prime destination for energy and infrastructure investments

AS THE global economy continues to be challenged by ongoing trade tensions and geopolitical uncertainty, investors are looking for the next pocket of growth. In this context, South-east Asia’s significant transformation in the global energy and infrastructure investing space is relevant.

South-east Asia is not burdened by legacy energy systems to the same extent as the West. This creates a significant opportunity to build the future from the ground up.

Capital deployed today can define how 700 million people power their homes, move their goods and connect to the world tomorrow. The question is: Who will have the conviction to help South-east Asia get there?

Demand drivers

South-east Asia’s digital economy is reported to have reached a gross merchandise value of US$263 billion in 2024, said Temasek and Google.

With much of South-east Asia home to a young and “digital-first” population, rising data consumption is driving strong demand for better data infrastructure and storage capacity. Digital services with high-capacity power systems have created a substantial rise in the need for data centre expansion across the region, with Singapore and Malaysia at the forefront.

Concurrently, South-east Asia is projected to account for 25 per cent of global energy demand between now and 2035, driven by the region’s rapid urbanisation. Countries such as Indonesia, Vietnam and the Philippines are experiencing a rise in large-scale infrastructure projects to support their growing populations and increased tourism. Meanwhile, industrialisation efforts are being made to expand access to reliable electricity in remote and rural areas.

The International Energy Agency has said that South-east Asia is one of only two regions in the world (the other being the Middle East) where emissions are rising in line with gross domestic product.

These growing demands have served as a catalyst for clean energy investment. Following COP28, eight in 10 Asean member states have made net-zero pledges with mid-century target dates. To achieve these pledges, the countries must diversify their energy sources.

Opportunities for renewable energy investment

South-east Asia’s landscape provides an abundance of natural resources for clean-energy investment. Malaysia, the Philippines, Thailand, Vietnam and Indonesia have year-round sunshine and utility-scale solar potential. Vietnam and the Philippines, with coastal and mountainous areas, create strong opportunity for onshore and offshore wind projects too.

Looking at hydropower, Laos has positioned itself as the “Battery of South-east Asia”. However, cooperation frameworks are still being developed between neighbouring countries with transboundary rivers such as the Mekong River.

Geothermal energy also holds significant potential for the region, especially in countries such as Indonesia, which is strategically located along the Pacific Ring of Fire. There is also rapidly increasing demand for battery projects, whether standalone or integrated with renewable energy generation assets.

This potential is already being realised in projects by Actis, an investor in sustainable infrastructure; examples of projects are MTerra Solar, a solar power and battery storage facility in the Philippines, and Levanta Renewables, a pan-South-east Asian renewable platform with assets in Thailand, Philippines, Vietnam and Malaysia.

For many countries in South-east Asia, grid infrastructure is still in its infancy. With grids now needing to be equipped to efficiently integrate intermittent renewable energy sources, they can effectively “leapfrog” onto next-generation systems, in preference to maintaining outdated ones. This gives investors the opportunity to fund grid assets designed to accommodate new technologies, without the legacy cost constraints.

Furthermore, cooling systems account for a significant portion of the energy use in the region. Innovations such as advanced cooling technologies provide firms with attractive sustainable investment opportunities.

Cooling systems are frequently used in data centres, a sector which is rapidly expanding across Asia. Since January 2025, Asia has announced almost 13 gigawatts of new data centre projects, requiring over US$180 billion in capital. This brings the Asia-Pacific total funding needs close to US$750 billion this year.

Political landscape

Most governments across South-east Asia have positioned infrastructure as a core pillar in their economic development, recognising that public markets alone cannot fund the growing demand.

South-east Asia’s role on a global stage can serve as a neutral platform for major powers to engage, as we saw at the recent Asean summit; many cooperative initiatives were brokered, from the bloc’s renewable energy action plan to various trilateral digital infrastructure frameworks.

What’s next for the region

By deploying renewable power where coal once reigned and coupling it with battery storage and advanced grid-edge technologies, the region leapfrogs past the usual intermittency issues towards more resilient, modern energy systems.

Together, these factors make a compelling case for South-east Asia as a strategically located destination for infrastructure and renewable energy investment.

The writer is managing director for energy infrastructure, Singapore, at Actis