Thailand’s decision to put THB200 billion (US$6.01 billion) behind an emergency energy transition fund could provide an early test of whether Southeast Asia can turn years of sustainable finance rulemaking into clean energy projects large enough to reduce its dependence on imported fossil fuels.
The government plans to help one million households install 5 gigawatts (GW) of rooftop solar within a year, using subsidies and loans to shield consumers from soaring energy prices triggered by conflict in the Middle East, Energy Minister Akanat Promphan said this month.
“Otherwise we’ll be subjected to what’s happening in the Middle East forever,” said Akanat, as cited by Reuters.
Gas accounts for more than 60 per cent of Thailand’s power generation, while renewable sources including solar provide about 10 per cent. More than a quarter of the gas used for power is imported, and Thailand purchases half its liquefied natural gas (LNG) on the spot market, exposing it to sharp movements in global prices.
The rooftop programme, which includes financial support of THB50,000 per household, would more than double Thailand’s small-scale solar capacity from an estimated 3.6 GW at the end of 2025. The target is due to be incorporated into a new 25-year power development plan.
But Thailand’s intervention also highlights a wider challenge confronting the Association of Southeast Asian Nations (Asean). The region has created green bonds, sustainability-linked loans, taxonomies and blended finance platforms, yet its banks and energy markets continue to direct more capital towards fossil fuels than low-carbon energy.
The issue is increasingly not whether sustainable finance products exist, analysts say, but whether they are affordable and flexible enough – and supported by enough investable projects – to change the underlying energy system.
Fossil finance retains the advantage
Banks headquartered in eight Asia Pacific markets facilitated just US$0.83 of low carbon energy financing for every US$1 directed towards fossil fuels in 2024, according to a BloombergNEF study published in May.
The study covered banks based in Japan, South Korea, Taiwan, Singapore, Indonesia, Malaysia, Thailand and the Philippines, which collectively arranged about US$240 billion in energy supply financing annually between 2022 and 2024.
Their financing activity in the Southeast Asian markets examined – Indonesia, Malaysia, Thailand and the Philippines – was more heavily skewed to fossil fuel development. The banks provided less than US$0.50 to low carbon energy for every US$1 of fossil fuel financing in those countries during 2023 and 2024, BloombergNEF found.
Although fossil fuel financing declined gradually over the three-year period, low carbon transaction volumes grew only marginally and remained below their 2021 level. Financing for wind and solar was broadly flat in 2024, with grids and energy storage accounting for most of the increase in low-carbon financing.
The disparity persisted despite a 23 per cent increase in energy transition investment across Asia Pacific markets excluding mainland China in 2025, far above the global growth rate of 8 per cent.
The region invested US$1.30 in low-carbon energy supply for each US$1 spent on fossil-fuel supply, compared with a ratio of US$3.50 to US$1 in Europe. Those calculations excluded spending on imported fossil fuels.
BloombergNEF estimated that low carbon energy investment globally needs to average about four times fossil-fuel investment this decade to align with scenarios limiting global warming to 1.5°C.
The figures suggest that established fossfuel companies retain important financing advantages. They typically have large balance sheets, existing cash flow, collateral and regular refinancing requirements, while renewable developers may depend on a single project securing permits, a grid connection and a creditworthy electricity buyer.
Windmills at Ilocos Norte, Philippines. Image: Shekinah Togonon on Unsplash
Not simply a shortage of money
Southeast Asian clean energy investment increased by 60 per cent between 2015 and 2025, helping push total regional energy investment above US$100 billion last year, according to the International Energy Agency’s Southeast Asia Energy Outlook 2026.
Clean energy investment reached about US$47 billion in 2025, approaching the US$50 billion directed towards fossil fuels. But the region still received only about 3 per cent of global energy investment despite accounting for approximately 9 per cent of the world’s population.
Financing conditions are particularly important for solar, wind and grids because most of their costs are paid upfront. Higher borrowing rates therefore have a greater influence on project viability than for conventional generation, where a larger portion of costs comes from fuel purchased during operation.
The weighted average cost of capital for utility-scale solar in 2024 was 9.4 per cent in Indonesia, 9 per cent in Vietnam and 8 per cent in the Philippines, according to the IEA’s Cost of Capital Observatory. Indicative costs were 6 to 8 per cent in Thailand and 6 to 7 per cent in Malaysia, compared with 5 to 6.5 per cent in advanced economies.
However, the IEA found that financing costs alone did not explain weak investment. In Indonesia, international lenders and development finance institutions were competing to finance a limited number of utility-scale solar projects.
Despite an estimated 1,500 GW of solar potential, Indonesia had installed less than 1 GW of utility-scale capacity by 2024. Survey respondents cited slow and complex procurement, unpredictable project volumes and permitting processes involving multiple government bodies.
In Vietnam, transmission constraints, power curtailment and disputes over feed-in tariffs contributed to a sharp fall in solar investment after the rapid expansion seen between 2019 and 2021.
Across the markets surveyed, regulatory and political uncertainty, permitting delays and insufficient transmission infrastructure were among the principal risks raising financing costs.
That means providing banks with more capital will not necessarily generate more renewable investment unless governments simultaneously improve procurement, grid access, tariffs and power-purchase arrangements.
In Vietnam, transmission constraints, power curtailment and disputes over feed-in tariffs contributed to a sharp fall in solar investment after the rapid expansion seen between 2019 and 2021. Image: Tâm Koppelaar on Unsplash
Rulebooks completed
Asean has already developed much of the framework intended to guide sustainable investment.
The ASEAN Taxonomy Board released the fourth and complete version of its regional sustainable-finance taxonomy in November 2025. The board said it was moving from developing the framework towards encouraging its adoption and helping financial institutions put it into operation.
Asean’s 2026–2030 energy cooperation plan also targets renewables providing 30 per cent of primary energy supply and 45 per cent of installed power capacity by 2030, according to the ASEAN Centre for Energy.
Meeting those goals will require a substantial change in capital allocation.
An ASEAN Centre for Energy assessment published in 2026 estimated the region’s annual energy-transition financing gap at as much as US$170 billion by 2030, including US$150 billion for clean energy.
The centre identified regulatory uncertainty, incomplete rules, unclear planning, foreign-exchange volatility, political risk, insufficient incentives and grid limitations as leading constraints. It called for greater use of guarantees, concessional capital, political-risk insurance and other mechanisms designed to absorb specific risks.
Those instruments may need to become more targeted. A guarantee cannot compensate for a project that lacks a grid connection, while concessional financing alone may not resolve uncertainty over electricity tariffs or the creditworthiness of the buyer.
Currency mismatches pose another obstacle. Renewable projects often earn revenue in local currency but borrow in dollars, leaving them exposed to depreciation and expensive hedging. A Climate Policy Initiative study covering Indonesia, the Philippines and Vietnam said mobilising more domestic capital could reduce those costs by allowing projects to borrow in local currencies.
Corporate demand for sustainable finance nevertheless appears strong. An August survey published by Standard Chartered found that all the participating companies had raised sustainable finance and expected to do so again. Nearly three-quarters believed the transition would strengthen their businesses, but identified affordability and infrastructure as the main obstacles to faster progress.
Asean accounted for only 3 per cent of outstanding sustainable debt globally, Standard Chartered said.
Thailand plans to use subsidies and loans from its energy-transition fund to support the installation of 5 GW of rooftop solar across one million households within a year.
The government has not yet disclosed the lending terms or detailed how the programme will address grid connections, equipment supply and installer capacity.
Authorities are expected to provide further details when the 5 GW target is incorporated into Thailand’s new 25-year power development plan, due to be released next month.
