Transport will require US$6.2 trillion in investment by 2060 – the largest share of the Association of Southeast Asian Nations’ (Asean) US$14.2 trillion needs under a coordinated regional energy transition scenario, according to a new report by the Asean Centre for Energy (ACE).
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The intergovernmental organisation, which coordinates regional energy cooperation, launched its Asean Energy Investment 2026 report on the sidelines of the 26th Asean Energy Business Forum on 6 October.
The study puts annual transport investment needs under this pathway at US$178.2 billion, underscoring the scale of spending required beyond power generation and grids.
The Asean Coordinated Transition Scenario is a pathway that refers to Asean countries developing a more connected regional energy system, rather than relying only on separate national approaches. Under this pathway, 66 per cent of the investment would go towards how energy is used, including in transport, while 34 per cent would fund energy production and supply.
Transitioning to this pathway would require reallocating investments towards centralised electricity generation and cross-border interconnection, with estimated total required investment of US$4.3 trillion
Overall investment needs through 2060 vary by pathway, with US$7.8 trillion under a baseline scenario that follows existing trends, and US$9.8 trillion under the Asean Member States scenario, in which countries meet their national energy targets.
Indonesia’s transport energy use rose from around 25 million tonnes of oil equivalent (Mtoe) to nearly 65 Mtoefrom 2005 to 2024, far outpacing its peers as its vehicle fleet and road network expanded. Image: ACE
The scale of transport investment comes against a backdrop of rising energy consumption. Transport energy demand more than doubled in most member states between 2005 and 2024, according to the ACE report.
Domestic transport was the region’s second-largest energy-consuming sector after industry in 2024, accounting for 34.9 per cent of final energy consumption, the Asean Energy Statistical Yearbook 2026 showed.
Indonesia’s transport energy consumption rose from around 25 million tonnes of oil equivalent (Mtoe) in 2005 to nearly 65 Mtoe in 2024, the ACE report found.
The country’s vehicle fleet also continues to expand. It grew by about 22 per cent between 2020 and 2024 to 166.5 million vehicles, Statistics Indonesia reported.
Thailand and Malaysia followed at broadly comparable consumption levels, while Vietnam and the Philippines recorded sustained growth. Smaller markets saw sharper increases relative to their starting points as transport energy demand grew roughly fivefold in Laos and more than fivefold in Cambodia. Myanmar’s trajectory has been more volatile, rising sharply after 2017 before declining in subsequent years, likely reflecting economic and political disruptions rather than a structural shift in mobility patterns.
Electric ambitions, financing barriers
Electrifying the region’s extensive two and three-wheeler fleet offers an opportunity to curb oil demand. Southeast Asia had more than 270 million such vehicles in 2022, a number expected to more than double by 2050, according to ACE.
“As Asean’s power system incorporates larger shares of renewable electricity, this shift from petroleum-based mobility to electric mobility could progressively reduce exposure to imported fuels and international oil-price volatility, strengthening long-term energy security and resilience,” ACE said in the report.
But financing the shift, alongside investments in power supply and grids, remains a challenge, noted the study. Asean’s energy investment exceeded US$100 billion in 2025, yet the region attracted only about 3 to 4 per cent of global energy investment, despite accounting for about 5 per cent of energy demand and 9 per cent of the population.
Drawing on previous studies, the report estimated an annual financing gap of US$100 billion to US$170 billion through 2030. More than US$300 billion is needed for grid expansion and modernisation by 2040, including US$27 billion for cross-border connections under the Asean Power Grid.
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As Asean’s power system incorporates larger shares of renewable electricity, this shift from petroleum-based mobility to electric mobility could progressively reduce exposure to imported fuels and international oil-price volatility, strengthening long-term energy security and resilience.
High borrowing costs compound the shortfall. Clean energy projects in Southeast Asia face financing costs at least twice those in advanced economies, driven mainly by political, regulatory and offtaker risks. The latter refers to the risk that electricity buyers cannot meet their payment obligations.
Private capital accounts for only around 60 per cent of renewable-power investment in the region, compared with nearly 90 per cent in advanced economies.
The financing challenge persists despite strong overall investment inflows. Foreign direct investment into Asean rose by almost 9 per cent to US$226 billion in 2024, the largest inflow in developing Asia. Yet international project finance for renewables and infrastructure fell by 64 per cent and 82 per cent, respectively, that year.
Development finance also mobilised relatively little private capital for the region’s energy sector –an annual average of about US$79 million between 2021 and 2024, concentrated in a small number of markets and financing instruments.
To attract more investment, the report recommended tackling risks “in order, not as separate options”. Policy and regulatory reforms should first address avoidable risks through credible project pipelines, competitive procurement and greater regulatory certainty.
Strong power purchase agreements should then allocate the remaining risks between generators and electricity buyers. Financial tools such as guarantees, insurance and blended finance should address risks that remain – not substitute for those underlying reforms.
