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28 Jan 2025
Insight
Economies in the Asia region are projected to grow by 4-5% in 2025, with a corresponding 4% growth in electricity demand.
However, Asia is facing a perfect storm. Powering rapid regional development and the drive for sustainable energy has been complicated by a sudden, significant increase in demand for electricity from technology companies. Meanwhile, the prevalence of extreme weather events and geopolitical uncertainty means companies, funders and governments are facing multiple energy challenges.
So, what will Asia energy look like in 2025? We believe five key trends will shape the Asia energy markets and industries in the year ahead.
1. Growing electricity demand will strain energy supply in Asia.
Accelerated by rapid economic growth, rising temperatures and the widespread adoption of electricity-dependent technologies, demand for electricity is expected to increase by 4% globally. Notably, China, India and Southeast Asian countries will account for 85% of this growth. Energy supply in China and India should continue to grow at pace – both have a good pipeline of energy projects that will be coming online over the next few years. We expect to see large-scale procurement of capacity in Southeast Asia, particularly in Vietnam, and also expect that LNG will be used as a bridging fuel to meet demand, replacing coal. This LNG demand will be served by new projects in the US, with the Trump Administration expected to remove LNG export obstacles, as well as the Middle East where new projects in the UAE and Qatar are moving forward at pace.
2. Growing electricity requirements will also increase demand for renewable energy generation and investment.
Renewable energy is projected to generate an estimated 23% to 26% of electricity in Asia for 2025. Financing challenges for traditional energy sources will also drive investment in renewables. Governments' ambitious climate policies and incentives, as well as businesses' commitment to sustainability targets, will make renewable energy investments more enticing, thus increasing its demand. We expect to see larger scale projects and more complex projects such as offshore wind, particularly in Japan. We also expect activity in secondary markets in Asia, with buying and selling of renewable assets renewable platforms. These projects take time and remain economically challenging; renewables cannot be expected to be the sole solution in the short term.
3. Asia will see a measured approach to low-carbon hydrogen and ammonia production schemes, as well as increased interest in CO2 mitigation projects.
Driven by the favourable environment for renewable energy, significant investments are flowing into supporting infrastructure, such as electrolysers and storage facilities. China and Japan are scaling up projects, while the Japanese and South Korean governments have launched hydrogen subsidy programmes that start from 2025. We feel there is much work to be done – investors need to build the value chain for these products. New infrastructure is needed to develop, transport and store low-carbon fuel, so there will be activity in this area. Carbon capture storage and carbon capture and utilisation storage in various forms remain on the radar throughout the Asia region.
4. Asia will see increased demand for and development of sustainable aviation fuel (SAF).
Asia is positioning itself at the forefront of SAF development and production on the expectations of greater demand. With the aviation industry accounting for 2.5% of global CO₂ emissions, SAF has become an important decarbonisation strategy. Forecasts suggest that Asia will produce over 1.8 million tonnes of SAF by 2025, yet this equates to less than 1.5% of the region's jet fuel consumption, exposing a significant supply and demand discrepancy. We expect traditional downstream energy companies to increasingly invest in this emerging field. Airlines, including Cathay Pacific and Qantas, are already exploiting local production capabilities, especially from the Neste refinery in Singapore, currently the world's largest SAF production facility with a million-tonne annual capacity. We also expect an upward trend in airline engagement with SAF sources next year. Pricing remains a challenge however – SAF will remain more expensive than conventional jet fuel for some time.
5. With the pursuit of carbon reduction, the growth in nuclear power seems inevitable.
Nuclear's zero-carbon, high-volume supply characteristics are integral to the clean energy transition. According to IEA, 2025 will be a record year for global nuclear power production, with increased capacity in China surpassing France, tripling in India by 2032, and a resumption of expansion in South Korea. Other Asian countries, including the Philippines, Indonesia, and Australia, are also considering nuclear programs. We expect renewed interest in the technology, particularly in small modular reactor technology from both public and private sectors in the upcoming year and technological progress in China and Japan on nuclear fusion. We also expect increased demand for legal services from new entrants to the nuclear space. It will require significant work to establish the framework for new nuclear projects, and downside risks – including waste storage – remain an issue for governments and local communities to overcome.
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