Policy drift in Southeast Asia pushes European renewables firms toward more predictable markets

Southeast Asia was once seen as the next frontier for renewable energy—a region buzzing with potential, with rising power demand and ambitious government promises to move away from coal. For European utilities, it seemed like the perfect place to invest, grow, and help drive a clean-energy transformation.

But that optimism is fading. Big players like Portugal’s EDP Renewables and Denmark’s Orsted have pulled back from projects or exited certain countries altogether in recent years, citing a lack of long-term policy clarity. Instead, they are turning their attention to more mature Asia-Pacific markets like Japan, Australia, and Taiwan, where regulations and grids are less of an obstacle.

The explanations are familiar yet exasperating: governmental barriers, severed power grids, and political régimes that scuffle to sustain fixed and solid energy policies. Coal still rules the region’s energy mix, and without pivotal restructuring, the move to greener options could remain excruciatingly sluggish.

Pedro Vasconcelos, an EDP executive overseeing the Asia-Pacific region, put it plainly: “The bet we wanted to make is that we could actually participate in this transition… but something hasn’t clicked yet.” It’s a sentiment echoed by many investors who came hoping to be part of a clean-energy revolution—only to find the reality more complicated.

Navigating Southeast Asia’s energy maze

With roughly 700 million people, Southeast Asia is full of promise. Energy demand is growing fast, and countries like Indonesia and Vietnam have made commitments to reduce coal use. But below its exterior, economic variances, regulatory complications, and topographical and environmental challenges make a smooth green conversion ambiguous, if not unreachable.

Politics hasn’t helped. A $20 billion climate deal meant to help Indonesia phase out coal plants remains tangled in legal disputes and funding debates. Thailand’s shifting political landscape has delayed a new national power strategy. And Vietnam, once a star for investors thanks to generous feed-in-tariffs, is now weighing retroactive changes that could upend the sector, leaving investors nervous and developers on edge.

“The regulatory frameworks are still evolving and often not fully bankable,” notes the European Chamber of Commerce in Singapore, pointing to a steep decline in foreign investment over the past few years. Companies such as Norway’s Equinor and Spain’s Iberdrola have scaled back or pulled out, frustrated by policy unpredictability and the challenge of turning green ambitions into profits.

Rebuilding confidence and attracting investment

While some European utility groups withdraw, homegrown players with regional know-how and proficiency are interceding, making the most of guidelines and strategies that favour domestic businesses. For instance, in Malaysia and Thailand, renewable sales have restrictions on foreign proprietorship, offering local firms an advantage.

Yet, there is hope. Experts agree that Southeast Asia could rekindle foreign investment—if governments provide stability, reform power markets, and clearly signal demand for renewables. Investors want certainty: transparent power purchase agreements, long-term policy commitments, and a consistent framework to make the numbers work.

“There is still a large pool of capital waiting to be unlocked pending regulatory reform and greater willingness of governments to embrace private sector contribution,” says Raksit Pattanapitoon, a lead analyst at Rystad Energy.

With the right policies in place, Southeast Asia could reclaim its status as an exciting, high-potential destination for green energy—one where ambition meets opportunity.