Asia’s role in global climate action is critical. Accounting for over half the world’s population, Asia is responsible for 46 per cent of global greenhouse gas emissions and 41 per cent of the total energy consumption. Most Asian countries depend on coal and imported fuels for electricity, making their energy mix 20 per cent more emission-intensive than the global average. To make matters more complicated, many Asian economies have energy-intensive industries such as steel, aluminium and shipping, making the transition to cleaner energy challenging.
To enable the effective shift to cleaner energy, the Asian Development Bank (ADB), in collaboration with the World Economic Forum (WEF), developed an energy transition readiness assessment (ETRA). This initiative considers the critical needs of countries in the Asia-Pacific region to transition to sustainable and secure energy systems that support global net zero goals. The findings of the initiative were published in the “Energy Transition Readiness Assessment for Developing Asia and the Pacific” report in April 2025.
ETRA, which is modelled on the WEF’s Energy Transition Index (ETI), assesses how prepared a country is to undertake energy transition, measuring its ability to cut emissions and build systems that bring social and economic benefits. The assessment covers 26 countries in total, including 25 of ADB’s 41 developing member countries (DMCs), along with Brunei Darussalam. Although small island developing states (SIDS) are included in the additional analysis, the main focus is on countries with sufficient data for a complete assessment.
The aim of the ETRA initiative is to give governments, investors and other stakeholders a clear picture of where each country stands in its energy transition journey. It identifies key areas for improvement, promotes knowledge sharing and supports informed decision-making.
Key findings
The ETRA framework includes 61 indicators across seven key areas – energy systems, energy economy linkages, infrastructure system, macroeconomic and investment environment, regulatory environment, technology and diffusion ecosystem, and social system.
The assessment indicates that while countries in Asia and the Pacific region are making progress in their energy transition efforts, most of them still lag behind advanced economies in five out of seven key areas. Gaps in the quality of regulations, innovation ecosystems and the overall investment environment persist.
The region’s energy transition is reliant on a resilient energy system, supported by the two pillars of reduced dependence on fossil fuels and enhanced energy security. Coal consumption continues to be a major obstacle. As of 2022, it accounted for 57 per cent of the region’s electricity generation. Many coal-fired plants are relatively new and continue to be a cheaper resource, making early retirement costly. Addressing this challenge will require strong carbon-pricing policies, access to transition financing and concessions. Initiatives such as ADB’s Energy Transition Mechanism, which was piloted in Indonesia, offer a promising approach to phasing out coal in a manner that is effective and also socially equitable.
On a positive note, the renewable energy sector is gaining momentum, which reduces the carbon intensity of the generation mix. In 2022, nine countries, including China, India and Kazakhstan, added more than 75 per cent of their new power capacity from renewable sources. However, energy efficiency remains low, and the adoption of cleaner technologies has been slower than required. Energy infrastructure also needs attention. While the region benefits from relatively flexible power systems due to hydro and gas integration (compared to advanced economies), the overall infrastructure quality is below global standards, due to overloaded transmission and distribution (T&D) lines and undersized transformers, as a result of inadequate planning, unplanned expansion and poor maintenance practices.
Ensuring a fair transition is especially crucial, as lower-income communities are at a high risk of rising energy costs. Since 2010, over a billion people in the region have gained access to electricity, primarily led by Bangladesh, India and Indonesia, but making energy affordable for all remains challenging. Investment in clean energy has surged, particularly in China, which accounted for 90 per cent of the region’s investment between 2013 and 2023, but sustaining this momentum will depend on greater private investments. Since 2013, clean energy investment in the region has grown by over 900 per cent, reaching $729.4 billion in 2023 and about 45 per cent of the global investment. Except for China, which is leading in innovation and producing clean energy technologies and services, as well as a few other Southeast Asian countries and India, Asian countries continue to face significant hurdles in the greater diffusion and production of clean energy products required for the energy transition.
Another area that requires attention is strengthening and harmonising regulatory frameworks to accelerate and enforce energy transition policies. The ETRA regulatory environment component measured readiness by assessing climate commitments, policy frameworks and governance quality. Among 26 developing Asian economies evaluated, 16 countries are shown to be making progress, with Georgia, Malaysia and Thailand standing out in particular. However, others lag, emphasising the continued need to enhance regulatory frameworks and governance to support the clean energy transition.
Finally, SIDS, which face unique challenges due to limited land, heavy reliance on fuel imports, weak T&D networks and climate vulnerability, will need stronger regulatory frameworks, improved infrastructure and greater international support to achieve their ambitious decarbonisation targets. Particularly, grants, concessional finance, capacity building and technical support are essential to help SIDS expand resilient renewable energy infrastructure.
Performance of infrastructure systems
The report states that the energy infrastructure in many countries needs to be revamped for a cleaner and more sustainable future. For many developing countries, this means moving away from large, centralised power systems towards building networks that are more decentralised and adaptable. The shift will require significant changes, which would involve addressing current system vulnerabilities, improving reliability and increasing digitalisation, while taking into account the impacts of climate change and country-specific nuances.
ETRA highlights three key pillars that determine how prepared a country’s infrastructure is for this shift – its resilience to climate-related disruptions, the overall quality of its energy infrastructure, and the development of both physical and digital systems.
Climate resilience is one of the biggest challenges. Many countries in developing Asia face serious threats from extreme weather events such as floods, storms and heatwaves. Compared to advanced economies, their energy systems are far less prepared for these shocks, about two-thirds as capable, according to the assessment. Water stress is another growing concern, especially for energy systems that rely on water for cooling or hydropower. Cambodia, for instance, benefits from favourable geography and rainfall, while Brunei Darussalam has taken proactive steps such as launching reforestation projects to reduce the risks of flooding and landslides. However, in general, much of the region is struggling to adapt its infrastructure to an increasingly volatile climate.
At the same time, the growing digitalisation of energy systems introduces new risks, particularly around cybersecurity. With more connected devices and systems in place, the potential for cyberattacks increases.
T&D networks require significant attention, as many countries in the region lose a substantial amount of electricity due to outdated or poorly maintained infrastructure. Overloaded lines and undersized transformers are common, often the result of unplanned urban growth and years of neglect. Since the early 2000s, some progress has been made in reducing T&D losses, dropping from 14 per cent in 2000 to 12 per cent in 2022, and expanding access to electricity from around 70 per cent in 2000 to more than 97 per cent in 2021. However, power grids are not fully prepared to handle the rapid shift to large-scale clean energy.
As more renewable energy sources, especially variable ones such as solar and wind, are added to the grid, the need for flexibility becomes even more critical. However, in many places, infrastructure quality remains far below global standards, largely due to persistent underinvestment in maintenance. High quality power, free from frequent voltage drops or fluctuations, is essential for making renewable energy integration feasible.
Some countries are beginning to close this gap. Hydropower and gas-fired generation have helped improve flexibility in power systems, with Turkmenistan emerging as a regional leader, based on its extensive gas capacity. These types of resources enable countries to respond swiftly to changes in supply and demand.
Digital technology is expected to play an increasingly significant role in managing modern energy systems. It enables real-time decision-making, automated control and efficient communication across the grid. For digital tools to work effectively, countries need to have solid infrastructure in place, such as fast internet, reliable mobile networks and well-equipped data centres. This will enhance responsiveness to price signals, grid frequency movements and grid operator signals to adjust electricity generation or consumption to maintain grid balance at all times. China is currently leading the region in digital readiness, and other countries, such as Malaysia, are also showing promise.
To achieve their digital transformation goals, countries need to also focus on their citizens, processes and operational systems. Utilities must be ready to integrate these technologies into their day-to-day operations. This involves building skills, modernising workflows and ensuring that supply chains are in place to support ongoing infrastructure upgrades. A good starting point for countries would be an extensive digital readiness assessment to gauge power infrastructure quality and identify how much power systems can benefit from the latest digital communication, metering, grid management and tracking, artificial intelligence and machine learning tools, and other digital technologies.
Improving the grid to accelerate the energy transition
Meeting global climate targets, including those under the Paris Agreement and net zero pledges, will require electricity grids worldwide to expand rapidly. According to the International Energy Agency, the addition of around 2 million km of new grid lines every year through 2030 is essential. This means investments of about $700 billion-$800 billion annually. For Asia, this translates to at least $2 trillion over the next decade and another $400 billion for energy storage, mostly pumped hydro (75 per cent) and battery systems (25 per cent). China alone is expected to contribute about 30 per cent of the global grid investment.
To support this transformation, ADB’s DMCs must adopt a range of measures, including the modernisation of grids, improvement in interconnectivity within and between countries, implementation of digital technologies and use of diverse financing sources.
Grid planning must go beyond reliability and affordability. It must consider long-term climate goals and integrate with other sectors such as electric mobility and charging infrastructure. Some countries are already making headway. For example, Indonesia’s national utility Perusahaan Listrik Negara has created a road map for carbon neutrality by 2060 and plans to build an additional 50 GW of renewable energy capacity up to 2034 to increase the share of renewables to 35 per cent of the energy mix by then. Thailand aims to significantly boost its share of renewable energy, targeting 51 per cent of the total power generation by 2037, according to its 2024 Power Development Plan. During the same period, the role of natural gas is expected to decline from 57 per cent in 2023 to 41 per cent, while coal’s share is projected to drop sharply from 20 per cent to just 7 per cent. The National Grid Corporation of the Philippines has highlighted that out of 17,249 MW in committed power capacity as of October 2024, 53 per cent is expected to come from renewables, mainly solar and wind. To meet the clean energy goals, the Philippines’ government is also advancing initiatives such as the Green Energy Auction Program and the Competitive Renewable Energy Zones framework to attract investment and streamline renewable project development.
Strategic planning also includes identifying renewable-rich zones and linking them to demand centres. India’s green corridor project, which involves the integration of renewable energy, especially solar and wind, into the national grid, is a good example of this. Private investment is expected to play a key role.
Cross-border integration can boost grid flexibility and reliability. Power-sharing arrangements help move electricity from areas with surplus renewable generation to areas with higher demand. For example, the Association of Southeast Asian Nations (ASEAN), comprising 10 countries, is expanding the ASEAN Power Grid to support regional renewable energy trade. As of now, nine of the 18 priority interconnections outlined in the ASEAN Interconnection Masterplan Study III are operational, offering approximately 7.7 GW of cross-border electricity capacity. Similar efforts are also under way in Central and South Asia.
Digitalisation is central to modernising grids. Smart technologies enhance automation, system awareness and the ability to respond to variable supply and demand. In the Kyrgyz Republic, fast charging batteries for public buses are programmed to recharge during off-peak hours, easing grid pressure and deferring infrastructure investments. Malaysia’s smart meter programme saw the installation of 2.3 million smart meters by August 2024. This will help improve energy efficiency, strengthen grid management and support renewable energy integration.
Addressing investment needs for grid infrastructure is a challenge. According to ADB’s estimate, ASEAN countries will need $210 billion annually between 2016 and 2030, equivalent to 5.7 per cent of the region’s GDP, in climate-resilient infrastructure. ADB has promoted public private partnerships and offered long-term loans to utilities in Georgia and India, mainly when commercial funding on such terms was not readily available. Since transmission is usually state-owned, India launched an infrastructure investment trust to attract private capital. Other countries could follow suit. The issuance of stable instruments such as green bonds will attract private investments, ensuring that the capital needed to improve and expand the grid is secured.
Conclusion
Given the economic and climatic challenges of many Asian countries, the transition to clean energy is a long and challenging road. While developed nations have had a head start towards clean energy transitions, poor infrastructure and regulatory inefficiencies, among other factors, make the transition even more challenging. Macroeconomic challenges such as high inflation, currency fluctuations and lower sovereign credit ratings raise capital costs, making clean energy projects in many developing Asian countries riskier and more expensive, compared to those in advanced economies. Additionally, underdeveloped financial markets and rising public debt limit both private and public funding availability. Moving forward, strengthening local capital markets, issuing sustainable bonds and implementing transparent policies and regulations will be critical. Ultimately, the energy transition in developing Asia depends on building smarter, more flexible and more resilient energy systems, which involve large investments and planning.
