Oil and gas supply shock triggered by the Middle East conflict has led several Southeast Asian countries to ramp up their coal reserves. A recent report, however, reveals that the region's shift back to coal is likely to increase costs sharply rather than reduce them.
The report, "Economics of coal versus renewables in Southeast Asia’s energy crisis", published by decarbonisation research and analysis company Zero Carbon Analytics (ZCA), reveals that the region’s shift back to coal could perhaps turn out to be the most expensive option.
ZCA said, “Recent spikes in global oil and gas prices—triggered by the ongoing war in the Middle East—have prompted short-term switching from gas to coal across the region. However, this shift is already pushing up coal prices, exposing ASEAN countries to the same volatility they sought to avoid. Renewables offer a cheaper, more secure alternative amid global energy shocks.
“Since the war in Iran began in February 2026, a surge in oil and gas prices has triggered gas-to-coal switching in Southeast Asia, pushing Asia’s coal benchmark nearly 20% above the pre-war price levels and highlighting the links between the coal, gas and oil markets.”
These facts raise urgent questions about the long-term energy security and affordability across the region.
ZCA Oil and gas researcher and author of the report, Amy Kong, said, “Fuel switching may offer short-term relief, but it ultimately locks countries into higher costs and greater exposure to global price shocks.”
She said since the onset of the crisis, Asia’s LNG prices have surged nearly 70%, with coal prices also rising as demand increases—echoing the 2022 global gas crisis, when coal reached record highs. The findings highlight a structural challenge: all forms of fossil fuels are interconnected, and shifting between them does not insulate economies from price shocks.
“Once we account for the full costs of coal, the economic case for renewables becomes overwhelming.”
Renewables
By contrast, renewables are already proving more cost-competitive and resilient. Solar power is cheaper than coal in seven out of 10 ASEAN countries, including Singapore, Vietnam, and the Philippines, and does not rely on imported fuel. Even in countries where coal appears cheaper, such as in Indonesia and Malaysia, subsidies mask its true costs, which include air pollution, health impacts, and climate damage.
Looking ahead, the report finds that replacing 45GW of planned gas capacity with solar and battery storage could save ASEAN around $4bn by 2030. Replacing gas expansion with new coal capacity, by contrast, would be the most expensive option.
The analysis concludes that Southeast Asia’s second major energy shock in five years underscores the need for a structural shift. Scaling up domestic renewable energy and strengthening regional power trade offers a more durable path to energy security.