Can Southeast Asia keep the lights on for solar projects as costs rise? - Eco-Business
Published February 19, 2026
Can Southeast Asia Maintain Momentum for Solar Projects Amid Rising Costs?
As solar energy continues to gain traction as a viable renewable energy source in Southeast Asia, stakeholders within the industry are grappling with rising costs that could impact the region's ability to sustain its solar projects. The escalating expenses associated with solar technology, including the price of materials and labor, raise concerns about the future viability of solar initiatives in the area.
The International Renewable Energy Agency (IRENA) reported that the cost of solar photovoltaic (PV) systems has increased significantly over the past year. In 2021, the average global cost of utility-scale solar PV fell to $0.05 per kilowatt-hour (kWh), but by 2022, it had risen to $0.07 per kWh. This upward trend in costs could hinder the progress of solar energy adoption in Southeast Asia, where many countries are striving to increase their renewable energy capacity.
Current Landscape of Solar Energy in Southeast Asia
Southeast Asia is home to a growing number of solar projects, with countries like Vietnam, Thailand, and Malaysia leading the charge. Vietnam, in particular, has witnessed a remarkable surge in solar capacity, with installed capacity reaching 19.4 gigawatts (GW) by the end of 2021, making it the largest solar market in the region. The country's feed-in tariff (FiT) policy has played a pivotal role in attracting investments, but the recent rise in costs poses challenges to future projects.
Thailand has also made significant strides in solar energy, with an installed capacity of approximately 3.6 GW as of 2021. The country has implemented various policies to support solar development, such as net metering and a solar rooftop program. However, the increase in costs could impact the affordability of new projects and limit the expansion of existing initiatives.
Malaysia, with an installed capacity of around 1.2 GW, is also focusing on solar energy as part of its renewable energy strategy. The country aims to achieve 20% of its energy mix from renewable sources by 2025. However, as costs rise, the government may need to reassess its targets and policies to ensure the continued growth of the solar sector.
Factors Contributing to Rising Costs
Several factors contribute to the rising costs of solar projects in Southeast Asia. One of the primary drivers is the increasing price of raw materials used in solar panel manufacturing, particularly polysilicon, which is a key component of solar cells. The price of polysilicon surged by over 300% in 2021 due to supply chain disruptions and increased demand from the solar industry.
Additionally, logistical challenges have also played a role in escalating costs. The COVID-19 pandemic caused significant disruptions in global supply chains, leading to delays in the delivery of essential components for solar projects. Transportation costs have also risen, further exacerbating the financial strain on project developers.
Labor costs have been another contributing factor, as the demand for skilled workers in the renewable energy sector continues to outpace supply. This has resulted in increased wages for personnel involved in the installation and maintenance of solar projects, adding to the overall costs.
Impact on Future Solar Projects
The rising costs associated with solar projects may lead to a slowdown in the pace of new installations in Southeast Asia. Project developers may need to reassess their financial models and seek alternative financing options to ensure the feasibility of their projects. The potential for reduced profitability could deter investors from entering the market or lead to the postponement of planned projects.
Moreover, the increased costs could impact the competitiveness of solar energy compared to other energy sources, particularly fossil fuels. As countries in the region continue to rely heavily on coal and natural gas for their energy needs, the economic viability of solar projects may come under scrutiny.
Government Response and Policy Adjustments
In light of the challenges posed by rising costs, governments in Southeast Asia are considering various policy adjustments to support the solar sector. Some countries are exploring the possibility of introducing new incentives or revising existing feed-in tariffs to ensure that solar projects remain attractive to investors.
For instance, Vietnam's government has indicated a willingness to review its FiT policy in response to the changing economic landscape. This could involve increasing the tariff rates to better reflect the current market conditions and encourage continued investment in solar energy.
Thailand has also been proactive in addressing the rising costs of solar projects. The government has launched initiatives aimed at reducing the regulatory burden on solar developers and streamlining the permitting process. These measures aim to enhance the overall investment climate and promote the growth of the solar sector.
In Malaysia, policymakers are working on a comprehensive renewable energy plan that includes strategies to mitigate the impact of rising costs. This may involve increasing public funding for solar projects or fostering partnerships between the government and private sector to share the financial risks associated with new installations.
Conclusion
The future of solar energy in Southeast Asia is at a critical juncture as stakeholders navigate the challenges posed by rising costs. While the region has made significant progress in expanding its solar capacity, the increasing expenses associated with solar projects could hinder further growth. Governments will play a crucial role in shaping the future of the solar sector through policy adjustments and incentives aimed at maintaining investor interest and ensuring the continued development of renewable energy sources.
As the world shifts towards cleaner energy solutions, Southeast Asia must find ways to keep the lights on for its solar projects, balancing the need for sustainability with the economic realities of rising costs.
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