IEEFA Asia Newsletter

Welcome

The ongoing Iran conflict and the closure of the Strait of Hormuz have underscored the vulnerabilities faced by Asian countries heavily reliant on fossil fuel imports, reinforcing the urgency of accelerating renewable energy deployment. Beyond decarbonization, renewables also act as a hedge against fossil fuel price volatility and strengthen energy security by reducing exposure to external supply shocks.

These risks have shaped the IEEFA Asia team’s research agenda this month, driving rapid analyses to assess national exposure and to strengthen the broader macroeconomic case for expediting the energy transition.

Key findings include:

• The Iran conflict has exposed South Korea’s vulnerability to fossil fuel dependence — driving up costs and disrupting supply — prompting the government to accelerate a shift toward a more diversified, efficient, and renewable-led energy system. The marginal cost of generating electricity from liquefied natural gas (LNG) has doubled. Fuel costs alone now roughly match the full retail electricity tariffs charged by the Korea Electric Power Corporation (KEPCO) to customers.
• Indonesia’s reliance on diesel for remote electrification has locked the country into a cycle of expensive imports, volatile fuel prices, and heavy subsidies, exposing it to global oil market fluctuations and supply risks. Solar plus battery energy storage systems (BESS) offer a low-cost alternative, with electricity costs of USD0.08–0.20 per kilowatt-hour (kWh) compared with diesel at USD0.29–0.65/kWh, enabling potential savings of USD1.5–2 billion annually in subsidies and USD2 billion in avoided fuel imports.
• The Iran conflict poses heightened risks for gas-dependent Thailand, which relies on gas for 66% of its power output. LNG accounts for 27% of its gas supply, and 28% of its cargo deliveries traverse the now-closed Strait of Hormuz. Thailand’s cost of sourcing a spot LNG cargo has increased by an estimated 125%, attributed to LNG prices rising from USD11 to USD23.50 per million British thermal units (MMBtu) and a 5.3% depreciation of the Thai Baht.
• Japan faces several risks due to its exposure to global LNG prices, with its total LNG import bill likely to spike. Higher LNG costs in the country are expected to pass through to wholesale power markets and retail tariffs. Several utilities plan to raise tariffs, with household electricity bills projected to increase by JPY15,000 (USD95) from April 2026.
• An over-reliance on long-term, rigid contracts in Pakistan had led to a surplus of LNG before the current Middle East crisis. High LNG costs and rising solar power resulted in a surplus of 177 LNG cargoes from 2026 to 2031. Rapid growth in solar generation and lower grid consumption in the country provide a hedge against dependence on global LNG.
• South Korea's financial system ranks highly among the ASEAN+3 economies on conventional metrics, yet its ability to mobilize capital toward climate goals remains comparatively weak. This gap highlights a fundamental structural issue — the misalignment between national institutional financial strength and urgent regional and global climate objectives.

We invite you to view the analyses in full for more detailed insights.

Warm regards,

Paige Nguyen

Latest Releases

Media Highlights

     Other media highlights include:

• BBC: The Iran conflict: Effects on Asia’s economy, LNG flow, and energy transition
• The Financial Times: Middle East war strengthens case for renewables, say clean energy experts
• Al Jazeera: How war on Iran turned Pakistan’s LNG surplus into a looming shortage
• Bernama (Malaysian National News Agency): Rising tensions in the Gulf expose Southeast Asia's energy vulnerability
• National Public Radio: How the energy crisis fueled by the war in Iran is affecting Asia
• Dawn: Running on sunshine: Pakistan’s solar boom to tide over Middle East energy crisis
• The Polycrisis: Electric World Order | The Quiet Revolution

Engagement Updates

IEEFA Around the Globe

• IEEFA Europe: Germany’s gas and hydrogen gamble (March 31)
• IEEFA South Asia: The war opens up renewable energy pathway (March 27)
• IEEFA Australia: The perfect storm to boost energy security (March 23)
• IEEFA North America: Ammonia build-out: Recipe for risks (March 12)