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[SINGAPORE] In the face of punishing solar tariffs from the US, South-east Asia has a silver lining: a glut in the supply of photovoltaic panels could make solar projects cheaper and increase adoption. But to seize this opportunity, the region will have to ramp up investments in energy storage systems.

The US recently imposed tariffs of as high as 3,500 per cent on solar exports from four South-east Asian markets: Cambodia, Malaysia, Thailand and Vietnam. These countries accounted for nearly 80 per cent of US solar imports.

As Prime Minister Lawrence Wong noted in his May Day speech, the US is effectively imposing an import ban on South-east Asian solar panels.

“There is no way you can export anything at these kinds of tariffs. The businesses can close shop,” he said.

While there is impending pain for solar-panel makers – and possibly consolidation as some companies shut down – there is also an opportunity for the survivors to focus more on domestic markets.

Solar adoption has been steadily growing in the region as the technology gets more cost-competitive, but there remains an investment gap for storage systems.

Malaysia has been identified as a market ripe with potential.

In a May 5 report, BloombergNEF analyst Felix Kosasih noted that in March, peninsular Malaysia tapped solar to meet 8.3 per cent of its early afternoon power demand, on average.

This is up more than 60 per cent from a year ago.

But as Kosasih also noted: “A high level of solar adoption can lead to surplus electricity around mid-day, which can pose challenges to grid stability if projects are not complemented by energy storage systems.”

Without infrastructure to store the excess energy generated by solar, there could be a need for curtailment of the system, leading to “wasted energy and financial losses”, he added.

The recent blackouts in Spain and Portugal further serve as a cautionary tale of what can happen when investments into grid infrastructure and energy storage do not keep pace with green energy output.

China has similarly faced issues with solar energy curtailment. The country’s rapid expansion of renewables newbuild has outpaced the development of transmission infrastructure, noted energy player Sembcorp Industries in its recent annual report.

While global investments in renewables have almost doubled since 2010, investments into grid infrastructure have stagnated at about US$300 billion a year – and to meet climate targets, they need to double to over US$600 billion a year by 2030, according to the International Energy Agency (IEA).

Time for investors to step in

Both public and private investors will need to fill the gap. In Malaysia, the government is preparing for its first battery storage auction later this year, with plans to commission four facilities with a combined power capacity of 400 megawatts in 2026.

Kosasih called for the Malaysian government to encourage investments with a “long-term pipeline of frequent and regular auctions”.

The focus would be not just batteries, which can provide up to four hours of storage, but also other solutions with longer storage durations, such as pumped storage hydropower.

More energy storage investments are also needed across the rest of South-east Asia. The region is set to account for 25 per cent of global energy demand growth up to 2035, second only to India, according to the IEA. This will be more urgent as solar energy becomes increasingly economical.

According to the think tank Carbon Tracker, it could become cheaper to build solar and onshore wind capacity – rather than operate existing coal plants – in Indonesia, Vietnam, and the Philippines by the end of the next decade

Some investors are already seizing the opportunity, such as British International Investment, the UK’s development finance institution, and Pentagreen Capital, a debt-financing platform for sustainable infrastructure by HSBC and Temasek.

In March, both investors unveiled US$80 million in joint financing for utility-scale solar and battery storage projects across South-east Asia.

To be sure, many investors are spooked by the current backlash on green energy led by US President Donald Trump.

The Stoxx Global Energy and Materials Index – which tracks key players in the energy storage and fuel cell industry – is more than halved from its past high in 2021.

It will then be up to regional governments to consider what incentives and financing structures – such as blended finance – can best draw in capital.