The utilities and electricity sector in Asia-Pacific (APAC) enters 2026 in a phase of deep transformation. Structural growth in consumption, driven by industrial electrification, data centres and rising residential needs, contrasts with pressured profitability and growing exposure to liberalised energy markets. This dynamic forces operators to redefine their business models in a climate of regulatory and geopolitical uncertainty.
Demand growth and tariff pressure
Electricity demand is increasing at an average annual pace of 4.6% over 2024-2026 in the APAC region, with China accounting for nearly 70% of that growth. In India, rapid urbanisation and the expansion of air conditioning boost internal consumption, while Malaysia emerges as a regional hub for digital hosting. In Johor, data centre consumption could exceed 68 TWh by 2030, already putting pressure on power capacity in 2026.
However, this trend collides with the rapid evolution of market mechanisms. A growing number of operators are exposed to price volatility on spot markets, challenging the stable revenues once guaranteed by long-term Power Purchase Agreements (PPA). This shift, underway in China and Australia, affects the cash flow of Independent Power Producers (IPP) and State-Owned Enterprises (SOE), making their revenue streams more sensitive to price cycles and supply-demand imbalances.
Margin pressure despite renewable expansion
The accelerated shift towards renewable energy is transforming the composition of utilities’ aggregated EBITDA. In 2026, renewable assets represent the majority of operating income in the region. While this change improves the perceived quality of earnings among institutional investors, it also increases variability due to solar and wind intermittency.
The continued decline in the Levelised Cost of Energy (LCOE), particularly in China and India, fuels intense tariff competition. This price pressure, combined with rising grid integration costs (notably storage), weighs heavily on return on invested capital. In some Chinese provinces with high solar penetration, spot prices can turn negative at midday, forcing operators to rely on batteries to arbitrage energy on the market.
Financial sustainability and sovereign credit dependence
Sector stability continues to rely on implicit or explicit government support. Most entities rated by credit agencies in Asia-Pacific are Government-Related Entities (GRE), with credit profiles aligned to their respective sovereigns. In South Korea, Korea Electric Power Corporation faces a wall of debt, worsened by retail tariff freezes despite rising production costs.
In India, NTPC raises capital through the listing of its green subsidiary, NTPC Green Energy, enabling the financing of a 60 GW renewable target by 2032. The use of Restricted Group structures has become a key tool to secure access to international bond markets while isolating operational risks.
Geopolitical shocks and supply chain vulnerability
In 2026, the technological decoupling between China and Western economies reshapes supply chains for critical equipment. China produces 92% of global solar modules and 82% of wind turbines, concentrating a dominant share of added value. This forces developers to choose between cost competitiveness and regulatory compliance.
The United States and the European Union adopt new trade barriers, extending tariff exemptions while opening investigations into potential dumping or subsidisation. In response, Chinese manufacturers relocate production capacity to Southeast Asia, increasing compliance risks and equipment traceability challenges for utilities.
Critical minerals and energy security risks
Dependence on strategic minerals becomes a key vulnerability. China restricts exports of gallium, graphite and rare earth materials, affecting supply chains for electronic and energy components. Meanwhile, Indonesia maintains its ban on raw nickel exports to build local industrial capacity.
This resource protectionism fragments supply chains and introduces major variability in equipment costs, particularly for lithium-ion batteries, transformers and high-voltage direct current (HVDC) systems.
Infrastructure investment pressures: networks and storage
Transmission infrastructure represents the main technical bottleneck of the transition. In China, State Grid Corporation invests more than 650bn RMB annually in ultra-high-voltage (UHV) lines to link western renewable generation to eastern consumption hubs. However, global shortages of cables and transformers delay projects by 12 to 24 months.
Battery Energy Storage Systems (BESS) expand rapidly due to a 50% drop in lithium-ion cell prices between 2023 and 2026. In Australia, these installations replace peaking capacity and participate in market arbitrage.
Regulatory risk and legal uncertainty
The legal framework remains fragile in several countries. In Vietnam, payment delays at Electricity of Vietnam, lack of sovereign guarantees for PPA and retroactive tariff adjustments have undermined investor confidence. This situation raises the prospect of international arbitration.
In India, despite large-scale ambitions, slow land acquisition and financially weak distribution companies (Discoms) hinder project execution. Developers increasingly turn to commercial direct sales through Open Access contracts to reduce counterparty risk.
Data centres and artificial intelligence reshape power demand
Energy needs from data centres grow at an exponential pace. In 2026, hyperscalers require continuous and low-carbon energy, but variable renewables cannot fully supply constant loads. This leads South Korea and Japan to reconsider the role of nuclear energy in their generation mix.
To meet demand, companies sign virtual PPA to hedge exposure and offset emissions while securing long-term supply.
