The Strait of Hormuz disruption has prompted Asia-Pacific power systems to prioritize energy security, boosting coal and nuclear generation in the short term while accelerating structural investment in renewables and storage, BMI Country Risk and Industry Research said last Thursday.
According to the research house, governments across the region have shifted to a “security-first” dispatch model, maximizing coal and nuclear output to reduce dependence on disrupted liquefied natural gas (LNG) and oil flows.
In Japan, the Ministry of Economy, Trade and Industry (METI) announced on March 27 that it would temporarily relax efficiency restrictions on coal plants from April 1, 2026, for one year.
The measure is expected to cut LNG consumption by around 0.5 million tons, more than 10 percent of at-risk volumes, while leveraging Indonesian coal and more flexible LNG supply.
South Korea has also pursued similar measures. By mid-March, Seoul prepared contingency plans to lift coal caps and raise nuclear utilization to as high as 80 percent, formalized in a broader crisis package by late March.
India has also instructed coal plants to run at maximum output and ordered Tata Power’s 4GW imported-coal plant in Gujarat to operate at full capacity from April to June 2026 to meet peak summer demand.
The Philippines has also combined higher coal dispatch with direct market intervention.
President Ferdinand Marcos Jr declared a one-year state of national energy emergency on March 24 and suspended the Wholesale Electricity Spot Market (WESM) after spot prices jumped 58 percent in March.
Manila also launched a PHP 20 billion ($330.16 million) emergency fuel-security fund to maintain supply reliability, blending fiscal support with market intervention.
In the near term, elevated coal and nuclear utilization will persist, said BMI.
It is noted that governments are actively shielding consumers through subsidies, tax cuts, and price caps.
South Korea expanded fuel tax cuts to 15 percent for gasoline and 25 percent for diesel, raised pump-price caps, and launched a KRW 5 trillion ($3.32 billion) emergency bond buyback.
Thailand capped diesel prices at THB 33 ($1.01) per liter and froze cooking-gas rates through May, while Malaysia increased petrol subsidies to MYR 2 billion ($500 million), and Vietnam suspended select fuel taxes until mid-April.
In emerging Asian markets with limited fiscal capacity, responses have shifted to demand rationing and load curtailment, according to BMI.
Bangladesh imposed daily fuel-purchase limits, rationed gas, and temporarily shut four fertilizer plants, while seeking external financing and alternate diesel imports.
Pakistan reduced workweeks, closed schools, and cut official fuel allowances. Sri Lanka raised electricity tariffs for households, industry, and hotels.
BMI noted South Asia is particularly exposed to LNG and oil shocks, as fiscal constraints force industrial curtailment and affordability stress rather than absorption through subsidies.
It is noted that gas remains a key power source across Asia Pacific (APAC), accounting for 94 percent of Singapore’s mix, 65 percent in Thailand, 59 percent in Bangladesh, 48 percent in Taiwan, 31 percent in Japan, 29 percent in South Korea, and 25 percent in Pakistan.
BMI noted that exposure to the Strait of Hormuz varies, with North Asia less reliant on Middle East LNG (10 percent to 20 percent), whereas South and Southeast Asia, particularly Bangladesh and Pakistan, depend on it for up to two-thirds of LNG imports.
The crisis is also reshaping medium-term energy strategies, highlighting the strategic value of domestic energy sources such as renewables, nuclear, and battery storage, said BMI.
India accelerated approvals for wind projects and battery storage systems, while South Korea’s crisis response under President Lee Jae-myung included incentives for renewable investment.
Vietnam’s Vingroup proposed scrapping an LNG-to-power project in favour of renewables and storage due to elevated LNG costs.
Cambodia cut import duties on solar panels, lithium batteries, and energy-storage products from 15% to zero, effective April 1, 2026, to encourage renewables deployment.
BMI warns that while coal extensions and market interventions provide short-term relief, there is a risk these measures become entrenched.
It opined that APAC’s response reflects a hierarchy of energy policy priorities: security first, affordability second, and decarbonization third.
The scale of the shift varies according to fiscal capacity and domestic resource availability, it added.
Over the medium term, BMI highlighted countries are expected to accelerate domestic renewables, battery storage, and nuclear capacity to structurally reduce import dependence.
The trajectory of the Hormuz disruption and evolving policy responses will continue to shape investment decisions, credit risk, and market reforms across the region, it added.
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