Southeast Asia’s energy transition is being shaped by a strong tilt towards solar power and electric vehicles (EVs), which together captured nearly 90 percent of the region’s funding, highlighting both momentum and structural gaps in the ecosystem, according to a report by Tracxn.

The report showed that energy transition funding in the region reached about $1.8 billion, with solar and EVs accounting for $1.6 billion.

Solar alone drew $1.1 billion, or roughly 62 perent of total funding, cementing its role as the anchor of Southeast Asia’s clean energy investment landscape.

EVs followed with $505 million, reflecting growing interest in electrified mobility.

In contrast, other critical segments such as energy storage and energy efficiency remain underfunded. Storage attracted just $119 million, while efficiency secured $77 million, together making up only about 11 percent of total funding.

The imbalance underscores a broader trend in Southeast Asia where capital is concentrated in more established, policy-supported sectors, leaving system-enabling technologies relatively overlooked.

Tracxn said this “safety-first” investment approach reflects investor preference for lower-risk opportunities with clearer revenue visibility, such as utility-scale solar and EV platforms.

However, it also points to missed opportunities in areas essential for long-term grid stability and decarbonization.

Energy efficiency, in particular, stands out as the most underfunded segment despite being widely regarded as a key tool for energy security.

It receives just a fraction of the capital allocated to solar and faces the lowest conversion rate from seed to Series A funding at only 11 percent, indicating significant barriers to scaling.

Across the ecosystem, progression beyond early-stage funding remains limited.

Of more than 2,000 energy transition companies in Southeast Asia, only 13 percent have secured funding.

Solar leads in maturity, with 109 funded companies out of 1,078 and the highest number of exits, including 50 initial public offerings and 25 acquisitions.

EVs and storage lag behind, with 54 and 41 funded companies respectively, while efficiency has seen only six firms reach Series A.

The report also highlighted a structural mismatch between where capital is raised and where it is most needed.

Singapore dominates as a financial hub, capturing the bulk of funding across all sub-sectors, including 78 percent of solar capital, 94 percent of storage funding and nearly all investment in energy efficiency.

However, major energy demand markets such as Indonesia, Vietnam, Thailand and the Philippines receive a much smaller share of investment routed through Singapore.

This disconnect limits the deployment of capital in countries with the greatest need for renewable energy infrastructure and grid upgrades.

“Capital pools in Singapore rather than reaching high-demand markets,” the report noted, adding that the region lacks the integrated manufacturing ecosystems, consistent policy frameworks and deep domestic demand seen in leading markets such as the United States and China.

Globally, the gap is stark. Solar funding in the United States alone stands at $39.5 billion, far exceeding Southeast Asia’s $1.1 billion.

Similar disparities are seen in EVs and storage, where cities such as Irvine and Shanghai individually surpass the region’s total funding levels.

Energy storage, in particular, shows the widest divergence, with Southeast Asia’s $119 million dwarfed by multi-billion-dollar investments in advanced economies.

Within Southeast Asia, countries that have made progress have done so through clear policy direction.

Vietnam’s feed-in-tariff program between 2017 and 2020 rapidly expanded solar capacity, while the Philippines has introduced reforms to accelerate project approvals and attract investors.

In markets where such measures are absent, capital inflows have remained limited.

Investor activity further reinforces the concentration trend. The report found that 78 venture capital firms are active in EV investments and 38 in solar, compared with 41 in storage and just 24 in efficiency.

Firms such as Peak XV Partners and SEEDS Capital are backing EV platforms, while players like Trirec are active in solar.

By comparison, investments in storage and efficiency are more selective. Companies including VFlow Tech and Alterno have attracted limited backing, while efficiency-focused firms such as SensorFlow remain concentrated in Singapore.

Looking ahead, Tracxn expects several trends to shape the region’s energy transition from 2026 onwards.

Funding in the EV sector is likely to stabilize after a decline from $157 million in 2022 to $35 million in 2025, reflecting market recalibration rather than waning interest.

At the same time, energy storage could reach an inflection point, with early-stage companies in areas such as flow batteries, hydrogen and grid-scale storage potentially advancing to Series A funding over the next two years.

Development finance institutions are expected to play a larger role in supporting these technologies, particularly as commercial capital remains focused on generation assets.

The report also pointed to emerging opportunities in grid software, demand-response platforms and energy efficiency startups outside Singapore.

A key indicator of progress will be whether companies in Indonesia or Vietnam can secure later-stage funding, signaling a shift towards more geographically distributed capital.

Ultimately, Southeast Asia’s energy transition remains in an early stage of development, characterized by strong growth in solar and EVs but limited depth in enabling technologies.

Unlocking the next phase of growth will require a shift in both capital allocation and policy support.

Tracxn said investors may need to move beyond asset-heavy generation and adopt a more system-oriented approach, including distributed energy solutions such as microgrids, rooftop solar and demand-side management.

Greater use of blended finance could also help bridge funding gaps in emerging markets.

“The focus going forward is not just the volume of deployment, but the quality of the system,” the report said, noting that investments in storage, efficiency and grid reliability will be critical to ensuring a sustainable and resilient energy transition in Southeast Asia.

Southeast Asian startups total funding surges 110 percent year on year to $2.8B in Q1 – Tracxn