High cost of capital and limited project pipeline hinder clean energy investment in Southeast Asia

The median weighted average cost of capital (WACC, nominal, post-tax and in local currency) for solar PV in Indonesia, Viet Nam and the Philippines based on survey responses was 9.4%, 9.0% and 8.0% respectively in 2024, while a lower range was quoted for Thailand (6.0-8.0%) and Malaysia (6.0-7.0%). These are above the range of 5.0-6.5% seen in advanced economies.

In Indonesia, there is strong participation from international lenders in project finance with USD-denominated loans. Rising US treasury rates contributed to a rise in overall WACC, while there has not been a noticeable shift in equity IRR expectations. Several respondents commented that, due to limited volumes of utility-scale solar projects in the pipeline, there is strong competition among both commercial lenders and development finance institutions (DFIs) to participate in these deals.

In Viet Nam, lending costs fell following cuts in lending rates from the State Bank of Viet Nam (SBV) in 2024, and reductions by commercial banks under direction of the Prime Minister to lower rates to achieve the Government's 8% growth target. Respondents also cite improved regulatory clarity following publication of the Revised Power Development Plan 8 released in April 2025, the new Direct Power Purchase Agreement (DPPA) scheme, a new tender scheme and a new round of solar price caps, with variation by location and incorporating storage systems.