Asia Pacific’s power industry is rapidly evolving as surging data centre installations and shifting energy policies reshape the region’s electricity landscape in 2026, according to Wood Mackenzie.
Wood Mackenzie’s Five trends to look for in Asia Pacific power & renewables report looks at key trends shaping the market this year. The region will account for 85% of global power demand growth this year, adding 790TWh. While 2025 was defined by record-breaking installations, 2026 will be defined by market maturation, regulatory pivots, and an emerging supply-chain bottleneck in conventional generation.
“Data centres are no longer just a niche load; they are the primary driver of transformational demand across Asia Pacific,” says Yanqi Cao, Senior Analyst, Asia Pacific Power Research, at Wood Mackenzie. “In Japan, a market that has seen a decade of energy demand decline, data centres are single-handedly reversing the trend. However, this growth is clashing with a global gas turbine supply crunch and a policy-driven reset in renewable markets that will test the region’s energy trilemma in 2026.”
Data centres continue to dominate the demand story
The global race for AI and data centre capacity is fundamentally changing electricity demand patterns. While the US and Europe are projected to represent 9% and 5% of global demand growth in 2026, respectively, compared to an average of 5% and 1% over the past decade, the Asia Pacific region remains the global heavyweight. According to Wood Mackenzie, the region is set to account for 85% of the 920 TWh in additional power required globally this year. China, the world’s largest power market, continues to expand at a scale twice that of the US, Europe, and the rest of the Asia Pacific combined. Outside of China, the region’s growth is fuelled by India and Southeast Asia, which are expected to contribute 50% and 25% of the remaining regional demand growth, respectively.
Renewable momentum faces a policy-driven recalibration
After years of unbridled growth, the region’s two largest markets are hitting a ‘policy plateau.’
- China: Solar and wind installations may decline for the first time in a decade, dropping to 318 GW in 2026. New merchant-pricing mechanisms (Policy No. 136) are forcing developers to face greater spot-market exposure, dampening near-term investment.
- India: Despite a record 2025, tendering activity has slowed as the market rationalizes a pipeline plagued by transmission congestion. 2026 will be a year of ‘quality over quantity,’ with new tenders increasingly mandating storage and grid-flexibility obligations.
Direct power contracting becomes the new market norm
Corporate Power Purchase Agreements (CPPAs) are moving from the periphery to the mainstream. With wind-and-battery hybrid systems now costing one-third of utility tariffs in China and 30% less in premium markets like Japan and Taiwan, corporations are bypassing traditional utilities. 2026 will see the full-scale implementation of ‘Green Power Direct Connection’ in China and Direct PPA frameworks in Thailand and Vietnam.
Gas turbine supply crunch threatens transition timelines
A critical bottleneck has emerged: the global lead time for heavy-duty gas turbines has extended to five-to-eight years. While 2026 projects are mostly secured, failure to place orders this year will almost certainly result in project slippage for 2030 targets. This is particularly acute in Southeast Asia such as Vietnam, where gas is the primary ‘bridge’ away from coal.
Low-carbon fuel generation faces persistent cost hurdles
For land-constrained markets like Singapore, Japan, and South Korea, 2026 is a year of ‘economic reality’. Despite heavy subsidies including Japan’s US$20 billion hydrogen CfD green hydrogen co-firing will maintain a massive premium over conventional LNG through 2026. Operators like JERA and Keppel will commission hydrogen-ready plants this year, but the long-term fuel supply remains a high-cost risk that many markets are still struggling to price.
