Waiting to transition to renewables is a losing game for companies

THE Iran war hit Asia disproportionately hard, compared with other regions in the world. That’s because Asia buys around 60 per cent of its oil from the Middle East, according to the Asian Development Bank. 

The supply and price shock did not stop at oil. 

Asian prices of liquefied natural gas (LNG), long treated as the region’s bridge fuel – an energy source that supports the transition to renewables – jumped 97 per cent in the first week, LSEG data showed.

By contrast, prices rose just 11 per cent in the US, which can increase domestic supply in the event of a shortage. (* see amendment note below)

Even though it seems that the Iran war could wind down soon, it is hard to say that this energy crisis is a one-off affair.

While governments can still rely on reserves, coal and restarting nuclear plants to cushion the blow of another energy crunch, they cannot provide long-term subsidies as fiscal debt mounts globally. 

Companies, increasingly, are on their own, and are facing a narrower window to secure supply, protect margins and manage energy costs. In this context, the turn to renewables is no longer just an ESG box to tick.

From macro reaction to corporate response

As a result, within the most competitive companies, the debate is shifting from hedging energy prices to removing exposure to it altogether. They are doing so by treating power not as a cost to ride out, but as a position to secure in an unstable environment.

The difference between the Iran oil shock and previous crises is that some alternatives are now commercially mature.

Renewable energies are one of the most stable and cheapest forms of energy today.

For instance, the prices of solar modules produced in Asia fell by about 90 per cent between 2015 and 2024. Installed on site, they are undeniably the most local source of energy a corporation can ever procure. 

Beyond energy production, long-term power-purchase agreements (PPAs) strengthen the economic case for renewables.

While such contracts are not unique to renewable energy, solar and wind projects have no fuel costs, allowing them to offer long-term prices that are less directly exposed to fluctuations in oil, gas and coal markets.

Corporations can therefore secure greater visibility over part of their electricity costs for 15 to 20 years, without making any upfront capital investment. That is why renewables are becoming a prerequisite to competitiveness in an unstable environment.

Tech firms as leading energy buyers

Across Asia, technology firms and data centres are now leading the pack in their updated approach to energy needs.

It is tempting to cast these firms as villains. Undeniably, data centres strain the power grid: In Singapore, they already use nearly 20 per cent of the country’s total power grid, based on the 2026 Global Data Center Report by the International Data Center Authority. 

But they are indisputably the most savvy buyers in the market for one reason: Electricity is their single biggest cost, so they refuse to treat it as a side utility bill.

Leading technology companies are therefore major buyers of renewable and carbon-free electricity with long-term PPAs, and are increasingly seeking to match their power consumption with clean generation on an hourly basis.

Google and Microsoft, for example, have joined the UN-backed 24/7 Carbon-Free Energy Compact, alongside major renewable energy suppliers.

The lesson for everyone else is not to admire data centres’ balance sheets, but to notice that, in a volatile world, every energy-intensive company’s cost structure is starting to look like that of technology firms.

As the largest and most sophisticated buyers of power, technology giants will be the first to gain pricing power – they have already priced in the world that the rest of us are about to live in.

The importance of timing

What the energy teams of these companies understood is that timing is key. Even though long-dated, fixed-price contracts with suitable terms and reliable grids are still essential, they are finite and grow scarcer as more buyers move to secure volume.

Late adopters, then, will be in a weaker position. They could face premiums of up to 30 to 40 per cent, relative to buyers that secured capacity earlier, based on our proprietary modelling of constrained Asian power markets.

The precise gap will vary by market, contract tenor, grid conditions and project availability, but the trend is clear: Delayed procurement can create a structural cost disadvantage.

The most forward-looking buyers have gone further still, procuring renewables not just for their individual sites, but also as a single portfolio across their regional footprint or their whole supply chain for overall competitiveness.

The savings such a move could obtain are unprecedented: Since the beginning of the war, a long-term solar contract could cut a corporation’s electricity costs by around 50 per cent against grid tariffs in some countries.

For example, according to our modelling, Samsung’s manufacturing division in Vietnam has locked in savings of between 20 and 25 per cent against the national grid.

Toyota Group’s car parts manufacturer JTEKT in Japan has also secured a 40 per cent electricity cost reduction against grid tariffs before the war, a gap that has only widened since.

The cost of waiting

There is the counter-argument that energy shocks will not speed up the energy transition.

A recent Financial Times analysis suggested that the Iran energy crisis may not hasten the adoption of renewables, as governments fall back on coal and nuclear, and focus on short-term relief.

But that misses the game theory at work in this scenario. The issue is not whether one crisis accelerates the transition, but which risk each player chooses to carry.

One company locks in renewable power early. If the oil market calms down, it still owns cheaper and more stable electricity in a world where demand, grid costs, inflation and geopolitics could keep pushing prices up.

The other waits. If volatility lasts, it enters the same market later – and, with its weaker leverage, secures fewer projects at a higher price for the same input.

In this game, waiting is not a neutral action. It is a bet that the cost curve stops moving – which will never happen.

For open, trade-dependent economies such as Singapore – almost entirely reliant on imported energy – that bet is increasingly hard to justify.

A company’s ability to plan, invest and keep people employed rests on the stability of its inputs. Energy is now the least stable of them.

What is scarce is not the solution, but the willingness to move first.

Inaction may now prove costlier than transition: The companies that treat power as a position to take, not a bill to pay, will spend the coming decade negotiating from strength, while the rest pay more and wonder when the game began.

The writer is CEO of Peak Energy, an independent power producer based in Singapore

* Amendment note: An earlier version of this story listed the wrong geography for LNG prices.