El Niño Could Strain Southeast Asia’s Hydropower

Estimated reading time: 5 minutes · Last updated: 9 September 2026

Southeast Asia’s hydropower fleet faces a severe test from a record-strength El Niño that researchers say will cut water availability and shrink generation in the 2027 dry season. As first reported by Green Central Banking, models and recent seasonal forecasts point to weaker reservoir refill ahead of the first six months of 2027, raising the risk that shortfalls will be met with coal and LNG rather than faster renewable deployment. Hydropower supplies roughly one-sixth of the region’s electricity today; that dependence, combined with rising cooling demand, is the mechanism by which a temporary drought could push long-lived fossil infrastructure back into development.

“Planning should account not only for normal seasonal changes, but also for more challenging conditions where multiple parts of the system are under stress at the same time.”

Flavia Frederick, research associate, Asean Centre for Energy

Why El Niño reduces hydropower output and raises system risk

El Niño shifts regional weather patterns toward hotter, drier conditions that reduce rainfall and the freshwater inflows dams rely on. Hydropower plants convert stored water into dispatchable electricity; when reservoirs fail to refill during the wet season, generation available for the following dry months falls. In Southeast Asia that matters: hydropower delivers roughly one-sixth of regional electricity, and several systems are built around the seasonal storage that dams provide.

The shortfall mechanism is straightforward but consequential. Less inflow means fewer megawatts available when demand for cooling rises. The sector-level effect is already visible: hydropower generation dropped by 21 terawatt hours in 2023 compared with 2022, despite about 500 MW of new hydropower capacity coming online. That gap was filled largely by thermal plants, demonstrating how quickly shortfalls can translate into greater fossil-fuel burn.

Why early 2027 is the stress test for grids and markets

Experts warn the most acute pressure will arrive in the first six months of 2027, when reservoirs normally tapped for the dry season could be depleted. Brian Eyler of the Stimson Centre notes that hydropower is often the generation choice for the dry months and that poor refill now will limit that option in 2027. Drier-than-normal conditions unfolding through late 2026 would therefore intersect with peak electricity use for cooling and other seasonal loads.

That timing matters for planners because the window to deploy alternatives is short. Where hydropower cannot meet demand, utilities may turn to coal or LNG options already in planning or procurement pipelines. The practical result is a risk of short-term fossil capacity being built or reactivated to ensure supply, which can lock in emissions and capital commitments for decades.

Rapid, modular alternatives: solar, wind and storage plus demand measures

Thinktanks and analysts in the region argue that the fastest technical response is modular renewables paired with storage and demand-side measures. Dinita Setyawati of Ember says solar and wind with storage are the quickest to deploy and to restore after disruptions because they are more modular than large dams. Batteries, floating solar and pumped storage are cited repeatedly as ways to replace lost seasonal flexibility without building long-lived fossil plants.

Demand response and efficiency also reduce the need to build capacity under stress. Flavia Frederick of the Asean Centre for Energy highlights appliance standards, labelling and managed loads as relatively cheap, near-term levers that can be scaled before or during a drought to protect critical services. In short, the region’s toolbox includes rapid renewables buildout, storage options and demand-side programmes that together reduce the chance that a temporary water shortage becomes a permanent emissions problem.

Uneven exposure across countries and the limits of interconnection

Exposure to hydropower shortfalls is not uniform. Cambodia, Laos, Myanmar and Vietnam are the most hydropower-reliant systems in the region; among them, Laos is frequently described as the region’s power exporter. The Nam Theun 2 Hydroelectric Project (NT2) is a 1,070 MW plant that exemplifies how a single country’s reservoir performance can affect neighbours through cross-border trade.

Regional interconnection helps in normal years but offers limited protection if drought hits multiple countries simultaneously. The Mekong River Commission told Green Central Banking that a severe event would not guarantee drought everywhere, and it is studying pumped storage — identifying over 18,000 potential sites in the basin — but those projects take time. Laos’s recent experience is a caution: it cut exports to Thailand by about 30% in a dry season and paid US$240 million for imports in 2023, illustrating how quickly trade balances and national costs can swing.

What could move this either way

The bottom line

A record-strength El Niño exposes a governance gap as much as a technical one: the region’s reliance on seasonal hydropower, combined with rising demand for cooling, creates a narrow window in which temporary scarcity could shape decades of energy investment. The choice facing Asean countries is therefore not only how to plug a near-term supply gap but whether to use this episode to accelerate modular renewables, storage and demand measures. Doing so would reduce the chance that a temporary drought spawns permanent fossil infrastructure and would strengthen resilience ahead of the first six months of 2027.

What to watch

• Monitor reservoir levels and inflow reports across the Mekong basin in the first six months of 2027; that period is flagged as the most acute stress window.
• Watch Asean policy announcements and emergency procurement plans in early 2027 for accelerated tenders of solar, wind or storage capacity and for demand-response rollouts.