COUNTRY REPORT: MALAYSIA How grid enhancements can re-energise Malaysia’s solar energy boom

As Malaysia sets its sights on a more sustainable future, renewable energy is taking centre stage, with solar power expected to lead the expansion. The country’s Ministry of Natural Resources, Environment and Climate Change has ambitious targets to increase its renewable energy installed capacity, aiming for 31% by 2025 and 40% by 2035. It also wants to achieve 18.4 gigawatts (GW) of renewable power by 2040. Achieving these targets is tenable but Malaysia’s grid infrastructure will need significant enhancements to support the variable power source as the capacity grows.

According to the Malaysia Renewable Energy Roadmap, renewables account for 23% or 8.45 GW of its installed capacity mix in 2021, with gas and coal accounting for 39% and 34% of the total, respectively.

“Growing the amount of renewables to 18.4 GW by 2040, the grid itself needs to be strengthened for it to be able to take on the intermittency and variability of the solar energy,” The Lantau Group Principal Azrina Abdul Samat told Asian Power Samat noted that battery storage is one of the strategies the government is looking at to improve the grid. The ministry, in 2021, said that it plans to install battery energy storage systems with a 500 megawatts capacity from 2030 to support the potential of solar power, in multiples of 100MW.

Behind-the-meter, Malaysia has employed schemes such as Net Energy Metering (NEM) 3.0 and the SelfGeneration scheme to promote the installation of solar panels on rooftops for consumers to offset their bills by selfgenerating solar energy and an option to export any excess back to the utility

However, despite the falling cost of solar PV installation in recent years, only the top 1% of domestic customers have done so. The domestic tariffs in Malaysia are also one of the lowest in Southeast Asia with the lowest tier beginning at US$0.049 (RM 0.218) for the first 200kWh and the highest tier at US$0.13 (RM 0.571) for above 901kWh.

“Because of that, there’s a lesser push for domestic customers to be installing solar as they continue to enjoy the low tariffs,” she said, adding that the tariffs are also cross-subsidised.

For commercial and industrial customers, Samat said that the tariffs are competitive but on the lower side than the neighbouring countries, giving them a bigger push to deploy solar and the take-up is on the rise although some of the hindrances they face are the local legislation preventing to install solar panels on the rooftops of leased or rented facilities.

Solar potential

According to the Roadmap, large hydropower dominated the share of renewables in the country at 5,692 megawatts (MW), followed by solar PV at 1,534 MW, biomass at 594 MW, small hydropower at 507 MW, and biogas at 123 MW.

Whilst hydropower forms the bulk of the renewables capacity and the fastest means to reach the renewables aspiration, Samat noted that the sector is “constrained” due to the need for a suitable site and the high capital expenditure.

Malaysia’s low wind speeds due to its geographical location limits the potential to harness wind energy though pockets of higher wind speeds or coastal areas may still will. On the other hand, the country has a solar irradiance between 4.2 to 5.5 per kilowatt-hours per square meter per day with around 12 hours of sunshine in a day.

“Solar will be the fastest growing in Malaysia in terms of renewable choices,” she said. Fitch Solutions also expect that Malaysia’s target will be supported by the strong growth in the solar power sector.

Power Analyst David Thoo said in the report that the Malaysian government has implemented measures that would boost the country’s solar capacity.

Thoo noted that the government issued solar project tenders through the Large Scale Solar programme (LSS), LSS3 in 2020 and LSS4 in 2021, which received a total of 112 bids across 20 projects.

The energy and natural resources ministry also launched the NEM 3.0 scheme that encourages the installation of solar panels on the property of the locals, businesses, and government. Through this scheme, the participants were allowed to offset electricity bills by sending their excess solar power to the grid.

Malaysia also launched a Green Electricity Tariff (GET) programme in November 2021 which allows consumers to cut their carbon emissions by purchasing renewable energy. The consumers need to pay 3.70 sen per kilowatt-hour (kWh) or ¢0.08 of renewable energy and they will be provided with a Malaysian Renewable Energy Certificate. Under the GET programme, the government allotted 4,500 gigawatt-hours of renewable electricity that can be subscribed to.

“Our current forecast for nonhydropower renewables growth remains skewed towards solar power, as we have yet to notice any strong move by the government to advance biomass and waste growth and introduce wind power,” Thoo said in the report.

Malaysia also has a Feed-in Tariff system that mandates distribution licenses to purchase the generated electricity from renewable sources of Feed-in Approval Holders and set the rate.

Increasing renewable uptake

Malaysia has recently launched two programmes that will propel its energy transitions and green energy uptake.

Samat said the government announced in November 2022 a virtual power purchase agreement (VPPA) scheme through the Corporate Green Power Programme.

Under the programme, an eligible corporate consumer can enter into an agreement with a solar power producer to buy and sell renewable energy produced by the plant “under mutually agreed terms and conditions and price structure,” according to Malaysia’s Energy Commission.

The plant should be completed by 2025. The application for the programme ran from 7 November 2022 to 20 March 2023.

Samat also noted the launch of another GET this year offered by the largest electricity utility in Malaysia, Tenaga Nasional Berhad (TNB), with a cumulative quota of up to 6,600 gigawatthours for a subscription.

Residential and non-residential customers under the programme can subscribe to 100 kilowatt-hours (kWh) blocks, and 1,000 kWh blocks, respectively, for ¢0.08/kWh, according to TNB. They will receive Malaysia