COUNTRY REPORT: MALAYSIA

Renewable Energy Certificate and will be exempted from the imbalance cost passthrough from January to June 2023.

“I do believe Malaysia in its efforts to improve and grow the renewables,” Samat said. “The two new developments, CGPP and GET, are active measures and initiatives that should really improve and should really grow the renewables in Malaysia, in line with the target that we have.”

“Solar is going to be driving the growth for renewables with the economy picking up and a lot of more corporate players are looking to boost their ESG targets,” Samat said.

RE deployment challenges

With the current share of renewables in the generation capacity, Rystad Energy sees it is feasible for Malaysia to reach 31% renewables share target by 2025, “but this will require a serious commitment to expanding the solar PV and bioenergy fleet,” said Head of Power Research

Carlos Torres Diaz. “We expect close to 500 MW of new solar PV capacity to be installed in 2023 but the utilisation of coal and gas plants is likely to remain high as demand continues to increase,” Diaz said.

To reach the goal of 31% renewable energy share in 2025, the roadmap showed that large hydropower is expected to reach 5,826 MW, followed by solar by 4,706 MW. Smally hydro should reach 1,153 MW, biomass at 862 MW, and biogas at 333 MW.

The roadmap has also identified resource potential for the country with 269 GW for solar PV, lead by ground-mounted configurations with 201 GW, followed by rooftop solar with 42 GW and floating configurations at 17 GW. Malaysia also has 13.6 GW resource potential for large hydro, 3.6 GW for bioenergy, 2.5 GW for small hydro, and 229 MW for geothermal.

However, deploying them is not without challenges. Jun Yee Chew, head of Asian Renewables Research said that LSS is the only way to deploy utility-scale solar PV in the country, with foreign participation in the programme limited to 49%.

He added that as gas and coal receive government subsidies, this makes renewables less competitive, “artificially driving the true cost of fossil fuel down and diverting much-needed investment in the renewables.” The roadmap said there is difficulty in deploying solar PVs in securing land for LSS as well as debt financing for solar rooftop systems. There is also a lack of regulatory framework for customer choice, capacity limits, and limitations on the NEM scheme to assets on the premises of the customers.

The country’s roadmap also cited a longer gestation period, high development costs, public acceptance, and government and policy support, amongst others as the key challenges in the development of large hydropower projects.

Moving forward

To achieve the goal for the solar sector by 2025, Malaysia’s roadmap stated that it will hinge on the existing programmes but will be paired with the potential new business models. Future NEM programmes will be reviewed whilst the offtake tariffs will gradually converge with energy costs, whilst NEM tariffs and grandfathering of contracts will remain which will create more incentives and boost the rate of NEM uptake.

Other business models will be explored aside from NEM and LSS, including corporate power purchase agreements (PPA), and third-party access frameworks. The roadmap also noted that they will look into other LSS auctions for solar that will take up lesser land such as floating solar.

Aside from expanding the corporate PPAs from the limited 600MW, the government should offer more incentives that will aid projects with higher upfront capital expenditure such as through low-interest loans, Chew said. One way Malaysia could do this is by seeking out the Just Energy Transition Partnership like in Indonesia and Vietnam.

Regulatory roadblocks should also be reduced to accelerate the deployment time of the project, improving the economics of developers. Transmission infrastructure should also be upgraded but it could be shared with the private sector due to high capital cost.

“Malaysia’s government should gradually remove fossil fuel subsidies to ensure renewables can compete on a level playing field. The fossil fuel subsidy money should also be used to invest in renewables,” Chew said.