Malaysia’s Transition Towards Renewable Energy: Opportunities, Challenges, and the Road Ahead

The persistent burning of coal, oil, and gas worldwide poses a significant threat to our planet’s climate. Fossil fuels are the largest contributor to global climate change, accounting for over 75% of global greenhouse gas emissions, as per United Nations figures. With the global consensus growing for an energy transition – fueled by the increasingly devastating impact of climate change, especially in Asia – Malaysia, known for its tropical climate, is especially impacted. The country is witnessing a rise in surface temperatures, particularly affecting urban areas like Kuala Lumpur.

Recognizing these environmental challenges, the Malaysian government launched the National Energy Transition Roadmap (NETR) in August 2023. This ambitious plan outlines the transformation of Malaysia’s energy system, with a target to increase the country’s installed renewable energy capacity to 40% by 2035 and 70% by 2050. This shift is critical considering Malaysia’s current 91% dependence on fossil fuels, with coal, oil, and natural gas forming the bulk of its energy mix. The roadmap allocates RM2 billion (US$431 million) for a national energy transition fund, aiming to attract over RM25bn in investments. This financing strategy includes grants, loans, rebates, and incentives, supporting a comprehensive national approach to energy transition. The plan also envisions the establishment of a national energy transition committee to facilitate cross-sectoral cooperation in energy policy planning. The NETR not only steers Malaysia towards its net-zero greenhouse gas emissions goal by 2050 but also promises to boost the economy by producing green services and products, creating new jobs, and attracting investments. Malaysian Minister of Economy Rafizi Ramli highlighted the potential for a 10 to 15% uplift in GDP value from market-creating products in the high-growth, high-value sector. Additionally, the NETR is expected to create 350,000 new jobs, with 70% of income gains flowing to low- and medium-income households, thereby ensuring broad-based benefits from the energy transition.

Key to this transition are six energy levers outlined in the NETR, including carbon capture, green mobility, bioenergy, hydrogen, energy efficiency, and renewable energy. These levers aim to reduce dependence on fossil fuels for electricity generation and economic growth. In renewable energy, the goal is to achieve 70% renewable capacity and completely phase out coal power plants by 2050. The hydrogen strategy includes phasing out grey hydrogen production by 2050, establishing a low-carbon hydrogen hub by 2030, and adding two more hubs by 2050. In bioenergy, the roadmap plans to increase biorefinery capacity to 3.5 billion liters and biomass and biogas power generation capacity to 1.4 gigawatts (GW) by 2050. For CCUS, the plan outlines the development of three hubs with a total storage capacity of up to 15 million tonnes per annum (Mtpa) by 2030, expanding to three more hubs with a capacity of 40 to 80 Mtpa by 2050. These ambitious targets reflect Malaysia’s resolve to transition from fossil fuels to more sustainable energy sources.

Flagship Projects and Industry Participation

Some flagship projects include:

Hybrid Hydro-Floating Solar: TNB, the nation’s biggest utility provider, plans to generate up to 2.5 gigawatts of power from hybrid floating solar plants at hydro dam reservoirs. These innovative plants, to be developed in phases, aim to provide round-the-clock renewable energy, addressing the mismatch between electricity demand and solar energy availability.

Hydrogen and Ammonia Co-firing: In collaboration with Petronas, TNB will work on applying hydrogen and ammonia at coal power plants to reduce greenhouse gas emissions and increase renewable energy share.

Large-Scale Solar (LSS) Parks Development: YTL Data Center Johor Solar PV Park located in Johor, this is a 500MW solar PV power project, expected to be operational in 2024.

Photo: YTL DC

These projects are designed to be scalable, with a focus on impacting regulations. These foresee the decarbonization of power sources, development of a flexible grid, and empowerment of cross-sector electrification. As the country propels towards its goal of increasing renewable energy capacity, the demand for specific components, technologies, and services in these sectors is set to rise.

Malaysia’s renewable energy sector encounters various procurement challenges similar to those faced globally. These include high initial costs for renewable energy technologies, which particularly impact smaller players in the market. There’s also the issue of technology availability, where access to the latest renewable energy technologies is often hampered by high costs or supply chain constraints. Supply chain issues themselves are a significant challenge, with Malaysia potentially struggling to secure a reliable supply of components for renewable energy systems, especially in the context of global supply chain disruptions. Additionally, the sector is affected by regulatory and policy challenges. Uncertainties in government policies and regulatory frameworks can hinder the procurement process, leading to delays in project implementation. Financing and investment pose another hurdle, as securing funding for renewable energy projects, especially those involving new and emerging technologies, can be difficult. Another critical challenge is the skill and knowledge gaps in the local workforce. The lack of skilled professionals with expertise in renewable energy technologies affects the procurement and effective implementation of these projects. Furthermore, limited local manufacturing capabilities for renewable energy components in Malaysia mean there is often a reliance on imports, which can be more costly and less efficient. Lastly, land acquisition and environmental concerns are significant obstacles. Procuring land for large-scale renewable energy projects must be balanced with environmental impact assessments and local community concerns, adding complexity to the development of renewable energy infrastructure.

Tackling the procurement challenges in Malaysia’s renewable energy sector requires a comprehensive and strategic approach. Addressing the high initial costs of renewable energy technologies can be done through government subsidies, tax incentives, and favorable loan terms to make these projects more financially accessible, especially for smaller entities. Enhancing access to the latest renewable energy technologies involves not only addressing cost barriers but also strengthening supply chain resilience. This could be achieved by developing stronger relationships with multiple suppliers and investing in local supply chain capabilities. To navigate regulatory and policy uncertainties, a clear and consistent governmental framework is essential. This could include stable long-term policies that encourage investment in renewable energy. Establishing public-private partnerships can also play a crucial role in securing financing and investment for renewable energy projects, particularly those involving new technologies. Addressing the skill and knowledge gaps requires a focus on education and training programs to build a workforce proficient in renewable energy technologies. Collaborations with universities and vocational training institutions can be pivotal in this regard. Additionally, enhancing local manufacturing capabilities for renewable energy components is crucial. This can be achieved through incentives for local manufacturers and investment in research and development to foster domestic production capabilities. Finally, tackling land acquisition and environmental concerns involves a careful balancing act. Implementing rigorous environmental impact assessments and engaging local communities in the planning process can ensure that renewable energy projects are sustainable and socially responsible. By adopting these strategic solutions, Malaysia can effectively overcome the challenges in its renewable energy procurement and pave the way for a more sustainable energy future.