PETALING JAYA: The power and utilities sector will see a strong multi-decade growth, driven mainly by the National Energy Transition Roadmap (NETR).
TA Research, which has reaffirmed its “overweight” rating on the sector, said the country’s focus on decarbonising its energy grid, particularly through renewable energy (RE) expansion, is a key factor in this positive outlook.
According to the research house, one of the central strategies for achieving these targets is the planned addition of nine gigawatts (GW) of RE capacity under the Malaysia Renewable Energy Roadmap (MyRER).
However, the NETR sets a more aggressive goal of achieving a 70% RE capacity mix by 2050, requiring a far more substantial increase in renewable capacity – approximately 60GW.
“By our estimates, the NETR’s target would require a massive 60GW of additional RE capacity, which we expect to come predominantly from solar,” the research house noted.
It added that to reach the target, Malaysia will need to significantly accelerate the pace of RE capacity addition, from the current rate of 0.5GW annually to an average of 2.2GW per year, ultimately aiming for 67.9GW in RE capacity by 2050.
Big investments needed
TA Research estimated that between 2025 and 2035, RM22bil in investments will be required to achieve a 40% RE capacity mix. This would be on top of an estimated RM19.9bil expected to be spent between 2020 and 2025 to hit an initial 31% RE capacity target.
Simultaneously, RE capacity growth is anticipated to be accompanied by a marked reduction in coal capacity.
TA Research said coal capacity will drop from 37% in 2020 to just 18% by 2035.
“A large chunk of the existing coal capacity is expected to fall off the grid between 2029 and 2033, while another batch of coal capacity is expected to expire from 2040 onwards with the final coal power purchase agreement from Jimah East’s 2,000MW plant scheduled to expire in 2044,” the research house said.
It added thermal coal prices rose to as high as over US$400 per tonne, a record high, resulting in significant fuel cost under recovery for Tenaga Nasional Bhd
(TNB).
This rise led to a substantial increase in government subsidies aimed at insulating the local economy from the impact of high energy prices.
“While coal was previously seen as a cheap energy alternative serving the affordability dimension of energy, this may no longer be the case, especially considering declining investments into coal in the long run which inevitably leads to gradually lower supply,” it said.
TA Research pointed to a study by the Sustainable Energy Development Authority (Seda) which identified 289GW of RE potential in Malaysia, of which only 8.45GW – about 2.9% – had been utilised by the end of 2020.
It said Peninsular Malaysia holds roughly half of the country’s RE resources, followed by Sabah and Sarawak at 35% and 15%, respectively.
The research house said solar photovoltaic, in particular, to dominate, accounting for 93% of the country’s total RE resource potential.
Ideal location
It pointed out that Malaysia’s location near the equator provides a natural advantage for solar energy generation, with rooftop solar also playing a significant role.
Policies to encourage rooftop solar development will likely remain a key feature of Malaysia’s RE policies, it said.
Of the 289GW solar resource potential, 42GW is attributed to rooftop solar, according to TA Research.
However, it noted challenges in expanding rooftop solar, particularly for residential households.
“Not all households would have the financial means to install solar panels given income disparity, while those with low consumption would find it difficult to justify such an investment,” it said.
However, TA Research added the government is exploring potential incentives, including a rooftop leasing mechanism aimed at promoting adoption among the B40 income group.
Missing component
In the firm’s view, a key missing component of Malaysia’s decarbonisation strategy is carbon pricing.
“While a voluntary carbon market has been launched, we believe a carrot-and-stick approach will eventually be embraced in order to send the right signals to the market with regards to the government’s stance on carbon emissions,” it said.
TA Research said one of the most significant recent policy developments has been the lifting of Malaysia’s RE export ban in 2023.
It noted that this, coupled with the creation of an electricity exchange for cross-border RE trading, could accelerate domestic RE growth by tapping into rising regional demand.
The research house said Singapore, with its limited land area for RE generation and a growing number of multinational corporations committed to 100% RE sourcing, represents a key market opportunity for Malaysia, especially given existing interconnections between the two countries.
“As RE-sourced electricity in Singapore commands much higher tariffs, this could drive investments into solar and battery energy storage system (BESS) projects that may not have been feasible previously at local tariffs,” the research firm said.
TA Research named RE engineering, procurement, construction, and commissioning (EPCC) players such as Samaiden Group Bhd, Solarvest Holdings Bhd, and Sunview Group Bhd as key beneficiaries of Malaysia’s energy transition.
Additionally, the research outfit expects TNB to benefit from increased grid capital expenditure to support higher RE integration and growing demand from data centres.
On the RE export front, it said YTL Power International Bhd stands out as a key player, given its existing generation and retail operations in Singapore, which could allow it to capitalise on RE exports to Singapore and the sale of green electricity there.
News reports in September said Singapore has indicated that the city-state is set to double its electricity imports through a regional grid that will include Laos, Thailand and Malaysia.
