In 2018, Malaysia announced that it had set a target of 20% renewable energy in its generation mix by 2025. 

The Southeast Asian nation, which is mainly powered by thermal power plants, recorded a two per cent contribution by renewable energy to its generation mix at the end of 2018.

20% renewable energy use by 2025

To achieve its 2025 target it is estimated Malaysia will need RM33 billion (US$8 billion) worth of investments in its renewable energy sector. The expected investments would not only come from the government but from public-private partnerships and private financing. 

To increase private participation, the government will clearly need to incentivise private financing. Apart from the continuation of government incentives, such as the Green Technology Financing Scheme, the Green Investment Tax Allowance and the Green Income Tax Exemption, the focus should be on institutional reforms. 

The introduction of Net Energy Metering (NEM) programme for solar PV in late 2018 – where PV solar energy will be first consumed and the excess delivered to national utility company Tenaga Nasional Berhad (TNB) on a one-on-one offset basis – has received a positive response. 

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The scheme applies to all domestic, commercial, industrial and agricultural sectors as long as they are TNB customers. The Ministry of Energy, Science, Technology, Environment and Climate Change has allocated 500 MW as the 2019 NEM quota out of which 450 MW is for commercial and industrial buildings and the remaining 50 MW is for residential buildings. 

As of May 2019, a total of 16.6 MW of NEM has been approved compared to the approved capacity of 18.24 MW in 2018. The country has over 4.12 million buildings with solar roof-top potential in the peninsula. So the ministry is targeting commercial and industrial buildings to go solar and adopt NEM scheme.

Malaysia’s commitment to renewable solar energy

Apart from the NEM scheme, Malaysia has also introduced the Large Scale Solar (LSS) competitive bidding programme to drive down the cost of energy for the development of large scale solar photovoltaic plant (LSS).

The first tender was released in 2016 with a total aggregate capacity of 200 MW in Peninsular Malaysia and 50 MW in Sabah, followed by the second round in 2017 with an increased total aggregate capacity of 360 MW in Peninsular Malaysia and 100 MW in Sabah/Labuan. The third round of LSS bidding opened up in February 2019 for an estimated RM2 billion ($490 million) worth of projects with a target aggregate capacity of 500 MW and expected commissioning in 2021. 

The bidding has been completed and technical evaluation is currently underway. Out of 500 MW, four projects totalling 365 MW actually bid below the gas generation price of 23.22 sen per kWh ($0.056 per kWh). 

At the time when the second LSS was conducted the reference price stood at 32 sen per kWh ($0.078 per kWh). The lower prices can be attributed to the technological advancements as well as due to the open bidding for tenders so that the prices are competitive.

Apart from solar PV, the government is also focusing on the pricing related to other renewable energy technologies so that they become competitive with gas-based projects in Malaysia

The Sustainable Energy Development Authority (SEDA) has introduced competitive bidding for small hydropower and biopower technologies. The inaugural e-bidding for small hydropower systems has been introduced in 2019. A quota of 160 MW has been allocated under this. Each application will be capped at 30 MW per location and the projects should achieve commercial operations by the second half of 2024.

The government has been also conducting e-bidding for biogas technology. The inaugural e-bidding for biogas was carried out in the last quarter of 2018. The second e-bidding for biogas has been scheduled for 2019. The quota allocated is 30 MW with each application being capped at 10 MW per location. The biogas quota is for projects that will achieve commercial operations by H2, 2022.

The implementation of the Malaysia Energy Supply Industry 2.0 (MESI 2.0) plan could drive the country to achieve the target. According to the plan, renewable energy generators do not need to sell electricity to the national utility company TNB. The green energy trading could be done through the grid which would create higher competition. 

With a series of measures taken by the government to increase public-private partnership and private financing, the country might witness more investments coming from private players in the renewable energy sector which could ultimately propel the growth of the sector and the country might achieve its 2025 target.