Highlights
10%
Highest generation share of solar and hydro in meeting Peninsular Malaysia’s daytime demand in 2023
95%
Untapped solar power potential in Malaysia in 2035 after solar is built as per NETR (National Energy Transition Roadmap)
-53%
Electricity generation costs from solar compared with fossil fuels in 2023 for Peninsular Malaysia
About
The report examines Malaysia’s electricity transition roadmap, focusing on how it can maximise its plentiful solar potential with targeted policies for faster solar growth and battery storage. It also evaluates the electricity trends in each key region, Peninsular Malaysia, Sabah and Sarawak, offering an overview of the opportunities and challenges and suggesting how they can contribute to Malaysia’s renewable energy targets. The transition pathway provided in a Malaysia-specific energy transition study by the International Renewable Energy Agency (IRENA) is used as a benchmark to demonstrate that a pathway to clean electricity can deliver increased affordability and security benefits for the country.
Executive summary
Malaysia can reap affordability and security benefits from rapid solar growth
Malaysia’s National Energy Transition Roadmap (NETR) sets an ambitious commitment for the country to reach 70% renewable capacity in the energy mix by 2050, with solar power as the dominant source and gas utilised as the transitional fuel away from baseload coal.
From data provided in the NETR, Ember estimates that the generation share of renewables will contribute to about 52%, and gas will account for the remaining 48% of the mix in 2050. This could leave Malaysia’s power sector vulnerable to global fuel price volatility and domestic reserve depletion. Hence, the government could look to raise renewable energy ambitions for the power mix to be better diversified.
By utilising more of its abundant solar power resources, Malaysia can unlock affordability and security benefits in the power sector. Technically, solar power can reliably meet Malaysia’s daytime demand, while the non-solar hours demand could be addressed by utilising hydropower and building more storage facilities over time. Despite the high cost, investing in energy storage solutions such as battery energy storage systems (BESS) is critical. Efficiently managing the increasing solar loads requires upgrading the current grid infrastructure.
A gradual increase in solar power could also strengthen affordability in Malaysia’s power sector, insulating the country from the risk of rising electricity tariffs, which may be caused by fossil fuel price volatility. Therefore, policies to further support solar growth and BESS adoption across Peninsular Malaysia, Sabah and Sarawak regions can allow each region to excel in its solar power adoption and contribute to the national power transition target.
Director of the Institute of Energy Policy, and Researcher at Universiti Tenaga Nasional
Overcoming significant challenges in integrating high levels of solar power and implementing effective solar firming is crucial for ensuring grid stability and reliability. Despite the high cost, investing in energy storage solutions such as battery energy storage systems (BESS) is critical. By strategically planning, embracing technological advancements, and promoting public-private cooperation, Malaysia has the potential to harness its immense solar resources and pave the way for a secure and resilient energy future.
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Malaysia's electricity landscape
Malaysia aims for 29% renewables in its energy mix, with fossil fuels accounting for the rest
Malaysia’s renewable energy under the National Energy Transition Roadmap is expected to contribute 29% of the generation mix in 2035, while fossil fuels will account for 71%.
In this chapter:
Unlocking the benefits
Solar offers a win-win solution
Massive resource potential, energy security benefits and affordability make solar a promising energy transition option
In this chapter:
By looking at these trends, Ember calculates the shift of solar from fossil fuels could potentially reduce the electricity tariff for non-domestic customers by 38% in 2023, cheaper than the actual electricity tariff applied after the surcharge ($0.089 USD per kWh). However, it is worth noting that grid system upgrades are necessary to accommodate the transition in this analysis. We did not include the costs for system integration and updates in this estimate. The DNV study estimates that an 8.1% increase in total system cost may be needed if the solar penetration rate rises from 5% to 70% of the power mix in 2030, which may impact the electricity tariff rate calculation.
It is also worth noting that the bid prices from competitive solar auctions in Peninsular Malaysia can be lower than the levelised costs of electricity (LCOE), demonstrating a challenge when comparing both prices. In addition, final contract prices of selected solar plants may differ from the lowest auction rates due to the consideration of other factors, such as technical requirements, when awarding projects. Despite the discrepancies, using these tender-determined prices as a benchmark to see solar price trends in Malaysia is a useful indication that the government should consider prioritising solar projects in the coming years.
This analysis shows that Peninsular Malaysia can potentially benefit from boosting solar power generation, as it can lower and stabilise electricity tariffs, not only in Peninsular Malaysia but also in Sabah. This can help Peninsular Malaysia and Sabah bring their tariffs closer to Sarawak’s. With decreasing technology costs, solar power is cheaper than fossil fuels for meeting the growing electricity demand in the long run. By decoupling the power sector from fossil fuels, Malaysia can make significant progress in sustaining and enhancing electricity affordability for all, which is an integral part of the country’s vision in its National Energy Policy framework.
Securing the future
Advancing solar goals can bolster Malaysia’s energy affordability and security
64% fall in utility-scale solar cost in Malaysia between 2016 to 2021 demonstrated the possibility to further accelerate solar growth.
Malaysia’s substantial solar potential is an advantage for transitioning away from fossil fuels. This is further supported by the country’s long-standing policies that encourage solar adoption and affordability of solar technology. The existing NETR (National Energy Transition Roadmap) target, which prioritises solar as the primary renewable source, can play a role in balancing electricity reliability and sustainability. However, by quadrupling solar power generation by 2035 to align with the IRENA pathway, Malaysia can also bolster energy security and introduce affordability benefits to the power sector transition.
Peninsular Malaysia’s twin demand peaks demonstrate that solar power is the feasible option for Malaysia to transition away from fossil fuels. Solar intermittency can be challenging to address, especially with the conventional grid infrastructure, but complementing solar with hydropower and adopting battery storage at scale can be the solution to ensure power supply meets the demand. Before battery storage becomes vital to maintaining grid stability, Malaysia can expand its solar deployment and further harness its solar potential.
With the falling utility-scale solar generation costs in Malaysia, there are opportunities to reach the country’s power sector net zero ambitions faster. Holistic system-wide planning can support the country in accelerating its clean energy transition, paving the way for it to reap the benefits of less exposure to fuel price volatility risks and lower the possibility of becoming a net power generation fuel importer.
Supporting Material
Methodology
Regional electricity demand estimates for 2021-2023
The electricity demand for Peninsular Malaysia, Sabah and Sarawak from 2021 to 2023 is estimated by calculating each region’s demand share in the respective years, derived from electricity demand data from eStatistik, against Malaysia’s total electricity demand from Ember’s Electricity Data Explorer.
The Compound Annual Growth Rate (CAGR) is calculated to analyse the changes in Peninsular Malaysia and Sarawak’s demand shares from 2010 to 2020. Peninsular Malaysia’s demand share shows a decreasing pattern (-1.5% year-on-year) while Sarawak’s is increasing over the years (+13% year-on-year). Sabah’s demand share is relatively constant, using an average of 4% demand share.
NETR’s electricity generation estimates
The estimated generation volume of the NETR target in 2035 is derived from the 2035 capacity target outlined in the NETR report multiplied by capacity factors from some studies and full day and year operating hours.
Bioenergy and hydro capacity factors (60% for both) are taken from Peninsular Malaysia Outlook 2019. A capacity factor for gas power plants of 60% is used while the capacity factor for coal is 67.5% obtained from the average of two studies, Columbia University and Universiti Tenaga Nasional. Recognising that solar technologies keep advancing over the years, a 20% capacity factor is included in the calculation.
Net electricity demand estimates
Net electricity demand is the peak hourly demand minus the average hourly solar generation for 2023. For each scenario of increased solar penetration, increased solar generation is determined by adjusting the actual solar generation in 2023 according to the desired penetration level. For instance, if the actual solar generation in 2023 corresponds to a 5% solar penetration, then to estimate the solar generation for a 20% penetration limit scenario, multiply the actual solar generation by a factor of four.
Fossil fuel, solar generation costs and electricity tariff estimates
Ember analyses the comparison of solar and fossil fuel generation costs. The potential electricity tariff with solar power replacing fossil fuels is also estimated and compared with the actual electricity tariff in 2024.
The coal and gas generation costs of Peninsular Malaysia are obtained by adding the base tariff with the surcharges and rebates applicable to non-domestic customers between 2015 and 2023. The solar generation costs come from the lowest auction rates with a 30-50 MW capacity size range. An exchange rate of USD 0.21 per Malaysian Ringgit (MYR) is used across the years to present a comparable analysis.
To estimate the solar-dominant electricity tariff in Peninsular Malaysia, existing retail, transmission, and distribution costs are added to solar generation costs, assuming no significant grid upgrades are needed to accommodate solar between those years.
Acknowledgements
Our sincere gratitude to En. Saiful Hakim bin Abdul Rahman from Sustainable Energy Development Authority Malaysia, Prof. Yuen Yoong Leong from the UN Sustainable Solutions Development Network at Sunway University, Dr. Nora Yusma binti Mohamed Yusoff from Universiti Tenaga Nasional and Dr. Noor Miza Razali from Tenaga Nasional Berhad for their invaluable support in peer reviewing this report. Thank you to Ganesha Pillai for the insightful discussion during the idea-scoping process.
Special thanks to Aditya Lolla and Rini Sucahyo for their unwavering support through editing and structuring the report. We also sincerely thank Ardhi Arsala Rahmani and Sachin Sreejith for their meticulous proofreading and efforts in amplifying the report’s messages through social media and press channels. A heartfelt appreciation to Uni Lee, Libby Copsey, Oya Zaimoglu, Reynaldo Dizon and Jivan Zhen Thiru, for their support in data collection, validation and visualisation. Our humble gratitude to Chris Wright for making the report more nuanced.
Cover imageSolar panels to provide power supply on the island of Semporna, Sabah, Malaysia.
Credit: Muslianshah Masrie / Alamy Stock Photo