Malaysia’s anticipated open access power grid regime, slated to be in place by September, will be one of the important levers to accelerate Malaysia’s green energy shift, but there remains hurdles to long-term success in the absence of a more open electricity market, said some industry players.
To continue reading, subscribe to Eco‑Business.
There's something for everyone. We offer a range of subscription plans.
- Access our stories and receive our Insights Weekly newsletter with the free EB Member plan.
- Unlock unlimited access to our content and archive with EB Circle.
- Publish your content with EB Premium.
Malaysia’s energy transition ministry is currently laying the groundwork for opening up third-party access to its electricity grid, focusing on renewables supply. On 26 July, it announced that it will launch the Corporate Renewable Energy Supply Scheme (CRESS) later this year. The initiative will see electricity buyers negotiating pricing directly with a renewable energy power plant for green electricity supply, according to a statement issued by the ministry.
Currently, Malaysia’s energy sector operates with centralised utility systems that are being controlled by single entities. End users source their electricity, including that from conventional sources, from Tenaga Nasional Bhd (TNB), Malaysia’s largest utility and the sole operator of the national grid.
Even with the deregulation of access to the grid, Malaysia’s approach seeks to provide third-party grid access without liberalising the electricity market or ensuring all generators sell to a power pool, say experts. Speaking at the Unlocking capital for sustainability conference in Kuala Lumpur, held a day before the announcement on CRESS, Tham Chee Aun, founder and chief executive of Ditrolic Energy, a renewable energy (RE) company, said Malaysia could also need an open electricity market in its push for a green energy shift.
This is to “properly structure the relationship between consumers and the grid”, he said on a panel discussion. “It enables your road, your house, to inject power directly to the grid.”
Tham also noted: “Policymakers do know that [an open electricity market] is the ultimate goal, but capital needs to be mobilised and policies reformed to move towards this vision.”
A “shining example” is Singapore which operates a competitive and open electricity market, allowing consumers to enjoy more choices and flexibility when buying electricity, while also implementing a carbon levy that ensures that the appropriate pricing of carbon can further drive behavioural change, he added.
With the launch of the National Energy Transition Roadmap (NETR), which outlines an increase in the share of renewables in Malaysia’s energy mix, from 40 per cent by 2035, to 70 per cent by 2050, there has been much discussion on whether the near monopoly hold over the energy sector by the country’s leading utilities should be loosened.
Yet industry watchers also acknowledge that these are public listed companies – TNB is the largest public listed power company in Southeast Asia – which have played important roles in the country’s national development. Tham suggested that more needs to be done to think of how to “cushion the impacts” if the nation was pushing for such a shift.
Upgrading the grid might also result in adjustment in electricity tariffs that would impact the end user, he cautioned.
Regardless, political will to enable a more open market is there, said natural resources and environmental sustainability minister Nik Nazmi Nik Ahmad, who delivered the keynote address at the same event.
A lot on the ground “needs to move” and a fundamental shift of mindset is required, while ensuring that the reliability of electricity supply is not sacrificed, said Nik Nazmi, noting that he is not envious of deputy prime minister Fadillah Yusof, who now looks after the energy transition portfolio and has a difficult task of resolving these challenges.
Policymakers have already been navigating a shift away from the idea of having a sole distributor of electricity such as TNB, which is very much in control of Peninsula Malaysia’s electricity market, he said. The leadership will need to continue to back the move and signal that it is the way forward.
Financing gap and grid constraints
At the panel discussion, Tham said that Malaysia also needs to tackle its grid connection bottleneck in solar. Optimising the grid by spreading solar plants across the country could be a viable solution, he suggested, while highlighting the problem of the grid having “insufficient connection points” for large-scale solar.
Tham noted that there is plenty of excitement surrounding Malaysia’s NETR, which sets ambitious goals for Malaysia’s energy transition, but also said that key policy levers such as the third-party grid access regime and cross-border energy sales are still “work in progress”.
Commenting on cross-border energy trade, Karna Mohan, vice president of finance for Siemens Energy in Asia Pacific, said that for a regional power grid to work, there needs to be a harmonisation of regulations across borders in Southeast Asia, “so that it becomes practical for different private players to participate”.
Tan Ai Chin, managing director and head of investment banking at OCBC Malaysia, said that the implementation of CRESS is a welcome move. Beyond solar and wind, there is now also a whole range of energy solutions, including an emerging focus on biofuel production, and all these need to come together to complement each other for Malaysia to meet its transition targets, she said.
She also raised concern about how the proliferation of data centres across Malaysia could strain power supplies and change the demand-supply equation.
On green financing, she said: “The key to spearhead the development of a new energy sector is blended finance…We really need to get the support of multilateral finance institutions such as the World Bank, and there is a good pool of capital that we can tap on from government investment companies which can allocate part of their resources to financing impact-related activities and infrastructure development.”
Mobilising capital to fund clean energy projects that require billions annually is a big challenge in Malaysia’s energy transition. The country needs an estimated US$264 billion (RM1.2 trillion) annually to support its transition through to 2050. Renewables alone require RM637 billions in new investments.
Tan added that the Malaysian market, which consists of the bank market and bond market, is one of the largest when it comes to project financing at greenfield stage where the developer can approach the bond market to raise funding.
“Not many markets have this project financing ecosystem for the bond markets, so I think investors and developers can actually de-risk quite fast.”
Tham agreed that blended finance will be key to ensuring that new energy projects can be successfully implemented.
His company Ditrolic Energy secured US$673 million (RM3.18 billion) in private funding from Blackrock’s Climate Finance Partnership (CFP) earlier this year to speed up the development of renewables across Asia Pacific. The boost in financing will specifically support the firm’s plans to expand its pipeline of solar projects.
CFP is BlackRock’s public-private finance vehicle that seeks to accelerate the flow of capital into climate-related investments in emerging markets. It is formed by a global consortium of investors including institutional investors, the governments of France, Germany and Japan, as well as leading United States-based impact organisations.
