Malaysia faces a long and winding road in meeting its 2050 net zero target.
While decarbonising its energy sector – which is responsible for some 80 per cent of the nation’s carbon emissions –could nip most emissions in the bud, the country must first navigate evolving policies, outdated grid infrastructure, and the intermittent nature of renewables, before it can make progress.
While clean energy commitments were made under the National Energy Transition Roadmap (NETR) when it was released in June 2023 to increase renewable energy capacity from 40 per cent to 70 per cent (56 gigawatts (GW)) by 2050 in the national energy mix, the energy industry faces multiple policy, planning and infrastructure challenges.
How the energy sector can overcome sectoral reforms – key to building long-term resilience and decarbonising the energy sector – was a key topic of discussion at the Malaysia edition of the Asia Pacific Energy Talks, organised by global energy technology company Siemens Energy.
The event brought together high-profile stakeholders in Kuala Lumpur across the industry, academia, and government, to discuss Malaysia’s energy transition.
Siti Safinah Salleh, the chief executive officer of MyPower Corporation, highlighted several reforms that could enable Malaysia’s power sector to meet both growing energy demand and decarbonisation goals.
MyPower is a special-purpose agency under the Ministry of Energy Transition and Water Transformation (Petra), tasked to organise key reforms of Peninsular Malaysia’s Electricity Supply Industry (MESI) initiative.
Safinah, who spoke at a panel discussion on future-proofing Malaysia’s energy sector, said the agency is looking at “structural changes” to be implemented in the medium term in governance, planning, market model and tariffs.
“There are a set of governance reforms that are being undertaken now,” she said, noting that the electricity supply planning done by the Committee for the Planning and Implementation of Electricity Supply and Tariff (JPPPET) is being reformed, as current planning strategies are “no longer tenable for the longer term.”
JPPPET is the electricity generation development planning committee that oversees the development and coordination of energy infrastructure projects in the country. Safinah said that MyPower is looking at revamping electricity planning from “end to end” to ensure it is more integrated.
The market model and electricity tariff structure are also being reviewed to ensure the country can improve from the current single-buyer model, with a centralised utility procuring electricity for the whole of Peninsular Malaysia.
Peninsular Malaysia consists of several states, including Johor, Kedah, Kelantan, Malacca, Negeri Sembilan, Pahang, Penang, Perak, Perlis, Selangor, and Terengganu, along with the federal territories of Kuala Lumpur and Putrajaya.
End users in the peninsular currently source their electricity – including those that rely on fossil fuels such as gas and coal – from Tenaga Nasional Berhad (TNB), Malaysia’s largest utility and the sole operator of the national grid.
Such reforms are necessary to encourage and give investment signals in the right areas based on the right costs, Safinah said.
Currently, MyPower is conducting a study to reform the electricity tariff structure, with the outcome to determine the appropriate tariff structure and reflect the actual cost of electricity supply.
The new tariff structure is expected to be implemented by 2025 and will likely impact the end user due to adjustments in electricity tariffs.
Grid stability & the input of renewables
Determining the right energy mix will involve upgrading grid infrastructure to accommodate renewable energy and calculating long-term energy sector emissions from the energy sector.
Malaysia’s current electricity grid can only transmit about 6 GW of renewable energy, but the country’s National Energy Policy targets an increase in total renewables capacity to 18.4 GW by 2040.
However, due to Malaysia’s limited availability of resources, including financial capital, Safinah highlighted that the country needs to prioritise careful planning of the energy mix to ensure it is both affordable and resilient.
“It’s not something that we can afford to do [financially, in the same way] as most developed countries.”
She added that grid investments in the country should first consider the current design of the grid, the age of the equipment, and automation capabilities, which could decide whether it can handle the intermittency that comes with renewables.
During the event, Sanjayan Velautham, chief operating officer of Malaysia’s Energy Commission clarified in a fireside chat that the government will focus on integrating variable renewable energy – particularly solar – into the mix and the battery storage needed to support it.
He assured that the government is willing to address policy-related issues to enable Malaysia’s energy transition.
“We shouldn’t be shy to change what our policies are, if and when necessary. But investors are always looking for policies that are stable in the long term,” he said, adding that the government is also looking at hydrogen and green hydrogen to cater to the growing energy demand in the country alongside promises to phase out coal by 2044.
Accelerate energy efficiency
While such institutional reforms and new technologies are necessary to decarbonise Malaysia’s power sector in the long-term, increasing energy efficiency is low-hanging fruit, said Thorbjörn Fors, group senior vice president and managing director of Asia Pacific at Siemens Energy.
Southeast Asian economies can decarbonise through energy efficiency, Fors added, noting that this solution should be “more prominent” as it quickly reduces emissions.
The International Energy Agency (IEA) once described energy efficiency as a “hidden fuel” and a great lever in energy transition and decarbonisation. Boosting efficiency requires a significantly lower investment, the IEA notes, but also offers a faster turnaround.
“This means coming back to policies, to both incentives or carrots and sticks that should work [to maximise energy efficiency],” Fors said.
He noted that over the past decade, one billion people in the Asia Pacific region (excluding China) gained access to electricity for the first time.
However, this progress should not overshadow the urgent need for decarbonisation action and managing energy demand growth.
Asia’s power sector is one of the largest contributors to global GHG emissions, primarily driven by coal-fired power generation, which dominates the region’s energy mix. Asia is responsible for around 80 per cent of global coal consumption.
This includes Southeast Asia, which generates half of its electricity from coal, accounting for 80 per cent of power sector emissions.
Fors added that Malaysia is well positioned to capitalise on some of the emerging opportunities that are available in the energy sector, including championing the Asean power grid through high voltage direct current (HVDC) lines and powering energy-intensive infrastructure such as data centres through renewables, be it solar or hydrogen.
Siemens Energy is currently working on multiple projects that support Asia Pacific’s energy transition, including grid modernisation, energy efficiency, and renewable integration in Singapore, Malaysia, Japan, and Australia.
While there may be challenges ahead such as regulatory hurdles in Malaysia, businesses should focus on making their technologies commercially viable and reducing uncertainty for investors, who, Fors noted, should look towards the long term in assessing both decarbonisation and investment opportunities.
“We are very encouraged about opportunities in Malaysia, but there are some challenges that are not unique to Malaysia; some of them are related to policymaking and the regulatory environment. [However], developers and investors have a long-term horizon [with] this opportunity,” said Fors.
