Malaysia Renewable Energy Profile

Table of Contents

Last updated Jul. 26, 2024.

I. Introduction

Malaysia heavily depends on fossil fuels to fulfill its energy needs. 81% of the country’s electricity came from fossil fuels in 2022 alone. Despite Malaysia’s identified abundance in renewable energy potential, the share of the renewable energy system in its mix is significantly low compared to fossil fuels. Akin to its neighboring countries in Southeast Asia, Malaysia also shares an affinity with hydropower as the main source of electricity from renewable energy technologies. Hydropower leads with 17% share in the electricity mix, followed by solar and wind with a combined share of 1.5%.1Ember.

To ensure that Malaysia meets its electricity demand, the country must strengthen and increase other renewable energy sources such as solar and wind. Harnessing the potential of solar and wind power is key to diversifying its sources to fulfill growing demand. Continued reliance on fossil fuels as electricity source subjects the country to the volatility of their prices and supply.

II. Current Status of Renewable Energy

Primary renewable energy sources by installed capacity in 2022:2Ember, supra.

  • Hydropower – 6.21 GW in 2022
  • Solar – 1.93 GW 

Electricity generation of major renewable sources (2022):

  • Hydropower – 32.51 TWh
  • Solar – 2.72 TWh

In 2022, major renewable energy sources generated a total of 35.23 TWh of electricity. This fulfills 19.27% of the country’s total demand of 181.86 TWh. To fully detach itself from fossil fuels in its power generation mix, Vietnam needs to further accelerate the development of renewable energy sources (RES).

The total renewable energy sources by capacity pales in comparison to the current capacity of fossil fuels in the country. Even with the target of increasing the share of renewables by 20% in 2025, the RE share would not be enough to displace fossil fuels out of the mix. 

III. Renewable Energy Potential

Malaysia has set a target of achieving 70% renewable energy in its electricity mix by 2050.3Reuters. However, significant challenges stand in the way of achieving this goal.

In 2023, fossil fuels dominated Malaysia’s electricity generation, with coal (43.13%) and gas (36.78%) accounting for the vast majority. Renewables only contributed around 19%, with hydropower leading the way. Despite this, estimates suggest Malaysia has the potential to generate 6.5 GW of solar4BuySolar. and 2 GW of wind power.5AZMILAW. Diversification of electricity sources through renewable energy will result in reduced reliance on fossil fuels, and cheaper electricity.

Malaysia’s push for renewable energy is weakened by policy roadblocks such as:

  • ongoing subsidies for fossil fuels
  • lack of progress on previously established RE initiatives. 

Prioritizing policies that expedite the financing, development, deployment of renewable energy sources is crucial for achieving its 2050 target.

IV. Summary of Renewables Poolicies and Incentives

TYPE OF POLICYMALAYSIA
REGULATORY POLICIESRenewable energy in INDC or NDC✔
Renewable energy targets✔
Feed-in tariff/auctions/premium payment✔
Net-metering/billing/direct consumption-supply✔
Biofuel blend obligation/mandate/target✔
Electric utility quota obligation/RPS✔
Tradable REC
Renewable heat obligation/mandate
FISCAL INCENTIVES AND PUBLIC FINANCINGTax incentives✔
Public investment/loans/grants/subsidies/rebates✔
Reductions in sales, CO2, VAT or taxes✔
Tendering✔
Investment or production tax credits
Energy production payment
Source: REN21 and ASEAN Centre for Energy (ACE) via JSTOR.

  • Government policies and incentives supporting renewable energy:
  • The Renewable Energy Act established a feed-in tariff (FiT) mechanism in 2011, allowing the sale of electricity generated from solar PV systems to the utility company at a fixed premium for a specific time period.6Lin-Sea Lau et al. The FiT program ended in 2017 and was replaced with a net energy metering (NEM) program, allowing solar users to sell excess electricity to the grid.7Lin-Sea Lau et al., supra.
  • In 2014, Malaysia introduced the Green Technology Tax Incentive, which makes two incentives available to industry: the Green Investment Tax Allowance (GITA) for companies seeking to acquire green technology assets and the Green Income Tax Exemption (GITE) for qualifying green technology service provider companies.
  • The Malaysia Renewable Energy Roadmap (MyRER) promulgated in 2021 increased Malaysia’s renewables target to 31% share by 2025 and 40% by 2035.
  • The National Biofuel Policy introduced in 2006 aimed to promote the use of biodiesel in the transport sector.8Kazeem Alasinrin Babatunde et al.

View comprehensive list of Renewables Policies here.

V. Summary of Identified Challenges

  • Existing policy framework still needs to shift to bring Malaysia’s energy policy in line with emission reduction goals and to boost private investment.9Babatunde et al., supra.
  • Economic and political factors were most often cited as barriers to implementing renewable energy policy.10Roozbeh Kardooni et al.
  • Economic factors included subsidies for fossil fuels, tariff issues, and difficulties in obtaining bank financing.11Kardooni et al., supra.
  • Political factors included “weak plans,” unrealistic targets, and lack of follow-through on prioritizing policies.12Kardooni et al., supra.
  • Another barrier has been the lack of agreement among the various agencies and departments responsible for renewable energy planning and implementation.13Lin-Sea Lau et al., supra.

View comprehensive list of identified challenges here.

VI. Future Outlook

  • Malaysia plans to increase its share of renewables in the generation mix by 2025. The share of renewables will exclude electricity sourced from hydropower.14National Renewable Policy & Action Plan.
  • The government announced that it plans to increase the capacity of RE to 31% in 2025 and 40% by 2035.15Malaysia Renewable Energy Roadmap (MyRER). Moreover, a plan to increase the renewable capacity to 70% in 2050 was announced.16Reuters.
  • The government has announced to reach 70% of RE use by 2030 in Sarawak.17International Trade Administration.

VII. Conclusion

  • Malaysia heavily relies on fossil fuels, particularly coal and gas, for its electricity generation.
  • Fossil fuels accounted for 81% of electricity supply in 2022.
  • Hydropower is the dominant renewable energy source, comprising 17% of the energy mix.
  • Solar and wind combined make up a small 1.5% share.
  • Malaysia possesses significant renewable energy potential, especially in solar and wind.
  • Ongoing fossil fuel subsidies and policy inconsistencies hinder renewable energy development.
  • Economic and political factors impede the implementation of renewable energy policies.
  • The government has introduced policies like the Feed-in Tariff (FiT) and Net Energy Metering (NEM) to promote solar energy.
  • The Malaysia Renewable Energy Roadmap (MyRER) aims to increase renewable energy share to 31% by 2025 and 40% by 2035.
  • Sarawak targets 70% renewable energy use by 2030.

References