Malaysia opens its renewable energy market to PPAs, cross-border trade


Malaysia’s Ministry of Natural Resources, Environment and Climate Change and Ministry of Economy are working together to establish plans and determine new renewable energy initiatives and programs to drive the development of the country's renewable energy industry.

The ministries earlier this month presented their proposals to the cabinet, which approved a number of measures:

  • Renewable energy generation capacity will be increased to create new economic opportunities through the enhanced growth of the country's renewable energy industry while ensuring a secure electricity supply;
  • Based on the concept of self-contained systems, renewable energy development will be expanded to spur investment along the renewable energy value chain and to diversify renewable energy programs according to a “willing buyer-willing seller” approach to encourage corporate involvement via power purchase agreements (PPAs);
  • The government will directly allocate funds from its development budget for the installation of solar systems on government buildings, enabling government ministries and agencies to benefit from electricity cost savings;
  • The government will develop and establish an electricity exchange system to allow the implementation of policy on cross-border renewable energy trading.

“With this development, the renewable energy capacity in the electricity supply system is anticipated to reach approximately 70% by 2050,” said Nik Nazmi Nik Ahmad, minister of natural resources, environment and climate change. “The expansion of renewable energy capacity will enable surplus renewable energy generation capacity to be exchanged across borders with regional neighbors based on a mechanism that will be determined by the government, thus advancing the realization of the ASEAN Power Grid.”

The projected increase in renewable energy capacity is in line with government-backed studies on a low-carbon energy system pathway and will be incorporated into the National Power Development Plan (PDP), he added.

Efforts to increase renewable energy capacity in Malaysia’s electricity supply system are expected to require investments of some MYR 637 billion (€130.5 billion) through 2050. That funding would finance renewable energy generation sources and strengthen grid infrastructure, including transmission lines enhancement, energy storage system integration and operation costs of grid system networks.

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The natural resources and environment ministry will examine the details of the costs and investment values involved as well as the affect on tariffs for electricity consumers.

Malaysia currently has 2,165 MW of total installed solar capacity, according to data from Berlin-based consulting firm Apricum.

It aims to add an additional 1,098 MW by 2025, and another 2,414 MW by 2035. The country has raised its renewable energy targets to 31% by 2025, equaling 8.53 GW of total renewable generation capacity, and to 40% by 2025, or 10.94 GW.

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