Renewable energy sources have become increasingly pivotal in driving the transformation of Malaysia's power sector. The nation is striving to diminish its reliance on fossil fuels and transition to a more sustainable energy mix. The Malaysian government has established ambitious objectives, aiming to augment the proportion of renewable energy to 40% of the total installed capacity by 2035 and to achieve net-zero emissions by 2050. Against this backdrop, the country’s cumulative renewable capacity is forecast to reach 30GW in 2035, registering a compound annual growth rate (CAGR) of 16.8% during 2024-30, according to GlobalData, a leading data and analytics company.
GlobalData’s latest report, “Malaysia Power Market Outlook to 2035, Update 2025 – Market Trends, Regulations, and Competitive Landscape,” reveals that during 2020–2024, Malaysia’s renewable power generation increased from 5TWh in 2020 to 9.8TWh in 2024, registering a CAGR of 18.5%. During 2024–2035, it is expected to further increase to 51.1TWh in 2035, growing at a CAGR of 16.2%.
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Attaurrahman Ojindaram Saibasan, Senior Power Analyst at GlobalData, comments: “The introduction of the National Energy Transition Roadmap (NETR) and the Malaysia Renewable Energy Roadmap (MyRER) has delineated a clear policy framework. This development has unlocked investment opportunities and signaled a robust commitment from the government. These efforts collectively contribute to the nation's progressive journey towards a cleaner and more resilient energy future.”
The Malaysian countryside is replete with potential renewable energy sources that offer local and cost-effective alternatives to fossil fuels. Bioenergy, particularly derived from palm oil, is the most extensively utilized alternative source in Malaysia and constitutes a significant portion of the country's renewable energy consumption.
Solar PV represents the largest renewable power technology within the nation. Net metering stands as the principal impetus for solar PV installations, offering substantial prospects for the growth of the residential solar PV sector. The Net Energy Metering (NEM) scheme permits the exportation of surplus solar PV-generated energy back to the grid on a "one-for-one" offset basis, meaning that each kilowatt-hour exported will be offset against one kilowatt-hour consumed from the grid.
Malaysia is a net exporter of electricity, primarily relying on thermal resources for power generation. Despite its substantial fuel reserves, the nation faces the risk of diminishing energy security. The country boasts significant coal reserves; however, it lacks the necessary mining expertise. Consequently, Malaysia imports coal for electricity generation from countries like Indonesia and Australia. Moreover, according to Petronas, local oil fields are depleting, with oil production anticipated to decline. This trend has led to sluggish growth in power generation and has rendered the power supply security vulnerable.
Saibasan adds: “To mitigate the escalating dependence on imported fuels, the Malaysian government is promoting the development of renewable energy sources, such as solar and biomass. Solar energy is at the forefront of this shift, bolstered by initiatives such as large scale solar (LSS) programs, NEM schemes, and incentives for rooftop solar installations for both residential and industrial sectors. Hydropower remains a significant contributor, particularly in the eastern regions of Malaysia, namely Sabah and Sarawak. Additionally, bioenergy derived from palm oil waste and municipal solid waste is gaining momentum.”
The development of power generation from renewable energy sources is facilitated through government grants. This support is essential because emerging technologies carry inherent uncertainties that can hinder their progress, often resulting in substantial financial expenditures for research, development, and implementation. Consequently, these factors elevate the cost of clean energy alternatives, thus postponing their comprehensive integration into the marketplace. Typically, the initial investment for high-efficiency equipment exceeds that of traditional power generation methods.
Saibasan concludes: “Furthermore, renewable energy initiatives encounter challenges in securing financing and bank loan approvals due to the associated high risks and a general lack of expertise among financial institutions. The government is looking to overcome this challenge by implementing robust policies and create a sustainable environment for investors to promote renewable growth.”
