Sunday 19 May 2024
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This article first appeared in The Edge Malaysia Weekly on December 25, 2023 - January 7, 2024

The year 2023 was a big one for the energy transition in Malaysia, with a strategic road map and a long-awaited energy efficiency bill introduced, as well as the removal of blanket subsidies for electricity, which spurred more interest in renewable energy (RE) adoption.

In fact, the National Energy Transition Roadmap (NETR) was the talk of the town when it was released in the second half of the year.

It presented flagship projects and energy transition levers, covering energy efficiency; RE; hydrogen; green mobility; and carbon capture, utilisation and storage (CCUS), among other areas, which are expected to achieve a 32% reduction in energy sector emissions (compared with 2019) by 2050.

“I have been in the energy sector for quite some time and I can’t seem to recall a buzz like this year. Usually, when you have new policies like that, people in the industry get excited but it doesn’t really trickle out to the wider community,” says Dhana Raj Markandu, energy analyst at the Institute of Strategic & International Studies Malaysia (Isis).

“Now, it’s not just people in the industry but the investment and business community as well as civil society [who are paying attention]. It touches so many different aspects because we are now actively linking it to climate change and things like that.”

NETR is, to Dhana, the biggest achievement this year as it covers many sectors within energy and transport, and is a good starting point for the industry.

Energy comprised 78.5% of greenhouse gas emissions in Malaysia (based on 2019 data), amounting to 259 MtCO2eq. The NETR initiatives are projected to reduce these emissions to 175 MtCO2eq in 2050, discounting contributions from CCUS.

(Photo by Institute of Strategic & International Studies Malaysia)

The Energy Efficiency and Conservation Bill 2023, which was passed in October, could reduce close to 200,000 kilo tonnes of carbon emissions, according to the government. If the 2019 emissions data is used, this translates into an average annual 2.4% reduction, says Dhana.

“Whether these are enough or not is up for debate. But the main thing is that it signals that we have something in place now,” says Dhana. It is important to note that to get to net zero, Malaysia will still have to rely heavily on forests to offset the total emissions.

A driver for companies and individuals to begin adopting energy efficiency and RE was the removal of blanket subsidies for electricity this year.

The various incentives and programmes, such as the Corporate Green Power Programme (CGPP), the lifting of the RE export ban and the introduction of an energy exchange and third-party access (TPA) framework going forward, have also ignited much chatter and interest in RE.

More details, please

Despite all the fanfare around RE and the installed capacity — which was 24.5% in 2022, according to the Malaysia Sustainable Energy Development Prospectus — the actual energy generated from these sources is still relatively low. The total electricity generated in 2020, which is the latest data cited, was only 1.6% from RE and 16.3% from hydropower. The rest were from fossil fuels.

One thing to note is that the installed capacity of RE does not translate into an equal amount of actual electricity generated, as sources like solar are not always available.

Industry players are clamouring for more RE penetration into the grid and more visibility into the programmes that enable this. For instance, they want more details on how the energy exchange and TPA framework will be conducted.

“With the new ministry, new people on the board of the Energy Commission and the new chairman [working with] current teams, we really see a significant difference in strategic directions,” says Davis Chong, executive director and group CEO of Solarvest Holdings Bhd, and president of the Malaysian Photovoltaic Industry Association.

(Photo by Mohd Izwan Mohd Nazam/The Edge)

“We see that the planning is good, but the implementation is still slow. Minister of Economy Rafizi [Ramli] previously pointed out that the key challenge is implementation. We definitely agree.”

This is echoed by Dhana, who hopes to see more details on targets and timelines as well as tracking of the outcomes. “Have something with clear timelines, targets and maybe a centralised system to see what is working and not working. That would be very valuable.”

Industry players and the regulator have had to spend time resolving many issues, says Chong, and they hope that information about the programmes can be communicated quicker.

It would also be useful to have better visibility of the government’s plans so industry players can plan ahead. “[For example], if we have visibility that 800mw of CGPP will be released this year and another 1,200mw next year, then we can plan our resources better,” says Chong.

Likewise, more must be revealed about the energy exchange and the role of the Single Buyer, which will be carved out of Tenaga Nasional Bhd to manage the exchange.

The mechanism for the TPA, which could allow RE generators to sell power directly to consumers by paying wheeling charges to the grid operator, should also be announced, says Chong.

A more complex grid

In previous interviews, Minister of Natural Resources and Environmental Sustainability Nik Nazmi Nik Ahmad has said that a more comprehensive review of the entire tariff structure will be needed to introduce the TPA.

The government is also looking at supporting the grid upgrade to accommodate more intermittent RE. Revenue from exporting RE could be used for this purpose.

“We have to make sure that the grid is able to cater to all these new complexities that we are introducing, which traditionally weren’t there. But other countries have done it before,” says Dhana.

Another thing to note is that the export of RE cannot come at the expense of meeting Malaysia’s own decarbonisation targets.

“It is not only a clean energy issue; it will affect other industries and foreign direct investments; it is also a community and social issue that will create job opportunities,” says Chong.

“It’s important to satisfy the local demand with programmes like Net Energy Metering, Self-Consumption and CGPP to make sure we have enough capacity [to meet the] ESG road maps for all industries.”

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