KUALA LUMPUR (June 3): Malaysia's power sector requires a long-term policy and regulatory certainty to support investments in renewable energy, according to the country's largest independent power producer.

Developers are currently facing a mismatch between the long-term capital commitments required for such projects and the shorter concession of power purchase agreement tenures currently available, said Malakoff Corp Bhd (KL:MALAKOF) CEO Syahrunizam Samsudin.

"One of the key problems I have is matching tenure with capital deployment," Syahrunizam said. "This impacts returns immediately, particularly for renewable projects where you typically want longer tenures in order to realise long-term benefits for all parties involved in the project.”

He was responding to a question at a panel discussion posed by moderator Nur Ayuni Zainal Abidin, special functions officer to the minister of economy, on measures that the government should prioritise in Malaysia's energy transition.

Malaysia is targeting to have renewable energy account for 70% of generation capacity by 2050 under the National Energy Transition Roadmap that also requires substantial investments in grid infrastructure, energy storage and dispatchable generation capacity.

Competitive tender exercises for government projects alone may not be sufficient to offset rising costs associated with power generation, Syahrunizam said, noting that uncertainties across the energy value chain have led to higher risk premiums, ultimately leading to high costs of projects.

Other industries like gas suppliers, turbine manufacturers, logistics providers, insurers and financiers are pricing in additional risks from market volatility, geopolitical developments and changing policy environments, he said.

"If everybody is risk-pricing, how can developers not risk-price when they develop levelised tariffs?" he questioned. "What that requires is policy intervention, particularly in terms of baseline pricing."

Syahrunizam also called for closer engagement between policymakers and industry participants when formulating regulations and energy transition policies, stressing that projects can only proceed if financiers and investors are confident in their commercial viability.

"Policy cannot be imposed on private developers without private developers giving some input to policymakers because ultimately somebody has to fund it,” he said. “If the bankers do not buy in, the projects will not move forward.”

Institutional investors like pension-linked shareholders Employees Provident Fund and Retirement Fund Inc, meanwhile, generally expect stable and predictable returns from their investments into utilities, making regulatory certainty crucial for attracting long-term capital, Syahrunizam said.

He also argued that greater transparency on the cost of decarbonisation is needed as consumers increasingly demand cleaner sources of electricity.

"If you want to be greener, we have to make certain choices. Malaysians don't like to make choices. People like to talk about making choices, but they don't like the cost of making those choices," he said.

Syahrunizam pointed out that some countries in Europe provide consumers with a clearer breakdown of electricity costs, including generation sources and transmission charges, allowing households and businesses to better understand the trade-offs involved.

"Being green requires us to change our lifestyle to make sure that we're able to moderate our consumption. The minute we don't want to make choices, the cost goes up," he added.