RE Policy: Placing Malaysia At The Centre of Regional Electricity Trade

A few updates to the RE policy were announced by NRECC together with the Ministry of Economy yesterday. The first involves a new RE capacity mix target of 70% by 2050. The current targets under the MyRER are 31% RE capacity mix by 2025 and 40% by 2035 against an RE capacity mix of 25% as of end-2022. While no further details were released, the new 2050 target signals a significant jump from the 40% mix targeted in 2035, which MIDF said it believes is expected to be enabled by a much larger adoption of grid-scale energy storage systems in the future to accommodate variable RE sources. Pilot deployment of battery energy storage system (BESS) is scheduled from 2030 onwards under the current generation development plan.

Another key announcement was the lifting of the current RE export ban and the development of an electricity exchange system to enable cross-border RE trading. This is expected to allow domestic RE capacity to grow at a faster and larger scale capitalising on rising regional RE demand. A low-hanging fruit is Singapore which lacks the land size to accommodate RE generation and houses a lot of the region’s RE100 MNCs – RE100 is a global initiative involving companies that are committed to 100% RE across its operations. Malaysia has an advantage here given its proximity to Singapore and an existing interconnection. As REsourced electricity in Singapore commands much higher tariffs, this could also drive investments into solar+BESS projects which may have not been feasible previously at local tariffs. Retail “green electricity plans” range from SGD0.32-0.45/kwh (RM1.07-1.50/kwh) relative to Malaysia’s base tariff of RM0.40/kwh (RM0.60 including ICPT surcharge for high-voltage non-domestic customers).

In the long run, the new policy on RE trade aims to position Malaysia at the centre of the regional electricity trade, riding on the ASEAN grid interconnection initiative. The move aims to capitalize on the ample RE resource in the country and its strategic geographical location at the centre of the region. To give perspective on Malaysia’s RE potential, the 18GW of RE capacity required to achieve the country’s mid-term target of 40% RE capacity mix by 2035, accounts for just 6.2% of the total 289GW RE resource identified in the country.

The ASEAN Power Grid (APG) is an initiative to construct a regional power interconnection to connect the region, first on
cross-border bilateral terms, and to gradually expand to sub-regional basis and subsequently leading to a total integrated
South East Asia power grid system. As one of the physical energy infrastructure projects in the Master Plan of the ASEAN
Connectivity, the APG project is expected to enhance electricity trade across borders that would provide benefits to meet the
rising electricity demand and improve access to energy services in the region. Seven of the 16 power interconnection projects have been completed thus far.

The updated RE target is expected to involve investments of up RM637b up till 2050 involving power generation sources, grid infrastructure and energy storage capacity. Broadly, the latest policy decisions also signal to potential third-party access to the grid to allow transmission of power from RE generators to its end customers, and is a step towards market liberalization, in our opinion. Key players to benefit from this latest announcement include YTL Power and directly YTL Corp in the immediate term given its advantage in having existing power generation and power retail operations in Singapore. Its 2000-acre land in Johor can accommodate up to 500MW solar capacity, though the house also believes part of this will be utilized to power its own planned data centers. The other party will be Tenaga from wheeling charges given its monopoly of the national transmission grid.

Previous articleBMW Motorrad Malaysia Unveils Two Sports Tourers Starting At RM114,500
Next articleUOB Malaysia Operating Income Rises 15% To RM3.9 Billion, However Citibank Deal Impacts Profits


Please enter your comment!
Please enter your name here