Malaysia is committed to low-carbon development aimed at restructuring the economic landscape to a more sustainable one. In this context, the National Energy Transition Roadmap (NETR) sets the goal to accelerate energy transition and change the way energy is generated to improve climate resilience.
NETR has developed the Responsible Transition (RT) Pathway 2050 to shift Malaysia’s energy systems from fossil fuel-based to greener and low-carbon systems. The Total Primary Energy Source (TPES) modelling indicated that the nation’s energy demand will increase marginally at 0.2% annually from 95 Mtoe in 2023 to 102 Mtoe in 2050. The RT Pathway 2050 has also shown promising decarbonisation results as evidenced by the phasing out of coal and the reduction of fossil-fuel reliance from 96% in 2023 to 77% in 2050.
Natural gas is set to be not only a transitional fuel, but also the primary contributor of TPES at 57 Mtoe (56%) followed by renewables that include solar, hydro and bioenergy, which collectively contribute 23% of TPES in 2050 from a mere 4% in 2023. NETR outlines 50 initiatives under the six energy transition levers and five enablers, in addition to the 10 flagship projects and initiatives announced in July 2023.
The energy transition financing will be undertaken through a combination of grants, loans, rebates, incentives, and other investments to support the whole-of-nation approach. NETR aims to power Malaysia’s future by unlocking potentials in new growth areas and delivering progress and prosperity to households and businesses.
The successful implementation of NETR will uplift GDP value from RM25 billion in 2023 to RM220 billion and generate 310,000 jobs in 2050. NETR is not just a document about measures to meet Net-Zero GHG emissions target. NETR represents a new way of thinking to fundamentally transform Malaysia’s economy and livelihoods for a stronger and more resilient future.
Energy Transition represents a structural shift in energy systems, characterised by a transition towards cleaner sources of energy, increased use of RE, and a significant reduction in carbon emissions. The energy transition is expected to occur at an accelerated pace, driven by rapid technological advances and robust climate change policies.
The urgency for Malaysia’s shift to sustainable energy is fuelled by global commitments, particularly the Paris Agreement and the need to fortify economic diversification and energy security. In addition, industry related to the energy transition has the potential to be a new source of growth that can benefit from the global market. The IEA reports that investment in the development of the clean energy industry is expected to reach USD1.7 trillion in 2023.
The focus of global investment is on the development of the RE, EE and strengthening the grid and energy storage. Moreover, corporations and enterprises confront a rapidly changing market landscape where carbon costs will reshape business dynamics and potentially strain competitiveness. Meanwhile, the imminent realities of climate change, exemplified by rising sea levels, extreme weather events, and escalating heatwaves highlight the direct and tangible impacts on rakyat’s daily lives.
Beyond mitigating risks, the energy transition presents Malaysia with the opportunity to restructure its economy and maximise the potential for green growth that balances sustainability, enhances GDP, creates jobs and meet the needs of the rakyat and businesses.
Malaysia’s Policy Responses
The five-year development plan covers socioeconomic policy planning that sets out the country’s direction and growth targets as well as the allocation of the development expenditure. The Twelfth Plan, outlines the aspiration for the nation to achieve net-zero GHG emissions as early as 2050. The plan emphasises Malaysia’s approach to effectively manage its energy transition. It recognises the complex and interconnected nature of energy systems and acknowledges the need to balance the energy trilemma.
The approach not only ensures that energy policies and programmes are environmentally responsible but also takes into consideration the socioeconomic implications. The DTN lays the groundwork for a transformation in the energy landscape. The energy transition is expected to occur at an accelerated pace, driven by rapid technological advancement and robust climate change policies.
The energy trilemma refers to the interconnectedness of energy security, affordability and environmental sustainability. These three objectives are often in conflict with each other. Addressing the energy trilemma requires a delicate balancing act and often involves making trade-offs. Solutions to the energy trilemma also commonly include a mix of policies, innovations, and investments that aim to harmonise these three objectives to the greatest extent possible while acknowledging their inherent trade-offs.
NETR has four guiding principles. The first principle highlights the importance of aligning the energy sector based on national aspirations and commitments to sustainable development. The second principle emphasises that the energy transition must be just, inclusive and cost-effective. It acknowledges the challenges that exist for low-income and vulnerable populations.
The NETR aims to ensure that the benefits and opportunities from the energy transition trickle down to every segment of society, leaving no one behind. The third principle stresses the need for effective governance and a whole-of-nation approach. Collaboration among all stakeholders is crucial to create a vibrant energy industry ecosystem that supports sustainability and facilitates the transition to a low-carbon economy. The fourth principle highlights the significance of creating high-impact job opportunities and enhancing small and medium enterprises (SMEs) involvement in the ecosystem.
The NETR is rooted in Malaysia’s overarching aspirations, charting a course for the energy system that is aligned with decarbonisation targets. It strikes the right balance between environmental mitigation and the need to bolster net socioeconomic values such as GDP and job creation.
NETR’s Responsible Transition (RT) scenario will support Malaysia’s pursuit of achieving net-zero as early as 2050. RT scenario represents the best-fit ambition for the nation, considering current technology developments, global trends and local context. The NETR’s RT aims to accelerate the pace of energy transition, with improved ambition across all six levers.
Moving forward, the government will re-calibrate ambition levels to capitalise on new and emerging technologies, potentially reviewing targets where possible. The stated ambition will also generate significant investment opportunities across all six levers.
The RT aims to achieve a notable 70% RE installed capacity mix for power sector. Despite this, Malaysia will continue to maintain diversification of its power generation mix remaining stable throughout projected period to 2050. However, there are concerns about Malaysia’s growing dependence on fuel import particularly natural gas imports. Given the anticipated rise in reliance on natural gas and crude oil by 2050, there is a heightened need to focus on ensuring energy security.
Malaysia will look to reduce this dependence on natural gas by scaling up of RE capacity and exploring potential non-carbon energy sources. In the meantime, proactive initiatives are being undertaken to secure natural gas, such as necessary infrastructure and commercial arrangements for importation, including long-term agreements to stabilise fuel imports. At the same time, it is crucial to ensure that natural gas prices for domestic consumers reflects market parity. This will enhance the attractiveness of Malaysia as an investment destination for upstream sector as well as incentivise third party suppliers to enter the domestic gas supply market, spurring the operationalisation of TPA for gas market.
By 2050, Malaysia is expected to face higher system costs due to the investments required to rapidly increase RE’s installed capacity within the country’s power generation mix. Though this trajectory might see an uptick in system costs, such an increase is inevitable given the potential scenarios of higher reliance on natural gas import in the power generation mix following the projected diminishing of Malaysia’s gas reserves by 2050.
Although there will be higher system costs, the RT is poised to significantly bolster Malaysia’s economic development. The energy transition will catalyse growth in nascent areas such as green mobility ecosystems, RE, energy storage, and alternative new energy ecosystems. Taking a pioneering role in these emerging areas will enhance Malaysia’s competitive edge, which will yield positive outcomes for both GDP and job creation. The RT is estimated to generate investment opportunities totalling between RM1.2 trillion and RM1.3 trillion by 2050.
These investments will contribute additional GDP of RM220 billion and create approximately 310,000 green growth job opportunities in 2050. Economic benefits will be felt across the social spectrum, with medium-and low-income households expected to be the biggest beneficiaries of income gains.
NETR aims to achieve the following targets:
– By 2040, achieve energy savings of 21% compared to business-as-usual scenario, specifically: Residential: 15%, Industrial and commercial: 22%; and
– By 2050, achieve energy savings of 22% compared to business-as-usual scenario, specifically: Residential: 20%, Industrial and commercial: 23%.