PETALING JAYA: Malaysia’s renewable energy (RE) sector is expected to sustain its growth trajectory through the second half of 2026 (2H26), supported by stronger solar engineering, procurement, construction and commissioning (EPCC) activity, rising battery energy storage system (Bess) adoption and expanding demand from data centres (DCs).
According to Hong Leong Investment Bank (HLIB) Research, Malaysia remains on track to achieve its target of 32% installed RE capacity this year, providing momentum towards the longer-term goals outlined in the National Energy Transition Roadmap of 35% by 2030 and 70% by 2050.
The brokerage said project awards slowed in 1H26 as developers adopted a cautious approach amid geopolitical uncertainty and volatile upstream material prices, but it believes visibility has improved.
“We expect project activity to pick up in 2H26, supported by ongoing construction activities and upcoming project deliveries.”
HLIB Research added that the rapid expansion of Malaysia’s DC pipeline will remain a major structural driver for RE demand.
However, it noted that the relatively slow take-up of the Corporate Renewable Energy Supply Scheme (Cress) has limited commercial attractiveness because of elevated and uncertain System Access Charges (SAC).
“We believe this strengthens the case for regulatory refinements, particularly on SAC recalibration, to improve Cress’ bankability and accelerate its adoption,” it said.
HLIB Research expects greater regulatory focus in 2H26, with potential rationalisation of the SAC serving as a key catalyst for a sector rerating. The research house also expects solar photovoltaic (PV) module prices to remain broadly stable through end-2026 despite recent cost pressures.
It noted that China’s removal of its 9% export value-added tax rebate on PV products in April pushed module prices up by between 8% and 9.6% year-to-date.
Nevertheless, structural oversupply is expected to remain the dominant force shaping longer-term pricing.
“Against this backdrop, we expect solar module prices to remain anchored between US$0.11 and US$0.12 per watt in the near term,” it said.
While stable module prices should improve cost visibility for developers and EPCC contractors, HLIB Research believes the next growth phase will increasingly be driven by Bess.
It said the shift towards grid-scale storage accelerated after the Energy Commission awarded 400MW/1,600MW-hour (MWh) of capacity under the MyBeST programme last year, alongside Sabah Electricity’s 100MW/400MWh facility in Lahad Datu.
“All major RE projects are expected to require storage capabilities,” it said, adding that developers are likely to front-load battery procurement in 2H26 before China removes export value-added tax rebates for battery products from Jan 1, 2027.
The brokerage also expects rooftop solar adoption to strengthen across commercial, industrial and residential segments over the next six months, supported by Suria Home rebate programme and higher Automatic Fuel Adjustment surcharges.
It said applications under the Solar ATAP framework had exceeded 10,000 registrations as of May, signalling growing market acceptance.
However, earnings contributions from rooftop projects are expected to remain modest as listed players are primarily exposed to utility-scale EPCC works.
Maintaining an “overweight” stance on the sector, HLIB Research said: “We like the sector riding on strong structural themes as well as a positive earnings growth cycle.”
It reiterated its “buy” recommendations on Solarvest Holdings Bhd
with a target price (TP) of RM3.59 and Samaiden Group Bhd with a TP of RM1.78.
It said both companies are well placed to benefit from a multi-year solar-plus-storage expansion cycle, driven by large-scale projects and their strong market positioning.
One analyst told StarBiz that the long-term fundamentals of the RE sector remained intact. “Rising electricity demand from digital infrastructure, coupled with the country’s energy transition agenda, should continue to provide a supportive backdrop for RE developers over the coming years,” he explained.
