TOWARDS A SUSTAINABLE ENERGY SECTOR


TRANSITIONING to a low-carbon future is not just an environmental necessity; it represents a vital economic transformation for Malaysia.

Sustainable economic strategies will help drive Malaysia towards a resilient, high-value green economy.

Energy demand is expected to rise 2% annually until 2050, driven largely by economic and population growth – backed by rapid urbanisation.

Recognising that energy consumption is increasing across residential, commercial, and industrial sectors, it will transition the nation’s cities and communities to address climate concerns.

The recently released National Energy Transition Roadmap (NETR) by the Ministry of Economy, highlights the challenges this rising energy consumption presents.

On this trajectory, even rapid expansion of renewable energy sources would be insufficient to support decarbonisation goals in line with the Paris Agreement – the international treaty on climate change adopted in 2015.

A broader perspective to mitigate this challenge must incorporate energy efficiency – widely recognised as one of the fastest and most cost-effective enablers to achieve Malaysia’s climate commitment to reduce carbon intensity by 45% against GDP by 2030 compared to the 2005 baseline.

While readily available technologies offer substantial efficiency gains, the limited demand in Malaysia, partly due to low energy prices, emphasises the need to raise awareness about the benefits of energy efficiency. This should be supported by driving technology accessibility for local energy service companies (ESCOs).

The NETR aims to establish a platform for streamlining public-private collaboration in retrofitting projects, ultimately driving substantial energy savings and fostering local ESCO demand.

On the supply side, it’s crucial to enhance the local ESCO ecosystem and provide better access to technological advancements for improved sustainability.

Recent adjustments in electricity tariffs and subsidies signal Malaysia’s progress. The expansion of the myTNB app to quantify savings from efficient appliances can amplify energy efficiency adoption efforts through a smart, data-driven approach.

From fossil fuels to renewable energy: Solar remains the main growth engine

It is critical to shift the energy mix towards more sustainable sources if Malaysia is to achieve its goal of decarbonising its high-emitting power sector.

Currently, fossil fuels dominate the power landscape, framing the vital need for a low-carbon transition.

Solar is a promising solution to this challenge, thanks to Malaysia’s favourable geographical conditions and solar competitive economics.

The attractiveness of solar technology lies in its lower generation costs compared to fossil fuels, driven by technological advancements, a growing supply chain, and economies of scale.

These are important added value drivers, particularly as Malaysia boasts high solar irradiance, significant photovoltaic (PV) industry employment, and a strong track record of historical programmes that have stimulated adoption.

Six out of 10 of the world’s largest PV manufacturing companies operate in Malaysia, positioning Malaysia as one of the top exporters in the global PV industry. This all contributes to the potential for maximising socio-economic impact.

The transition from fossil fuels to renewable energy will require a holistic approach, particularly in light of Malaysia’s ambitious goal of achieving a 70% share of renewable energy in installed capacity by 2050.

This endeavour will require rapid and substantial expansion of solar installations in Peninsular Malaysia and Sabah, alongside developing hydroelectric power in Sarawak.

This comprehensive strategy is poised to create a conducive environment for market-driven investments, underpinned by well-crafted policies.

Given the intermittent nature of renewable energy, concurrent investments in grid capacity are vital to ensure preparedness for increased solar energy integration – ultimately securing a dependable and sustainable energy future.

Energising a green future: Regulatory frameworks for renewable success

Charting Malaysia’s sustainable energy future will require tackling regulatory challenges as a critical collaborative effort.

Regulatory bodies and industry stakeholders must work together to address these obstacles and steer the energy sector towards the path of sustainability.

Malaysia’s recognition as the leading South-East Asian country in the 2023 Energy Transition Index by the World Economic Forum maps the nation’s progress in driving strategic shifts and economic restructuring, while also establishing regional leadership in energy transition.

The government plays a central role in propelling this transition. Policy formulation and implementation tailored to various energy sources, particularly solar for Malaysia, are key in addressing specific challenges and facilitating a smoother adoption of renewable energy.

Solar-specific regulations embrace several key elements. These include the introduction of a third-party access (TPA) framework, enabling physical green power purchase agreements (PPAs) based on a willing-seller-willing-buyer model.

To support these initiatives, there is a coordinated approach to funding grid investment – combining public direct funding, the implementation of the TPA framework, and the sharing of grid expansion costs among solar park developers.

Additionally, efforts are made to streamline zoning, land use, permitting, and approval processes.

Navigating diverse stakeholder interests, economic considerations, and addressing risk aversion arising from uncertainties represent significant challenges in the regulatory landscape.

To mitigate the risks associated with rapid renewable energy expansion, exploring alternative energy sources is a necessary endeavour.

As outlined in the National Energy Plan (2022-2040), natural gas continues to play a pivotal role in guaranteeing energy security and promoting sustainable socio-economic growth in Malaysia.

While natural gas serves as a transitional fuel, Malaysia’s diminishing reserves and susceptibility to price volatility requires a diversified energy strategy. Meticulous management will also be pivotal, given the trade-offs related to energy security and affordability.

In addition to renewables, three viable alternatives emerge: nuclear energy, renewable energy imports, and bio compressed natural gas (Bio-CNG).

Exploring these alternatives offers opportunities to bolster energy resilience and reduce dependence on fossil fuels, ensuring a more robust and sustainable energy sector in Malaysia.

Well-crafted policies, guidelines, and frameworks are foundational to Malaysia’s green growth. They empower a multitude of stakeholders to effectively navigate the complexities surrounding the adoption of renewable energy – offering clear direction ahead.

By establishing effective regulation structures that embrace renewable energy, Malaysia will be better positioned to lay the groundwork for building a more sustainable, resilient, and prosperous nation.

This article is authored by BCG Malaysia head Nurlin Mohd Salleh, and Boston Consulting Group managing director and partner Marko Lackovic.

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