PETALING JAYA: With Indonesia and Thailand setting a plan of achieving net zero emissions in 2060 and 2070, respectively, Malaysia’s ambitious goal to be carbon neutral ahead of its Asean peers by 2050 is approaching relatively quickly.
Global capital markets are aggressively looking for new opportunities and migrating investments towards ESG (environmental, social, and governance) entities, making it advantageous for Malaysia to proactively position its renewable energy (RE) sector in their crosshairs.
Stepping up Malaysia’s commitment toward embracing a sustainable future could trigger waves of foreign investments spurring economic growth, continually expanding an upskilled workforce, and providing value-added employment opportunities.
Malaysia’s renewable energy sector
According to a BCG report, out of Malaysia’s total capacity energy usage as of 2021, only about 18% is attributed to renewable and alternative energy consumption.
Expediting the transition to RE is crucial considering that the nation’s energy needs are growing and will eventually outpace supply. It is estimated that both the current oil and natural gas reserves will be depleted within the next 30 years.
With the National Renewable Energy Policy initially targeting a 20% RE share in the nation’s power capacity mix by 2025, it’s a positive sign that the government has recently revised that target to 31% by 2025.
Malaysia’s RE mix is diversified between solar, biomass, biowaste, biogas, and geothermal with hydropower accounting for over half of the output.
Recent incentives have propelled Malaysia to become a global player in solar panel production but ironically, local adoption is still proportionately miniscule. The intermittent nature of sunlight requires further advancements in battery storage capacities and cost to improve solar’s efficiency.
Leong Yuen Yoong, a professor at Sunway University’s Jeffrey Sachs Centre on Sustainable Development, said Malaysia should avoid deforestation for solar energy as the greenness of solar energy would be greatly diminished if it comes at the cost of clearing trees.
“Solar power is intermittent due to external factors that cannot be controlled, for example length of days and weather patterns,” she said.
“Base generation is thus needed to produce power at a constant rate to meet the minimum level of power demand 24/7. The base load is generally supplied by coal, natural gas and large-scale hydroelectric power plants in Malaysia.”
Biomass, biowaste and biogas
With the density in palm oil production, abundant agricultural yields, and equatorial climate, Malaysia has the perfect landscape for biomass and biogas energy. The current challenges include the need to improve connectivity of sites to the grid and stronger plant design engineering.
Although considered one of the more consistent forms of RE production, geothermal is extremely location dependent with only three potential regions identified in Malaysia and very few approvals granted by the Sustainable Energy Development Authority (Seda).
Shouldering the bulk of Malaysia’s RE output, hydropower accounts for 86% of RE capacity but that still only accounts for about 15% of the total electricity generation.
While only 20% of hydro’s potential has been explored, further growth comes with challenges of mitigating the environmental impact to land, rivers, and natural habitat of surrounding communities and wildlife.
Run of river hydro
With a significantly smaller carbon footprint than better known “big hydro”, run of river hydro (RoR) is a hybrid solution that is slowly gaining traction. Without the need to displace and disrupt larger land masses, construct dams or increase greenhouse gas emissions, RoR comes with better upside potential.
Although ecologically sound, the technical expertise and feasibility studies requirements present both a higher upfront investment and barrier to entry.
Current domestic initiatives
Malaysia’s path towards higher sustainability is supported domestically by financing schemes like Green Technology Financing Scheme 2.0 (GTFS 2.0) and the recent extension of both the Green Investment Tax Allowance (Gita) and the Green Income Tax Exemption (Gite) until 2023.
Through the Small Renewable Energy Programme (SREP), smaller renewable projects under 10 MW have been incentivised to contribute to the national grid but more projects of all sizes are desperately needed to meet our national energy goals.
To encourage further development of solar, biomass, biogas and small hydro producers, the Renewable Energy fund was created to support the Feed-in Tariff (FiT) scheme managed by Seda.
“We must consider the life cycle carbon footprint in order to get the conceptually correct economic accounting.
“Cost-benefit analysis that includes life cycle carbon accounting is what we need to keep focussing on and make it an integral part of public discussion,” Leong said.
Despite the domestic incentives and initiatives, meeting the carbon neutral targets requires access to significantly larger funding and subsidies matching or exceeding those currently available to non-RE/fossil fuel producers.
With a bulk of the global financial industry adopting ESG mandates, and investors currently facing challenges with low or negative yields, a perfect storm is brewing for Malaysia to showcase its potential as a renewable energy hub.
By implementing competitive subsidies and incentives, attracting foreign investment into long-term renewable energy assets, projects and companies will create a trickle-down effect benefiting all Malaysians moving forward.