Malaysia
With a cumulative score of 1.54, Malaysia ranks number 45 among emerging markets and number 74 in the global ranking.
- Emerging markets
- Asia-Pacific
1.88 / 5
Power score
0.73 / 5
Transport score
Buildings score
Only 56 markets (28 emerging markets) are scored on the Buildings sector. See the full list on the methodology page.
Low-carbon strategy
Net-zero goal and strategy
Malaysia is yet to adopt a long-term net zero goal.
Nationally Determined Contributions (NDC)
Under its Nationally Determined Contribution submitted to the United Nations, the country aims to cut its greenhouse gas emissions intensity by 45% by 2030, relative to the emissions intensity of the GDP in 2005.
Fossil fuel phase-out policy
There is no fossil fuel phase-out policy in Malaysia.
Power
Power policy
Coal and gas dominate power generation in Malaysia and accounted for 74% of the installed capacity and 83% of electricity generation in 2020. This share has largely remained stable over the last three years despite the government’s efforts to promote renewable energy.
Power policies
Power prices and costs
Average power demand in Malaysia has increased at a compound annual growth rate of 4% since 2010. The country achieved 100% electrification in 2015. The long-term economic growth prospects of the country offer further potential for power demand growth, and the government aims to ramp up solar power capacity to meet this demand at least partially. The country has a potential for 42GW of rooftop solar power capacity, and 16.5GW of solar on water bodies. Malaysia is also the third-largest PV cell producer in the world. The average age of power generation assets in the country is still low, therefore Malaysia does not have a program to modernize power plants.
The electricity sector is partially unbundled, with private participation allowed in electricity generation. Independent power producers account for about 70% of all power generation assets in Malaysia. The three state-owned utilities – TNB, Serawak Energy and Sabah Electricity – are the only entities allowed to participate in electricity transmission and distribution.
Power market
Malaysia passed the Renewable Energy Act in June 2011 and followed it up with the Renewable Energy (Feed-in Approval and Feed-in Tariff Rate) Rules in the same year. Solar PV, small hydro, biomass and biogas projects were allowed to apply for feed-in tariffs. In 2016, the government announced rules for auctions of large-scale solar power projects (greater than 30MW capacity). The country has conducted four rounds of solar PV capacity auctions until 2020 and has awarded 2.3GW of new projects since 2016 through this route.
In 2018, the Malaysian government announced that it targets 20% of the country’s electricity generation from renewable energy sources by 2025. In October 2020, the government approved a new target for Malaysia to have renewables, including large hydro, account for 31% of the installed generation capacity by 2025 and 40% by 2035.
Installed Capacity (in MW)
Electricity Generation (in GWh)
Utility privatisation
Which segments of the power sector are open to private participation?
Wholesale power market
Does the country have a wholesale power market?
Doing business and barriers
Malaysian residential electricity is among the cheapest in the region at $52/MWh, while commercial and industrial tariffs are higher, at $91-104/MWh. Average power prices have remained the same across all segments for the last five years. However, Malaysia also has a cost pass through mechanism that adjusts electricity bills for variations in fuel prices.
Foreign investors are not allowed to have majority shareholding in renewable energy assets in the country. This forces foreign companies to tie up with local partners to participate in auctions and other feed-in tariff projects. Additionally, feed-in tariff projects are incentivized to use locally sourced equipment by providing bonus tariffs. Land for large-scale projects is a growing constraint, as much of the available acreage is high-value agricultural land. The average electricity tariff for residential consumers is significantly lower than that for commercial and industrial consumers. The electricity tariffs in the country have been left unchanged for the last five years. This makes it difficult for solar rooftop projects to compete in the residential segment.
Currency of PPAs
Are PPAs signed in or indexed to U.S. Dollars or Euro?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel taxes
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel subsidies
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?
Transport
EV market
Malaysia is the second largest market for electric vehicles in Southeast Asia currently. Electric vehicles sales in the country surged from less than 500 in 2012 to over 6,000 in 2017. Tax breaks offered by the government to manufacturers helped increase the sales of plug-in hybrid electric vehicles (PHEV) from luxury brands like Mercedes-Benz and BMW during this period.
Sales of battery electric vehicles (BEV) in Malaysia are still negligible. The lack of incentives for BEVs in Malaysia has limited the number of models available in the market and has held back sales. There were less than 200 passenger BEVs and 3,200 electric two-wheelers in the Malaysian vehicle fleet in 2020.
The Malaysian government is yet to announce a long-term target for EV sales or production in the country. It also doesn’t offer any direct purchase subsidies or tax incentives for electric vehicles.
EV policy
Even though the government included EVs as one of the focus areas under the National Automotive Policy 2020, there are no incentives offered to manufacturers or consumers. This, combined with the relatively lower price of internal combustion vehicles sold in Malaysia, makes it challenging for BEVs to compete in the market.
Transport policies
Fuel economy standards
Does the country have a fuel economy standard in place?
Buildings
Buildings market
Malaysia has introduced the National Energy Efficiency Action Plan to improve energy efficiency in the country and proposes to mandate minimum energy efficiency requirements for new buildings. However, these standards are not enforced
Energy efficiency plan
Does the country have a national energy efficiency plan?
Energy performance standards
Are there minimum energy performance standards for buildings?
Buildings policy
The government has yet to implement any substantive policy support in this sector and the low-carbon heat market remains at an early stage.