Deep Dive: Malaysia’s National Energy Transition Roadmap

On 29 August 2023, Malaysia’s Prime Minister, Datuk Seri Anwar Ibrahim, launched the country’s National Energy Transition Roadmap (“NETR”)1 at Tenaga Nasional Berhad’s inaugural Energy Transition Conference. This follows the launch of the first phase of the NETR on 27 July 2023, which saw the introduction of six energy transition levers and 10 flagship catalyst projects that would be undertaken in order to facilitate Malaysia’s transition to a clean energy, low-carbon economy.2
The NETR is a comprehensive document that delves into the six energy transition levers, including the initiatives under each lever, the potential opportunities arising from the same, and the challenges that are likely to be faced. It also sets out other initiatives to support the process of the energy transition.
  • Energy savings of 21% by 2040.
  • Energy savings of 22% by 2050.
  • Improve existing Minimum Energy Performance Standards.
  • Enforce mandatory audits and reporting and monitoring protocols for large commercial and industrial (“C&I”) buildings.
  • Establish green-building codes for energy intensive C&I buildings, including mandatory national standard and disclosure of building energy performance.
  • Major retrofit of public and government buildings to be carried out by private energy service companies (“ESCOs”), with engagement through a new platform to connect the relevant parties and streamline funding.
The NETR has identified energy efficiency, with its cost efficiency and optimisation of resources, as the most important energy transition lever. However, it notes that lack of public awareness will be a major challenge to implementation. Additionally, the scope of the existing Minimum Energy Performance Standards is too narrow, which limits the potential for savings across the residential, commercial and industrial sectors. Such circumstances have led to low demand for energy efficient products and low returns for ESCOs.
  • 70% RE installed capacity by 2040.
  • No new coal plants.
  • Establish solar parks to accelerate deployment of utility-scale solar.
  • Enhancing existing Large Scale Solar (LSS) programme to improve financial sustainability for developers.
  • Increase floating solar and agrivoltaic technology by introducing clear guidelines and adopting distinct categories in the LSS programme for the same.
  • Expand existing virtual aggregation mechanism, which is currently limited to C&I consumers, to include government and residential buildings.
  • Accelerate investments in grid infrastructure and providing incentives for RE development.
  • Develop a third party access framework for RE sourcing, including allowing solar developers under the Malaysia Corporate Green Power Programme (“CGPP”)3 to sell excess power to Single Buyer.
  • Establish RE exchange hub for cross-border RE trading.
Globally, RE has been recognised as playing a vital role in energy transition, and Malaysia is no exception. The Malaysian Government has set an ambitious target of 70% RE installed capacity by 2040 and this is intended to be largely driven by solar photovoltaic installations.
The rise of solar as a RE resource in Malaysia has not been without its challenges. For instance, difficulties in obtaining land rights and unattractive returns have been a deterrent to participation in the LSS programme. There is also uncertainty at this early stage on the financial benefits arising from the virtual power purchase model under the CGPP. The above initiatives seem to be intended to address these concerns, which will be welcome news for RE players.
An interesting point to note is that the NETR has highlighted the need for investments in grid infrastructure. A key consideration with respect to increased RE in the generation mix is the readiness of the grid in terms of integration, capacity and the ability to balance supply and demand due to the intermittency of RE. A flexible, smart grid is essential in order to manage the risk of power imbalance. To this end, Tenaga Nasional Berhad has announced that they plan to invest upwards of RM90 billion over the next six years for their grid infrastructure, of which 40% will be channelled towards energy transition-related capital expenditure.4
  • Phase out use of grey hydrogen as a feedstock by 2050.
  • Produce up to 2.3 Mtpa of green hydrogen by 2050.
  • Establishment of one low-carbon hydrogen hub by 2030 and two additional hubs by 2050.
  • Establish low-carbon hydrogen standards and regulations on storage and transportation.
  • Streamline permitting process for hydrogen projects.
  • Develop green electrolyser manufacturing capabilities through research funding and financial incentives.
  • Reduce levelized cost of hydrogen by establishing hydrogen hubs and providing financial incentives.
  • Stimulate demand through bilateral agreements, providing incentives for development of hydrogen refuelling stations and purchase of hydrogen fuel cell vehicles, and exploring hydrogen co-firing.
Hydrogen has been touted as the alternative energy source of the future, with countries such as Australia and South Korea having made significant investments in hydrogen projects. Domestically, the state of Sarawak is taking the lead, with the Sarawak State Government having introduced the Sarawak Hydrogen Economy Roadmap and collaborating with multinational companies for the development of large-scale hydrogen production facilities.
However, there are technical and commercial hurdles that will need to be overcome in order to develop a hydrogen economy. At this early stage, the infrastructure and technology for hydrogen production, chiefly electrolysers and storage facilities, is somewhat limited. Further, such projects require high capital expenditure. There is also a lack of clear regulation – in this regard, it is to be noted that the NETR highlights the possibility of amending the Gas Supply Act 1993 and the Renewable Energy Act 2011 to address this gap.
  • Biorefinery capacity of 3.5 billion litres by 2050.
  • Biomass and biogas power generation capacity of 1.4 GW by 2050.
  • Explore alternative bioenergy feedstock such as bamboo and algae.
  • Enhance acceptance of palm oil biomass.
  • Obtain internationally recognised sustainable aviation fuel (“SAF”) certification.
  • Address issues of supply security by facilitating biomass clustering and scaling-up used cooking oil collection.
  • Catalyse local demand for bioenergy by establishing SAF blending mandates, upgrading nodal points and facilitating incentives through the Feed-in Tariff mechanism and co-firing.
  • Improve solid waste management policies including exploring landfill tax and quota, ensuring financial sustainability of waste-to-energy plants, and accelerating recycling targets.
It is telling that bioenergy projects at this time are relatively few and are small-scale in nature. The NETR recognises the challenges with respect to the adoption of bioenergy, which include supply security, the negative perception of waste to energy, and the economics of waste-to-energy plants.
Notwithstanding this, bioenergy is crucial to the energy transition given that it is a carbon-neutral energy source that could also serve as an alternative fuel. In addition, Malaysia’s generation of large quantities of municipal solid waste and production of palm oil can be utilised effectively.
  • Public transport modal share to reach 40% by 2040 and 60% by 2050.
  • Electric vehicles (“EV”) share of vehicle fleet to reach 80% by 2050.
  • Local EV manufacturing capabilities to reach 90% by 2050.
  • 5% of heavy vehicles to utilise hydrogen by 2050.
  • Net-zero carbon emissions for international aviation by 2050.
  • SAF blending mandate of 47% by 2050.
  • Low-carbon fuel penetration of 40% by 2050 for marine transport.
  • Facilitate buildout and electrification of public transport.
  • Improve light vehicle fuel economy.
  • Accelerate electrification of light vehicles, including incentivising investments for local manufacturing capability, co-funding of public charging infrastructure, implementing emissions and battery charging standards, and reducing regulatory challenges to EV adoption.
  • Enhance demand-side management with fuel economy and encouraging vehicle replacement with targeted incentives.
  • Implement biodiesel blending programme.
  • Introduce technology advancement through tracking future fuel powertrains and utilising hydrogen for long-haul trucks and battery electric vehicles for short-to-medium haul trucks.
  • Establish overarching aviation decarbonisation.
  • Implement SAF blending mandate, including developing a comprehensive framework for progressive escalation.
  • Evaluate palm-oil feedstock emissions with respect to SAF derived from palm-oil.
  • Encourage adoption of biofuels in onboard equipment and marine bunkering.
  • Enhance competitiveness of domestic ports in future fuel marine bunkering.
  • Develop plan for adoption of future fuels for domestic coastal ships.
The transportation sector is a major contributor to greenhouse gas emissions in Malaysia. As such, driving a shift towards green mobility is crucial to the energy transition and the achievement of the nation’s target to be net-zero by 2050. The materialisation of this shift is hampered by insufficient public transport connectivity and charging infrastructure, the cost impact arising from sustainable fuel adoption, and the lack of clarity and guidance by the relevant stakeholders. Overcoming these issues will be a long process that will require an extensive roll-out of targeted frameworks and policies for the various sub-sectors of transportation.
  • 3 CCUS hubs and total storage capacity of up to 15 Mtpa by 2030.
  • 3 carbon capture hubs and total storage capacity between 40 to 80 Mtpa by 2050.
  • Develop CCUS-specific policies and regulations and amend relevant existing regulations.
  • Provision of incentives for CCUS adoption and hub development.
  • Facilitate CCUS hub infrastructure development by exploring collaboration and funding opportunities.
  • Establish transboundary carbon agreements.
  • Promote local utilisation of carbon dioxide.
CCUS is poised to play a key role in decarbonisation of the energy sector. Being in its infancy, however, there is still much to be done in order to materialise the projected impact of CCUS. In Malaysia, there is currently no regulatory framework in place which could help spur CCUS investment and development. Further, as a nascent technology, CCUS is costly – although the NETR envisages that such cost will be subject to a steady decline. With the initiatives above, which reflect the Malaysian Government’s commitment to support CCUS development and adoption, it is likely that we will be seeing an uptick in CCUS investment.
The energy transition process is not an easy one, and it requires careful management of the energy trilemma: security, sustainability, and affordability. An effective energy transition necessitates the balancing of environmental and socioeconomic concerns. In this regard, the NETR emphasises a just, inclusive and cost-effective energy transition.
Key initiatives under the NETR that are aimed at supporting the energy transition process include: 
  • The launching of a National Energy Transition Facility with an initial seed fund of RM2 billion;
  • Adoption of green and sustainable finance instruments;
  • Implementation of a carbon-pricing mechanism; and
  • Roll-out of complementary policies such as the National Gas Roadmap, Nationally Determined Contribution Roadmap, National ESG Industry Framework, the Hydrogen Economy and Technology Roadmap, and the National Biomass Action Plan;
  • Positioning natural gas to support the transition in the energy landscape; and
  • Development and roll-out of green skills and increasing awareness. 
In addition, the Malaysian Government announced that a National Energy Council will be established to facilitate the implementation of the NETR.5 
While there are many obstacles to overcome and extensive implementation will be required, the NETR does indicate strong commitment by the public sector to drive energy transition in Malaysia. To this end, various ministries and agencies have been identified in the NETR to spearhead the key initiatives under each of the six levers. We anticipate that there will be various policy, legal and regulatory developments and changes in the next decade as the country strives towards a future of clean energy and achieving net-zero by 2050.
For enquiries on matters relating to energy transition, please contact Richard Khoo (Partner) and Rachel Chiah (Senior Associate) of the Energy Practice of Skrine.

1 A copy of Malaysia’s National Energy Transition Roadmap is available here on the Ministry of Economy’s website.
2 Our earlier Alert on Malaysia’s National Energy Transition Roadmap (Part One) is available here.
3 Under the Malaysia Corporate Green Power Programme, solar power producers will enter into virtual power purchase agreements with identified corporate consumers. Our Alerts on the said programme and the latest updates to the same are available here and here.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact