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AGF Policy Brief: Accelerate Malaysia's Energy Transition by Leapfrogging Over Natural Gas

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Malaysia’s energy transition necessitates a critical re-evaluation of its reliance on natural gas as a bridge fuel. Rapid advancements in solar and storage technologies present a compelling case for accelerating the shift away from fossil fuels. To maximise the benefits of solar power, Malaysia should prioritise investments in solar, storage, and grid infrastructure, while reforming regulatory frameworks. Integrating biomass and biogas into the energy mix can further enhance sustainability and address waste management challenges. A regional approach, focusing on grid interconnections and cooperation within ASEAN, is essential to unlock the full potential of renewable energy and ensure a cost-effective, reliable, and decarbonised power sector.

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Executive Summary

  • The rapid deployment potential of solar and supporting technologies necessitates a re evaluation of the extent to which natural gas should be relied upon as a bridge fuel as recommended in the National Energy Transition Roadmap (NETR). The rapid advancements in the technologies that harness, and store renewable energy, are likely to mean that a cheaper and cleaner energy transition can be achieved by replacing planned natural gas power plants with solar power and storage expansion.
  • Given the vast potential of solar power in Malaysia as well as its increasing affordability and its key role in all energy transition scenarios, Malaysia should unlock its solar power potential with coordinated investments in solar and storage technologies, and grid upgrades. Regulations on the power industry should be correspondingly updated.
  • The key components of the global energy transition are electrification, energy efficiency, solar, wind, energy storage, and energy transmission. Policymakers should explore creative incentives and funding mechanisms to accelerate the development of each component e.g. to build a smart grid infrastructure that integrates renewable energy that is time-varying in supply and generated in dispersed locations.
  • Biomass power and biogas power should play bigger roles in the renewable energy mix. The potential scale of biomass power must be assessed in the context of a comprehensive land-use study and supply chain analysis.
  • Similarly, the assessment of the potential for animal waste-based biogas production must also consider benefits like circular waste management, methane emission reduction, water purity protection and poverty alleviation.
  • The key to unlocking the most cost-effective and reliable path to decarbonising Malaysia's power supply lies in a regional ASEAN approach. This approach prioritises strategic interconnections of national grids over isolated national expansion of renewable energy capacity to allow cost-competitive sourcing and backup power during outages. This vision necessitates a two-pronged planning approach: a long-term vision for a regional ultra-high voltage direct current backbone grid and the near-term optimisation of the current ASEAN Power Grid plan.