Malaysia - Country Commercial Guide
Environmental Technologies

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2021-11-06

Overview

The Government of Malaysia’s (GOM) liberalization of the energy market will drive demand for renewable technologies as Malaysia works towards the GOM’s target of 20 percent renewable energy by 2025. Smart grid technology will play a key role in this transformation, particularly renewable energy (RE) storage solutions.

Malaysia is one of the most rapidly urbanizing countries in Asia with more than 70 percent of the population living in urban areas. The Greenhouse Gas (GHG) emission levels in Malaysia are high when compared with other countries at similar stages of development. More than half of Malaysia’s emission sources are directly related to urban settings, with emissions mainly coming from the energy sector (76 percent), the waste sector (12 percent), and the industrial processes sector (6 percent). The electricity and transportation sub-sectors are the biggest contributors to emissions.

In July 2021, Malaysia launched the National Low Carbon Cities Master Plan * http://gtalcc.gov.my/resources/national-low-carbon-cities-masterplan-nlccm/ ) providing guidelines for state governments and local authorities in developing low carbon cities. With this, the Low Carbon Cities Catalyst Grant (GeRAK) has also been launched to help local authorities implement their high-impact low-carbon cities initiative.

In line with Malaysia’s aim to become an inclusive and sustainable nation, Environmental Technology (ET), also commonly known as Green Technology (GT), has been identified as one of the drivers of the country’s green growth. Sectors identified under the Green Technology Masterplan Malaysia 2017-2030 were:

  • Renewable Energy (RE): Best prospects for U.S. businesses
  • Water purification
  • Air purification
  • Sewage treatment
  • Environmental remediation
  • Solid waste management: Best prospects for U.S. businesses
  • Energy conservation

Renewable Energy

Traditionally, Malaysia is dependent on conventional power generation, including natural gas, coal, and hydro. As a signatory nation to the Conference of Parties to the United Nations Framework Convention on Climate Change, Malaysia pledged to reduce its GHG emission intensity of GDP by up to 45 percent by 2030 by implementing clean, sustainable, and RE.

Renewables currently contribute 18 percent to Malaysia’s energy mix, dominated by hydropower technologies, which account for 86 percent of renewable capacity. Malaysia has an ambitious target of renewables, excluding hydropower, to grow to 20 percent of the generation mix by 2025.

Malaysia is expected to more than double renewable capacity from 6 to 14GW, rising from 18 to 30 percent of the generation mix. While the overarching ambition of non-hydropower renewables, reaching 20 percent of the energy mix by 2025 may be overly optimistic, large-scale solar (LSS) investment remains a major technical and financial opportunity for Malaysia.

The Energy Commission (EC) of Malaysia estimated the historical demand growth of electricity in Malaysia to be around 2.5 percent per year and, based on this, they projected in their Malaysia Generation Development Plan 2019, that electricity demand for the period 2020-2030 is expected to grow at 1.8 percent per annum.  Over this same period, Malaysia will need about 10.0 GW of new capacity to meet its demand growth, which will require replacing retiring plants and ensuring system reliability. Catering to this forecasted demand, and in line with the Kyoto Protocol, the GOM started to increase RE in its fuel mix capacity (Table 1).

Year

Capacity Mix

Interconnect

(percent)

Hydro

(percent)

RE

(percent)

Gas

(percent)

Coal

(percent)

2020

1.0

8.0

9.0

40.0

42.0

2021

1.0

7.0

10.0

45.0

37.0

2022

0.0

7.0

12.0

44.0

37.0

2023

0.0

7.0

16.0

40.0

37.0

2024

0.0

6.0

19.0

39.0

36.0

2025

0.0

6.0

23.0

36.0

35.0

2026

0.0

6.0

23.0

37.0

35.0

2027

0.0

7.0

23.0

36.0

34.0

2028

0.0

7.0

24.0

34.0

35.0

2029

0.0

7.0

23.0

36.0

34.0

2030

0.0

7.0

23.0

41.0

29.0

9: Projected Fuel Mix. Source: EC of Malaysia

Solid Waste Management: Malaysia generated 19,000 tons of waste per day in 2005 at a recycling rate of five percent. The quantity in 2019 was 38,000 tons, with a recycling rate of 17.5 percent. This figure should grow to over 40,000 tons per day after 2020, despite a targeted recycling rate of 22.0 percent with limited space for landfills and rising costs of disposal. There is increased pressure and an urgent need to tackle the waste management issue and reduce the impact on the environment and the general well-being of the population.

Aside from consumer and household waste, commercial waste generated from manufacturing activities is another source of concern. To overcome the waste produced, the government is encouraging companies to undertake environmental management activities, such as collection, storage, composting, disposal, recycling of toxic and non-toxic waste, and Waste-to-Energy (WTE).

Renewable Energy Mix

To attain sustainability in energy supply, Malaysia is looking at RE resources that are indigenous to Malaysia and not imported from other countries. The following prioritized list of RE options includes:

Solar: Malaysia has excellent potential for solar generation uptake due to its location along the equator with monthly solar irradiation estimated at 400–600 MJ/M2. The EC, since 2016, successfully initiated and carried out four bid processes to interested parties for the operation of Large-Scale Solar (LSS) Farms in Malaysia. The first LSS totaled 434 MW was in 2016, the second was 563 MW in 2018, and an estimated 500 MW for the third round of bidding in 2019. The latest bidding round for LSS reveals that the market is competitive and fragmented. It is also one of the most expensive solar markets in APAC, behind only Japan and Indonesia. The third round of LSS tenders saw 99 percent of bids below the reference tariff price. LSS is a transparent mechanism for awarding LSS projects to achieve the government’s RE target.

Solar PV has, by far, the highest technical potential in Malaysia and is supported by mechanisms to promote affordability. Malaysia allows installation of solar for self-consumption. Its Net Energy Metering program provides a pathway to self-generation with excess energy sold back into the grid. The nation’s LSS projects offer a successful pathway to utility-scale solar adoption.

Malaysia’s end-to-end solar PV value chain still reflects some important opportunities for investors and operators, including a well-established solar PV manufacturing industry. Manufacturing, project development, installation and construction, ownership, operation, service, and maintenance all offer areas of potential to the right type of industry player.

Waste to Energy (WTE): WTE involves any waste treatment process to convert non-recyclable waste materials into useable energy through a variety of methods, including combustion, gasification, pyritization, anaerobic digestion, and landfill gas (LFG) recovery. Due to the considerable amount of municipal solid waste (MSW) produced daily in urban areas, attention is focused on MSW processing as the feedstock to such technologies. The most common and widely used MSW-to-energy technologies are incineration in a combined heat and power plant and controlled landfill to capture methane from LFG waste. 

Biogas: Biogas is typically produced by the anaerobic digestion of organic municipal waste, food waste, and sewage. It has the potential to decrease the use of fossil fuels for power generation (WTE). Food waste is one of the highest potential sources for biogas production. It is estimated that more than 40 percent of Malaysian MSW is food waste. High organic content in the food waste means this source has a high potential to be tapped. However, Malaysia lacks aggressive policies to expedite the implementation and improper management of waste, particularly at the source, continues to be a problem. The location of biogas plants also impact viability as plants farther from the nearest connection point to export generated power will be less economical.  

Biomass: Malaysia produces approximately 168 million tons of biomass annually from palm oil waste, rice husks, coconut, sugar cane, municipal and forestry waste. Biomass power generation offers another potential area of opportunity, leveraging the nation’s palm oil industry as a fuel source. However, grid access and connectivity remain issues in this diverse and rural industry.

Biomass’ advantage is it can be easily pelletized and has attractive potential for co-firing in conventional power plants, which traditionally use coal or natural gas. Co-firing has lower emission of carbon dioxide, sulfur oxides, and nitrogen oxides, thus reducing the GHG level. The drawback of using biomass is the reduction in the boiler’s efficiency due to scaling and corrosion from the fly ash.

Small Hydro

Malaysia is situated in a high rainfall area, and this factor alone makes Malaysia one of the largest hydropower potential areas. Small hydro plants, which are sometimes referred to as mini hydro in Malaysia, are categorized as being under 30 MW. The smaller scale from 5 to 500 KW is classified as Micro Hydro. In Malaysia, these two categories of hydropower have untapped potential as they are clean, sustainable, and do not contribute to GHG. These power plants have a lower environmental impact on their surroundings due to their smaller footprint. However, as most of these are in rural or secluded areas, they usually cater to a small population and make it challenging to derive substantial profit from the venture. With the uncertainty in the project costs, these small hydro plants are carried out by TNB more as a corporate responsibility project rather than a business venture.

Wind: Wind power is considered an RE option in Malaysia. Malaysia is regarded as a low wind speed area with a monthly mean wind speed of between 1.5 and 4.5 meters per second. There is a small pocket of areas on the east coast of Peninsular Malaysia, such as Mersing, Johor, and Kuala Terengganu, Terengganu, and in East Malaysia at Kudat and Sabah are identified as potential with an average wind speed of 3 M/S at 60-meter height. The downside to Malaysia’s onshore wind power is that viable wind speed occurs typically during the monsoon season in November to February. 

Leading Sub-Sectors 

Malaysia’s Vision 2020, launched in 1991, aimed to become a fully developed country by 2020. Although not fully achieved, this vision managed to put much of its population in the middle-income bracket. This milestone was achieved through Malaysia’s three Industrial Master Plans, which emphasized the growth of the manufacturing sectors.

Malaysia’s success also led to other concerns such as energy security and waste management. Being a manufacturing nation, it consumes a high amount of energy, which at the current rate will not be sustainable. With higher disposable income, Malaysians are consuming more, leading to higher waste generation. At the current rate, all available landfills will be overrun with household, municipal, and commercial solid waste. To address these concerns, the government is looking for solutions that increase existing power and incinerator plant efficiency, explore renewable fuel sources, and encourage the construction of new plants (more WTE and RE).

Opportunities

As projected by the Energy Commission, Malaysia will need to replace 10GW of power and to add another 5GW of RE into its grid over the next 10 years.

Projected New Capacity Installation and Decommissioning of Old Plants

Year

CCGT (MW)

RE (MW)

Phase In

 Phase Out 

Phase In

 Phase Out 

2020

1,440.00

322.00

462.00

-

2021

2,241.00

-

688.00

-

2022

-

915.00

672.00

-

2023

-

720.00

 

-

2024

1,200.00

1,010.00

975.00

-

2025

-

249.00

2,227.00

-

2026

1,200.00

675.00

94.00

-

2027

300.00

1,303.00

97.00

-

2028

-

703.00

96.00

-

2029

2,300.00

1,486.00

94.00

-

2030

2,800.00

2,778.00

82.00

-

Total

11,481.00

10,161.00

5,487.00

-

10: Energy Commission of Malaysia Note: Numerals in italic are capacities that are already planned, awarded and work in progress.

Malaysian Green Technology and Climate Change Centre, an agency under the purview of Ministry of Environment and Water, seeks to identify green technologies that can be implemented in Malaysia. MGTC has a mandate to spearhead the growth of green technologies in the areas of Green Growth, Climate Change Mitigation and Climate Resilience, and Adaptation.

Resources

  • Department of Environment
  • Ministry of Housing and Local Government
  • Ministry of Science Technology and Innovation
  • National Solid Waste Management Department
  • Sustainable Energy Development Authority
  • Tenaga Nasional Bhd.