Scope for growth in Malaysia renewables: report

THERE is increasing scope for Malaysia's non-hydro renewable energy sector -- particularly solar energy -- to grow, with strengthening government support and rising investor interest in the past two years, Fitch Solutions Macro Research said in a Sept 13 report, identifying "substantial untapped ... potential" in that area.

The report noted recent and upcoming moves that increase government support for the sector, in light of which there is "an upside risk" to Fitch Solutions' forecast for the sector.

Fitch Solutions' current forecast is for net non-hydro renewables capacity growth of over 1 gigawatt (GW) over the coming decade, taking total installed non-hydro renewables capacity to 3.1 GW by 2028. But this will likely be revised upwards upon "more concrete announcements and developments" in the coming quarters, said the report.

The report highlighted the solar sector as being "particularly well poised for more growth", not least given the success of recent capacity tenders.

Besides relatively high solar irradiance levels, Malaysia has an established solar manufacturing sector. Although most of the output is currently for export, this domestic manufacturing base will ensure a reliable and low-cost supply chain for local project developers.

"We believe that this will be a key supportive factor to the Malaysian solar industry over the coming year, as greater numbers of manufacturers set up in the country," said the report.

After significant oversubscription of solar auctions in their first two capacity tenders, the Energy Commission of Malaysia issued a request for proposal for the development of large-scale photovoltaic power plants with a targeted capacity of 500 megawatts (MW) at the start of 2019, which closed in August 2019.

As of September 2019, Malaysia has launched 365 MW. Bid prices went to a record low of RM0.1777/kWh (kilowatt-hour), lower than the price for gas-fired power. The government has since announced plans to host more bids for large-scale solar projects.

There are also government efforts to further liberalise the power sector, creating a more favourable investment environment and encouraging private participation.

Malaysia already performs better than the world average on the Fitch Solutions Power Risk/Reward Index, although its renewables sector is below the world average. Said Fitch Solutions: "This reflects a continued preference for thermal sources in the country, but shows the amount of scope the renewables sector could still grow in should the government improve investor environment and procure more capacity."