The Twelfth Malaysia Plan, spanning 2021-2025 (Twelfth Plan), articulates the government’s commitment to achieve net-zero GHG emissions by 2050. Concurrently, the National Energy Policy 2022-2040 (DTN) lays the foundation for an equitable energy transition that is fair and inclusive for everyone. Globally, the energy sector faces a rapid transformation while balancing the energy trilemma of security, affordability, and sustainability. Energy transition is also gaining momentum both domestically and internationally.
In an effort to guide Malaysia’s energy transition efforts, the National Energy Transition Roadmap (NETR) was launched by the Ministry of Economy. This roadmap will steer the country’s shift from a traditional fossil fuels-based economy to a high-value green economy. The NETR requires a whole-of-nation approach, encompassing federal and state governments, industry, the general public, and the international community. Ten flagship catalyst projects of the NETR, which cover six energy transition levers namely, energy efficiency (EE), renewable energy (RE), hydrogen, bioenergy, green mobility, and carbon capture, utilisation and storage (CCUS) launched on July 27th 2023. These flagship projects are expected to attract investment of more than RM25 billion, create 23,000 job opportunities and reduce GHG emissions by more than 10,000 Gg CO2eq per year.
Additionally, the NETR establishes the pathway for national energy mix, GHG emission reduction and energy transition initiatives. This reinforces Malaysia’s commitment to net-zero emissions as early as 2050 despite contributing only 0.8% to global GHG. By 2050, NETR initiatives are expected to deliver a 32% reduction in GHG emissions for the energy sector compared to the 2019 baseline – reaching 4.3 MtCo2eq emissions per capita.
Based on the National Energy Policy, 2022-2040 (DTN), the energy sector contributed approximately 28% of GDP and employed 25% of the total workforce in Malaysia. In addition, it is a key source of national income, with petroleum-related products contributing 31% of fiscal income, and energy exports constituting 13% of total export value. The energy sector also benefits more than 10 million customers by providing daily access to electricity supply and enabling mobility through a reliable supply of fuels. Jobs and business opportunities created in the energy sector, as well as economic multipliers in energy-related supply chains, also contribute positively to the socioeconomic development of the nation. Fossil fuels continue to contribute the largest share of Malaysia’s energy supply and have a significant influence in shaping the country’s energy landscape.
Defining Energy Transition – energy transition is a structural shift in energy systems, characterised by a transition towards cleaner sources of energy, increased use of RE, and a significant reduction in carbon emissions. The energy transition is expected to occur at an accelerated pace, driven by rapid technological advances and robust climate change policies.
As of 2020, four energy sources dominated the national total primary energy supply (TPES) mix. Natural gas constituted the largest portion at 42.4%, followed by crude oil and petroleum products at 27.3% and coal at 26.4%. Renewables, comprising hydropower, solar and bioenergy, constituted just a mere 3.9%. Historically, the power sector in Malaysia has been operated as a vertically integrated monopoly system. Over time, it has undergone various stages of liberalisation. The power sector was privatised with the aim of attracting investments as well as enhancing efficiency and productivity to ensure a sufficient supply. Additionally, the government has encouraged the involvement of independent power producers (IPPs) to improve the reliability of the electricity supply and address the shortage of generation capacity in meeting the demand. Natural gas plays an important role as a transitional fuel in energy transition. The government implemented Third Party Access (TPA) in 2017 to provide healthy competition among industry players, including the IPPs. This will facilitate the shift towards market-based pricing for power and non-power sectors, thus ensuring reliable gas supply at competitive prices. Similarly, the government intends to reform the power sector further by establishing a TPA framework to supply fuel sources, and access to the grid infrastructure and the retail market. In addition, the government will embark on an electricity tariff restructuring initiative. These measures will ensure cost-reflective prices, enable higher penetration of RE and enhance Malaysia’s competitive advantage.
Malaysia has been recognised as the best country in Southeast Asia in the Energy Transition Index 2023 by the World Economic Forum. The index considers system performance and the country’s readiness to switch to more environmentally friendly energy sources. The recognition shows that Malaysia is on the right track to drive our strategic shift and economic restructuring into new growth areas. This is further supported by Malaysia’s various advantages such as a strategic location, diverse RE sources and a high level of skills to become a regional leader in energy transition.
Malaysia’s Carbon Footprint
The energy sector has long contributed to Malaysia’s development and growth. Yet emissions have also increased in tandem with this progress, necessitating an urgent need to transition towards a low-carbon economy. This will involve meeting the country’s climate commitment to cut 45% carbon intensity against GDP by 2030 compared to the 2005 baseline. Growth in the energy sector drives development in various related industries, creating spin-offs through employment, capital inflows and investments, besides supporting the energy service companies’ ecosystem.
However, the energy sector has been the country’s largest contributor of greenhouse gas (GHG) emissions. A summary of Malaysia’s GHG inventory in 2019, based on the Fourth Edition of the Biennial Update Report (BUR4) submitted to the United Nations Framework Convention on Climate Change (UNFCCC), is as shown in Exhibit 2.1.
In 2019, the energy sector emitted 259,326.11 Gigagram CO2 equivalent (GgCO2eq), or 78.5% of total emissions. This was followed by industrial processes and product use (IPPU) at 10%, waste at 9% and agriculture at 3%. The BUR4 report also listed climate mitigation actions undertaken in the energy sector, such as the use of EE measures, energy-efficient vehicles, RE, biodiesel and switching from coal to natural gas for power generation.
Malaysia’s Policy Responses
The five-year development plan covers socioeconomic policy planning that sets out the country’s direction and growth targets as well as the allocation of the development expenditure. The Twelfth Plan outlines the aspiration for the nation to achieve net-zero GHG emissions as early as 2050. The plan emphasises Malaysia’s approach to effectively managing its energy transition. It recognises the complex and interconnected nature of energy systems and acknowledges the need to balance the energy trilemma. The approach not only ensures that energy policies and programmes are environmentally responsible but also takes into consideration the socioeconomic implications.
The DTN lays the groundwork for a transformation in the energy landscape. The energy transition is expected to occur at an accelerated pace, driven by rapid technological advancement and robust climate change policies. The DTN’s Low Carbon Nation Aspiration 2040 (LCNA 2040) seeks to transform the primary energy supply, moving to cleaner, RE sources. LCNA 2040 emphasises low-carbon policies, including:
- Restricting the development of new coal power plants while the renewables share is being increased
- Driving EE practices
- Encouraging the adoption of EVs
- Increasing public transport’s modal share
- Improving carbon footprint accounting and sustainability reporting
These progressive aspirations will ensure the energy sector is resilient to future challenges and in a good position to seize the opportunities arising from the energy transition. The DTN is supported by four strategic pillars, 12 strategies, 31 action plans and five enablers, as shown in Exhibit 2.3.
National Energy Transition Roadmap (NETR)
The Ministry of Economy leads the development of the NETR with invaluable support from the Steering Committee and the Technical Committee. These committees comprise representatives from ministries, agencies and private sector, as shown in Exhibit 3.1 to help ensure a collaborative and comprehensive approach to the development process. In addition, the Project Team includes representatives from the Energy Commission (ST), Sustainable Energy Development Authority (SEDA), Malaysian Green Technology and Climate Change Corporation (MGTC), PETRONAS and Tenaga Nasional Berhad (TNB) to leverage the diverse expertise in ensuring NETR’s strategies and plans meet the needs of the wider stakeholders.
To ensure inclusive participation in the development of NETR, the Ministry of Economy organised a workshop on 17 April 2023 as a platform for discussions and information exchange between ministries, agencies, the private sector and industry associations, including those from Sabah and Sarawak.
The ministry has also undertaken more than 100 engagements and consultations to gather feedback and ensure the accuracy and validity of the NETR data and initiatives. This feedback has played a crucial role in shaping the scope of the roadmap and in fine-tuning the catalyst projects, initiatives, and enablers of the NETR. The Project Team undertook a comprehensive scoping and stocktaking process of macro and sectoral policies, including the Twelfth Malaysia Plan, the DTN, BUR4, the National Energy Efficiency Action Plan (NEEAP), Malaysia Renewable Energy Roadmap (MyRER), Malaysia Energy Transition Outlook (METO), National Low Carbon Cities Masterplan, Green Technology Master Plan Malaysia 2017-2030, Low Carbon Mobility Blueprint, and GHG emissions reduction plans from the state governments and private sector. The team also collaborated with the Ministry of Finance (MOF), Bank Negara Malaysia (BNM) and Securities Commission (SC) to explore suitable energy transition financing.
The development of the NETR is divided into two parts as shown in Exhibit 3.2.
Part 1 outlines the 10 flagship catalyst projects and impact initiatives based on six energy transition levers, namely EE; RE; hydrogen; bioenergy; green mobility; and carbon capture, utilisation and storage (CCUS). The six levers are further supported by five enablers: financing and investment; policy and regulation; human capital and just transition; technology and infrastructure; and governance and implementation.
Part 2 focuses on establishing the energy mix, GHG emissions reduction pathway, selected targets and initiatives. Targeted investments, people strategies and international cooperation planning, as well as policy and regulatory frameworks, will be strengthened to develop the talent, technology and infrastructure needed to scale up and sustain decarbonisation efforts.
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