Malaysian government launches National Energy Policy 2022 – 2040: what it means for the renewable energy landscape



The National Energy Policy 2022 – 2040 (“CIP“), which was launched by the Prime Minister of Malaysia on September 19, 2022, details the Government’s priorities for the energy sector (encompassing electric and thermal power) for the next two decades. It represents a concerted effort of the government to define its approach for the energy sector with the aim of bringing the country to benefit from and adopt the megatrend of energy transition.The NEP covers all sources of energy, including renewable and non-renewable sources. renewables, and also covers the use of energy in all sectors of the economy.To ensure the effective implementation of the NEP, the government will establish a National Energy Council (chaired by the Prime Minister) which will be responsible for steering the agenda within the framework of the NEP.

We present below a summary of some of the objectives, action plans and initiatives within the framework of the NEP, relating mainly to the areas of renewable and alternative energy, grid systems, mobility trends and greenhouse gas (“GHG”) reports.

CIP targets

The NEP prescribes certain targets (compared to 2018) that seek to bring the nation to become a low-carbon nation by 2040, some of which are as follows:

  • increase the total installed capacity of renewable energy from 7,597 MW to 18,431 MW and increase the percentage of renewable energy in the total primary energy supply from 7.2% to 17% (which will mainly consist of 4% of solar energy, 4% bioenergy and 9% hydro);
  • reduce the share of coal in installed capacity from 31.4% to 18.6%;
  • increase the percentage share of electric vehicles in the country from less than 1% to 38%; and
  • increase the percentage of residential energy efficiency savings and industrial and commercial energy efficiency savings from less than 1% to 10% and 11%, respectively.

NEP Action Plans and Initiatives

Here are some of the initiatives that the government has committed to undertake within the framework of the following ten action plans (out of the thirty-one planned in the PNE):

  1. Improving and unlocking the potential of solar resources
  • Maintain a long-term pipeline of large-scale solar projectswith indicative total packages and batch sizes, optimized between large solar parks and smaller scale packages.
  • Encourage dual-use agro-voltaic solar farms.
  • Explore floating solar projects.
  • Increase availability and competitiveness of private capital for solar investmentswith optimization of capital holding rules and strengthening due diligence during the bid evaluation process.
  • Extend net energy metering (“NMS“).
  • Increase access to capital for distributed solar power with rooftop solar aggregation, peer-to-peer (P2P) commerce and virtual power purchase agreements (“VPPA“).

These initiatives mirror the Prime Minister’s speech earlier this month at the Fifth International Sustainable Energy Summit 2022, where he announced that there would be 1,200 MW of quota allocation for solar power, which will include projects under the NEM and New Enhanced Shipping Agreement (commonly referred to as NEDA programs), the development of solar parks, and the supply of electricity to data centers. It was also mentioned in the Prime Minister’s speech at the time that a quota of 600 MW will be allocated for the development of solar power plants under the VPPA.

  1. Improving and unlocking the potential of hydropower resources
  • Optimize the use of water resources and improve the efficiency of small-scale hydropower, to position hydropower to meet future energy needs and as a balance between electricity generation and energy storage contribution.
  1. Improving and unlocking the potential of bioenergy resources
  • Optimize, explore and pursue the role of biofuels in transportation and industrial use cases, such as marine bunkering, aviation, biogas and biomethane.
  • Find out where biogas or biomass plants can support rural electrification.
  1. Improve the platform for companies to access renewable energy (“RE”) in accordance with environmental, social and governance (“ESG”) standards
  • Improve mechanisms for industries to draw electricity from renewable energy sources (including additional requirements per selected RE100) through VPPA arrangements.
  • Commercialize companies’ ability to source RE.

The government is fully aware of the needs of the business sector, especially multinationals (“multinational company“), to accelerate the need to obtain most (if not all) of the electricity they use from renewable energy sources. Some multinationals have also made the availability of electricity from renewable sources renewable energy a key factor when deciding whether to invest in a The government’s initiatives on this front will be widely welcomed by all.

  1. Explore the potential of new energy sources
  • Identify the potential of alternative energy sources such as waste-to-energy, third-generation bioenergy, solar thermal and ocean thermal energy conversion.
  • Consider geothermal and wind energy potential in specific regions.
  1. Unlocking opportunities in the hydrogen economy
  • Appoint a government entity to lead the development of Malaysia hydrogen economy roadmap with the aim of optimizing the production chains of green, blue and gray hydrogen.
  • Position Sarawak as a hub for hydrogen exports.
  1. Actions to advance the system
  • Invest in grid infrastructure upgrades and energy storage to support the future mix with greater variable penetration of renewables and to deploy smart grid infrastructure.
  • Facilitate the entry of VPPA to increase the picking choice.
  • Consider the potential of market reforms such as liberalization of the energy market and third party access regimes.

To this end, Tenaga Nasional Berhad (TNB), the national utility and grid operator, recently announced that it will invest RM21 billion in its Grid of the Future program from 2022 to 2024 to improve preparedness and reliability of its transmission and distribution network.

  1. Improve and optimize network system connectivity
  • Implement network connectivity between Sabah and Sarawak to improve system stability, enable sharing of standby capacity and unlock the benefits of hydropower in Sarawak.
  • Leverage ASEAN Power Grid Interconnectivity enhance system stability, optimize reserve margins and explore electricity sales to neighboring countries.
  1. Unleash the opportunities of mobility trends
  • Conduct strategic planning and support with public-private funding at an early stage to support construction of charging infrastructure and other physical catalysts.
  • Establish regulations to support the adoption of electric vehicles.

The first steps have been taken by the government in this regard, as the Energy Commission of Malaysia’s guide on the electric vehicle charging system, published in July 2022, is expected to be applied in the fourth quarter of 2022.

  1. Improve carbon footprint accounting, reporting and certification
  • To improve accuracy and completeness of national GHG accounting standardssuch as establishing country-specific emission factors.
  • Adopt international standards and encourage (with the aim of mandating) private sector carbon footprint accounting and reporting.


The NEP underlines the government’s commitment to an energy transition that is currently taking place around the world. It seeks not only to make Malaysia’s energy sector sustainable, but also to make it a catalyst for investment in and within the country for the well-being of the people. More importantly, the NEP sets the tone for the development of the energy sector over the next two decades and is expected to have a major impact on the entire energy value chain, from production and generation. distribution and use by end users.

Government agencies and relevant regulators are also expected to issue a deluge of guidelines, policies and regulations in the near future, which will no doubt have an outsized effect on the evolution of the energy ecosystem. Industry players and stakeholders are encouraged to keep an eye on these developments and align their strategies and approaches to take full advantage of what would likely be a seismic shift in the energy landscape.

If you need further information on the national energy policy or any other questions relating to projects, energy and infrastructure, do not hesitate to contact our team at your convenience, via the Christophe and Lee Ong partners listed below.


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