MALAYSIA’S solar sector is well-poised for more growth given the favourable conditions that the government is seeking to leverage upon.
Besides having relatively high irradiation levels in the country, Malaysia already has an established solar manufacturing sector although most solar equipment is exported.
Moreover, the expanding domestic manufacturing base for renewables components will ensure that there is a reliable and low-cost supply chain for project developers to capitalise on falling technology costs, according to Fitch Solutions Country Risk & Industry Research.
“We have upwardly revised our solar forecasts for Malaysia, and note that the continuation and success of solar tenders present a sizeable upside risk in the market,” noted Fitch Solutions in its latest commentary entitled Solar Investment Hotspots: Outperformers and Markets to Watch.
On May 31, Malaysia launched a new round of solar auctions with a targeted capacity of 1 gigawatt (GW) – its largest solar auction to date.
Despite the uncertain economic and financing environment stemming from the COVID-19 pandemic, Fitch Solutions remain broadly optimistic on the latest tenders given Malaysia’s significant oversubscription and highly-competitive bid prices in previous solar auctions.
The last round held in September 2019 had a targeted capacity of 500MW but attracted more than 112 bids for a total of more than 6.7GW of generation capacity with bid prices falling below gas-fired power.
“The Malaysian Government’s commitment to the domestic renewables sector has also strengthened of late and a number of regulations have been put in place to encourage investment into the sector,” Fitch Solutions pointed out.
“We now forecast Malaysia to add a net capacity of approximately 800MW between end-2019 and 2029, with increasing upside risks.”
The Government is currently looking to introduce more financing incentives such as those similar to the Green Investment Tax Allowance and Green Technology Financing Scheme 2.0 which has already attracted many private investors.
Elsewhere, Malaysia also plans to launch a Renewable Energy Transition Roadmap (RETR) 2035 which aims to boost the country’s share of renewables in the power mix to 20% by 2025 from less than 1% in 2020.
“We believe that the roadmap will contain provisions and more specific actions to accelerate renewables growth, and may include strategies such as peer-to-peer electricity trading or transitioning towards a mandatory renewable energy certificate market,” opined Fitch Solutions. – Dec 3, 2020
