Harnessing the Potential of Solar

The rise of global solar power usage provides Malaysia with a golden opportunity. Ongoing commitment from all stakeholders to align the local ecosystem with industry needs will help to ensure that solar power in Malaysia continues to shine.

Solar leading the rise of green energy

Malaysia’s potential for green energy generation is substantial. Its extensive tropical forests are able to supply large quantities of biomass and palm oil; large hydro, which although not green is certainly renewable, already provides a significant share of the country’s energy mix, while small hydro is boosting electricity supplies in rural areas; and there is untapped potential to harness wind energy in certain areas. Moreover, as an equatorial country with year-round sunshine and a high irradiance level, Malaysia is particularly well suited to the generation of solar photovoltaic (PV) energy.

Consequently, the country is strongly positioned to benefit from the growth of the global green energy sector in the coming years. According to the International Energy Agency, renewable energy, which includes all green energy sources, is set to constitute the largest single segment of electricity growth to 2020, thanks largely to falling costs and aggressive expansion in emerging economies, particularly China.

Significantly, the global solar PV market achieved an unprecedented growth rate of 50 per cent in 2016, with 76.6 gigawatts of newly installed capacity year-on-year (see fig. 1), according to SolarPower Europe, the European member-led trade association. Such growth is particularly noteworthy because for the first time, solar outperformed wind in terms of annual installation.

At the local level, Malaysia has been taking significant steps for a number of years by introducing several incentives and strategies to encourage the growth of the budding solar sector. For example, the National Renewable Energy Policy and Action Plan (2009) institutionalised efforts to increase the contribution of solar and other renewable energy sources to the national energy mix. This effort was reinforced in 2015 under the United Nations’ Paris Climate Change Conference (COP21), in which the country committed to reducing its greenhouse gas emissions by up to 40 per cent from 2005 levels by 2020.



Bright ambitions for solar

One of the prime drivers behind the rise of green power in the Malaysian energy mix is the solar PV sector. Following the introduction of the country’s first stand-alone solar PV system in the 1980s and a concerted effort aimed at boosting green energy generation, solar PV technology was soon identified as the most suitable long-term prospect for this approach. Accordingly, the government’s Eleventh Malaysia Plan (2016-2020) established a national target of achieving an installed capacity of 2,080 megawatts generated from green energy sources by 2020, up from 243.4 megawatts in 2014.

As of 2016, approximately 1 per cent, or 227.5 megawatts, of the total installed electricity capacity in Malaysia was generated from solar PV installations, with a further 1 per cent stemming from all other green energy sources. Moving forward, the national target is to increase the share of green power in the total peak electricity demand capacity to approximately 11 per cent by 2020, which includes the goal of generating 1,250 megawatts from solar PV (see fig. 2).



The achievement of these ambitious targets will require a multi-faceted approach and ongoing commitment, from the top down. One significant scheme to that end is the Feed-in-Tariff (FiT) mechanism implemented and run by the Sustainable Energy Development Authority of Malaysia (SEDA). As of July 2016, 98 per cent of the of 9,586 approved applications through the FiT corresponded to solar PV. Moreover, approximately 95 per cent of these applications were for small installations of less than 72 kilowatt peak, which is the output power of the solar module in question. This trend suggests a growing acceptance of solar energy from the general public, as people become increasingly aware of not only the environmental, but also the economic benefits of solar PV. Such acceptance is crucial to the success of the solar industry, not only in Malaysia, but around the world.


The starring role of local solar PV

At the regional level, a total of 37 gigawatts of solar PV capacity is expected to be developed in Asia alone between 2014 and 2018, according to the Malaysian Investment Development Authority (MIDA). This development provides Malaysia with an opportunity to expand its market share of the regional sector while simultaneously enhancing the growth of its local industry.

At present, Malaysia is the world’s third largest producer of solar PV cells and modules and has an ecosystem comprising 250 companies involved in both upstream activities, such as polysilicon, wafer, cell and module production, and downstream activities including inverter and system integrator installation. The goal of the Ministry of Energy, Green Technology and Water Malaysia (KeTTHA) is for the country to become the second largest producer of solar PV technology by 2020.

According to MIDA, Malaysia has achieved significant progress in the solar PV industry over the last decade, resulting in the emergence of new businesses and the creation of thousands of jobs. In 2015, 48 solar projects were implemented with a total investment of MYR28 billion, to produce solar wafers, cells, modules and balance of system components. Of this total financing, 95.3 per cent related to foreign investment.

In 2016, export and local sourcing activities undertaken by the top solar companies in the country were valued at MYR11.1 billion and MYR1.42 billion, respectively. Furthermore, MIDA is holding ongoing talks with distinct solar PV manufacturers from around the world who are keen to invest in Malaysia. This all feeds into MIDA’s wider goal to transform the country into a hub for solar manufacturing and services, as well as a key global player in terms of creating economic expansion, energy security and sustainable development based on green growth.

To pave the way for the future development of the country’s solar PV industry, the government is due to publish its Malaysian Solar PV Roadmap 2030 by the end of 2017. An important aspect in the design of this roadmap has been close collaboration with key stakeholders from across industry, government departments and academia. This multi-party engagement is helping to ensure the roadmap is well formulated and that each actor can enjoy a sense of ownership in terms of the direction the national solar PV industry is taking.


Shining a light on future challenges

Despite progress in the solar PV segment in recent years, industry stakeholders indicate that to push on to the next level, certain developments at the institutional level are required.  These include the increased liberalisation of the national electricity supply industry; greater third-party access to the grid; the rationalisation of fossil fuel subsidies for electricity generation; and the promotion of additional distributed solar PV generation initiatives.

A further challenge facing green energy sources in general is the need to overcome related issues of intermittency management in order for them to provide a base load of power. Regarding solar, Catherine Ridu, CEO of SEDA, says energy industry leaders still require convincing about the need to create an energy balancing market in order to address the higher penetration of solar PV in the mix.



SEDA itself is playing a leading role in boosting the contribution of solar PV to the national energy mix by means of the FiT mechanism, and the percentage of green energy in the national energy mix is rising (see fig. 3). To date, 337.36 megawatts of cumulative installed solar PV capacity have been financed under the FiT since its launch in 2011, with a further capacity of 64 megawatts under construction. Additionally, a total of 268,663 megawatt hours were generated from solar PV under the FiT system in 2016.



In order to meet its targets and foster the ongoing development of its solar PV industry, it is important that Malaysia continues to adopt solar PV technology while keeping pace with lucrative markets such as the U.S., Europe and Japan. To that end, SEDA and KeTTHA are jointly devising a Renewable Energy Transition Roadmap 2050 to facilitate the country’s move from fossil fuel-based electricity generation to that of green and renewable energy. The roadmap is expected to be complete by the end of 2017.

With the cycle for new applications to the FiT for solar PV proposed to end in 2017, the government is seeking to implement new actions to further scale up the solar PV sector, with two new programmes launched in 2016. The first was the Net Energy Metering (NEM) scheme, which enables consumers, whether industries or individuals, to install solar PV systems for their own use and to sell any excess energy generated back to the grid in the form of reductions from their electricity bill. The objective is to generate approximately 500 megawatts from the NEM by 2020.

The second is the government’s launch of a series of competitive bids for tender for the development of distinct large-scale solar PV plants, which are anticipated to generate over 1,000 megawatts of energy between them, from 2017-2018 onwards.


Final remarks

The Malaysian solar industry is on a firm footing from which it is expected to expand further over the coming years. Certain initiatives, including the liberalisation of the electricity supply industry, have been identified as necessary steps in order to generate a regulatory framework fully conducive to the ongoing growth of the segment. With such initiatives in place, coupled with a mature industry, ongoing commitment from authorities, and rising global demand, Malaysia’s solar future is looking bright.


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