Kenanga Research said Monday that rising electricity costs and corporate requirements to report energy-saving initiatives are set to accelerate solar adoption in Malaysia, driving solar engineering, procurement, construction and commissioning (EPCC) players’ order books to all-time highs.
The research house said in a note that it maintained positive view on the sector, underpinned by the Malaysian government’s robust execution of renewable energy (RE) initiatives and expanding solar quota allocations.
According to Kenanga, key catalysts include MYR 2.4 billion ($540 million) in EPCC contracts from the 800MW Corporate Green Power Program (CGPP), with earnings recognition
beginning in the first quarter of 2025, and MYR 5 billion in large scale solar (LSS5) EPCC contracts set to be awarded in the same period, as the successful bids—reportedly already decided—are gradually being disclosed.
“These initiatives, which are expected to sustain the sector’s growth until 2028, also dovetail with declining panel prices due to oversupply, boost margins of solar EPCC contractors, and stimulate investment in solar power systems,” it said.
It is noted that in recent months, the sector has seen a strong surge in job wins and order book growth driven by EPCC contracts under the corporate green power program (CGPP).
“With the CGPP set to wrap up by end-2025, we expect the momentum of job opportunities to continue,” said Kenanga.
It is also noted that the Energy Commission (EC) will embark on the 2GW LSS5, the largest LSS program thus far, in four packages.
Kenanga estimated that there will be at least MYR 5 billion ($1.12 billion) worth of PV system EPCC jobs coming from the LSS5.
It noted developers whose bids for LSS5 are unsuccessful may shift to corporate renewable energy supply scheme (CRESS) as an alternative for project development, potentially creating further EPCC contract opportunities for the sector.
Kenanga also highlighted that that recent 14 percent rise in electricity base tariff is driving increased investment
in solar installations by both businesses and residential space, primarily due to cost-saving motives and environmental, social, and governance (ESG) considerations.
Malaysian utility firm Tenaga Nasional Berhad (TNB) has announced a base tariff increase to 45.62 sen ($0.10)/kWh (from 39.95 sen [$0.09]/kWh in RP3) set to take effect from the second half of 2025.
In addition, the Net Energy Metering (NEM) initiative has introduced a new additional quota of 450MW (residential: 150MW; commercial: 300MW) to further support business investments in solar energy assets, with the deadline extended to June 30, 2025.
Meanwhile, the Solar For Rakyat Incentive Scheme (solaRIS) for the residential segment will continue to offer rebates ranging from MYR 1,000 ($224)/kWac up to MYR 4,000 ($896)/kWac, with the extended deadline now set for April 30, 2025.
“The residential segment is still significantly untapped. Based on our estimates, TNB has approximately 10.2 million domestic customers but only about 54,000 have installed the rooftop solar thus far,” it said.
Meanwhile, according to Kenanga, there are early indications that the severe oversupply in the solar industry may be starting to ease.
It noted solar panel prices have reached an all-time low of 9 US cents/W, falling below production costs.
In this highly competitive environment, Chinese solar manufacturers are struggling to maintain market share, and the sustained low prices are putting significant pressure on them.
Kenanga anticipated that most solar manufacturers will report losses this year, with some unable to withstand the financial strain and ultimately exiting the market.
“While this pressure could set the stage for a potential recovery, a substantial rebound is unlikely in 2025. We believe therefore renewable energy players are still in a season of being able to enjoy a good runway on margins,” said the research house.
Moreover, Kenanga noted that Chinese solar manufacturers are halting production at Southeast Asian plants due to weak export outlook, following a US tariff increase on solar panels imported from China—rising to 50 percent from 25 percent as of 1 Aug 2024.
Recall, Longi has halted all five production lines at its plant in Vietnam, and is winding down its operations in Malaysia; Trina is shutting down its plants in Thailand
and Vietnam.
“Despite this adjustment, global solar panel supply remains excessive. All in all, we expect solar module prices will be reaching 9 US cent/W by end of this year, an extension to its multi-year decline,” Kenanga said.
Kenanga also sees hidden potential for renewable energy certificates (RECs) in Malaysia.
According to the research house, there is a growing market for RECs backed by demand from corporations as they commit themselves to the RE100 initiative (i.e. the goal of using renewable resources for one’s all energy needs) as well as data centers (to achieve the “green” status).
It is noted that TNB has received over 70 applications for electricity supply to data center projects, with a combined maximum demand of 11GW.
“Based on our estimates, the REC market could potentially
generate about MYR 1.1 billion ($250 million) annually with this capacity,” said Kenanga.
Moving forward, it noted that electrifying the entire economy will require at least three times the current electricity usage by 2050, driven by the shift to electric processes and rising power demands from artificial intelligence (AI) technologies.
Analysts: Malaysia’s renewable energy outlook remains robust in 2025