Analysts have foreseen strong momentum ahead for Malaysia’s renewable energy sector, anchored by strong policy pipeline.

Maybank Investment Bank said in its recent report that the sector outlook remains upbeat into FY26.

According to the research house, the Malaysian government is progressing toward large-scale solar 5+ program (LSS5+) and LSS6 rollouts, with request for proposals (RFPs) expected to be released in the second half this year.

LSS6 is anticipated to open up 2GW of new solar capacity and may incorporate battery energy storage system (BESS) elements as part of grid firming requirements.

Meanwhile, corporate green power agreement (CGPP) and LSS5 remains a critical growth engine, with most awarded projects targeting to complete by FY26–FY27.

Maybank also highlighted that solar panel prices have remained stable at multi-year lows, with latest quotes below $0.10/W.

This is supportive of project internal rate of returns (IRRs) and is expected to sustain through the second half this year due to global oversupply, despite higher demand from Southeast Asia.

It is noted that the Energy Commission is accelerating efforts to enable commercial scale BESS deployment.

A request for quotation (RFQ) for 400MW/1600MWh of BESS capacity was close for submission in February 2025, with results on qualified bidders expected in the second half this year – marking a key milestone in Malaysia’s energy transition roadmap.

On the cost side, BESS economics have improved, with battery prices falling from $350/MWh to $110–120/MWh, hence improving its project feasibility.

While still in early stages, the sector views BESS as a complementary solution to support solar intermittency and grid reliability, particularly for larger commercial and industrial (C&I) users and utilities, said Maybank.

The Malaysian renewable energy sector reported robust performance in the first quarter this year, driven by an acceleration in project execution under the CGPP and steady contributions from the C&I solar segment.

Kenanga Research also said in its recent report that it believes many developers who were unsuccessful in LSS5 will pivot to LSS5+ as an alternative path for project development.

It opined that asset owners from previous LSS rounds, with proven track records, are well-positioned to benefit.

“Assuming awards mirror the 100MW blocks seen in LSS5, we estimate around 15 awards remain up for grabs,

“With the current solar panel prices, we expect winning tariffs to land between MYR 0.14 ($0.033)/kWh and MYR 0.18 ($0.042)/kWh, supporting a project IRR of roughly 8 percent,” it said.

Kenanga also projected average module prices to dip slightly to $0.09/W in 2025 (from $0.10/W in 2024) as Tier-1 manufacturers flood the market.

Still, with weaker solar manufacturers exiting, it says a price rebound is possible, though not likely in 2025.

“Given the low IRR of 8 percent in LSS jobs and rising cost risks, we remain bullish on engineering, procurement, construction, and commissioning (EPCC) contractors over asset owners,” said the research house.

According to Kenanga, the newly introduced ultra-high voltage tariff has raised electricity costs for data centers to MYR 0.60 ($0.14)/kWh, repositioning corporate renewable energy supply scheme (CRESS) program as a cost-effective alternative.

It noted solar developers now require a minimum tariff of MYR 0.64 ($0.15)/kWh to achieve an 8 percent IRR.

Given the likelihood of further hikes from Tenaga Nasional Berhad (TNB) to support grid infrastructure upgrades, it said CRESS provides a compelling long-term hedge for large energy users such as data centers.

With its 21-year fixed power purchase agreement (PPA), it said CRESS offers protection against future tariff hikes while supporting environmental, social, and governance (ESG) and RE100 commitments.

While system access charges (SAC) will be reviewed in each regulatory period, Kenanga believes the cost risk is skewed towards non firm output providers as the government’s policy direction remains clear on prioritizing grid stability.

“In this context, we expect solar players to actively explore partnerships with firm output providers to lower SAC exposure,” it said.

For instance, hybrid solutions combining solar and biomass could be particularly attractive.

“Based on our estimates, such setups can price competitively at around MYR 0.55 ($0.13)/kWh while sustaining an 8 percent IRR, driven by the lower SAC of MYR 0.25 ($0.059)/kWh,

“In short, we expect to see more solar-biomass hybrids grabbing market share and offering better value to energy-hungry users,” it added.

Meanwhile, Kenanga highlighted that solar order books are hitting all-time highs as solar EPCC players race to deliver corporate green power program (CGPP) projects before the end-2025 deadline.

At the same time, MYR 10 billion ($2.35 billion) worth of 4GW LSS5 and LSS5+ contracts are about to hit the market, with completions targeted by end-2027.

Now with CRESS back in play, another MYR 5 billion ($1.18 billion) in EPCC works could land soon, driven by 2GW of firm output demand.

According to the research house, the total EPCC contract value has surged to MYR 17.4 billion ($4.1 billion) from MYR 12.4 billion ($2.92 billion), ensuring sustained sector activity till end-2028.

Thus far, it has already seen MYR 2.9 billion ($680 million) contract awards announced by listed firms.

As for rooftop solar, it sees longer ROI horizon, for now.

The electricity tariff restructuring introduces a clearer breakdown of cost components into three categories as follow: energy charge, capacity charge, and network charge.

Previously, Net Energy Metering (NEM) users could offset the whole bill, but now only the energy charge is eligible, slashing savings to just up to 50 percent.

Kenanga opined that this is a major hit to rooftop solar economics.

“What was once a five-year ROI has now stretched to 10–12 years,” it noted, adding that the change has triggered some pushback and complaints, and there is a chance TNB may refine the NEM details in response.

That said, it noted the new tariff also sets the stage for Community Renewable Energy Aggregation Mechanism (CREAM) which will allow homeowners to lease out rooftop space for solar generation with full details expected in the second half this year.

“With just about 65,000 of TNB’s 10.4m retail customers currently using rooftop solar, there’s vast untapped potential across both residential and C&I segments,” said Kenanga.

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