UOB Kay Hian expects total solar photovoltaic (PV) capacity in Malaysia to exceed 6.5GW over 2026 to 2029 as the government calls for tenders for the Large-scale Solar (LSS) 6 bidding program and the rollout of corporate renewable energy supply scheme (CRESS) projects.

The research house said in a note on Tuesday that assuming a construction cost of MYR 2 million ($510,000) to MYR 3.5 million ($890,000) per MW, total engineering, procurement, construction, and commissioning (EPCC) replenishment opportunities are estimated at a staggering MYR 13 billion ($3.31 billion) to MYR 23 billion ($5.86 billion) in the next five years.

This is translating into a projected three-year earnings compound annual growth rate (CAGR) of 28 percent over 2026 to 2028 for the renewable energy sector.

UOBKayHian, however, sees the risk of increase in solar module prices for the sector. Solar module prices are expected to
trend up to $0.13/W by June 2026 from $0.12/W currently, following China’s removal of value added tax (VAT) export tax rebates for PV products effective April 1, 2026.

In addition, the upcoming rebate removal (from 9 percent rebate to 0 percent rebate) and rising raw material prices (polysilicon: +39 percent year on year, copper: +40 percent year on year, silver: +167 percent year on year) have strengthened suppliers’ incentives to reprice contracts and increase module pricing.

While silver accounted for about 14 percent of total solar module costs in 2025, the research house noted its cost contribution has risen to over 20 percent in recent months and could increase further in tandem with elevated silver prices.

“While these are clear risks to rising cost of sales, we note that the ringgit has appreciated 12 percent year on year, partly mitigating higher solar module prices,” it added.

Overall, the key re-rating catalysts for the sector include a stronger ringgit to offset rising solar PV costs; CRESS and/or Self-Consumption (SELCO) contract wins; and eventual monetization of solar assets – either via a listing or trade sale.

Analysts foresee Malaysia’s energy transition to sustain momentum moving into 2026