UOB Kay Hian expects total solar photovoltaic (PV) capacity to exceed 6.5GW over 2026 t0 2029 as the Malaysian government calls for tenders for the Large Scale Solar 6 (LSS6) and the take-off of Corporate Renewable Energy Supply Scheme (CRESS) projects.
Assuming a construction cost of MYR 2 million to MYR 3.5 million per MW, total engineering, procurement, construction, and commissioning (EPCC) replenishment opportunities are estimated at a staggering MYR 13 billion ($3.28 billion) to MYR 23 billion ($5.8 billion) in the next five years.
Cited the Sustainable Energy Development Authority (SEDA) Malaysia, UOB Kay Hian highlighted that Malaysia has an estimated 16.5 GW of floating solar photovoltaic (FPV) resource potential.
FPV is expected to play a meaningful role in supporting Malaysia’s ambition to achieve a 70 percent renewable energy (RE) generation mix by 2050, which implies 56 GW of installed solar PV capacity by 2050, representing a near ten-fold increase from the current installed base of approximately 5.8 GW in 2025, it said.
“Against this backdrop, we believe opportunities in the FPV EPCC segment are set to materialize, underpinned by the introduction of the LSS6; the rollout of CRESS projects; and the increasing adoption of hybrid hydro-floating solar (HHFS) developments.
The research house’s channel checks indicate that the Energy Commission of Malaysia (EC) would initiate the tender exercise for the LSS6 program by mid-2026, with an estimated allocation of 2GW.
“We expect LSS6 to incorporate mandatory inclusion of Battery Energy Storage Systems (BESS) and with a greater allocation for floating solar farms,
“Assuming a construction cost of MYR 3 million ($760,000) to MYR 3.5 million ($880,000) per MW (including BESS), total EPCC contract value is estimated at MYR 6 billion ($1.51 billion) to MYR 7 billion ($1.77 billion) for LSS6,” said UOB Kay Hian.
It is noted that in April 24, the EC and the Ministry of Energy Transition and Water Transformation (PETRA) had also introduced a designated quota for floating solar farms under LSS5, which was subsequently adopted for LSS5+ program as well in January 2025.
This saw total floating solar farm capacity of 399.99MWac and 200MWac awarded for LSS5 and LSS5+ respectively.
“We believe the upcoming LSS6 program will allocate a higher quota for floating solar farms, benefitting EPCC players due to its higher contract value of MYR 2.5 million ($630,000) to MYR 2.75 million ($690,000) per MW,” the research house said.
Meanwhile, despite Malaysia’s considerable overall solar PV installation potential, UOB Kay Hian opined that the scalability of ground mounted solar farms is significantly constrained by land availability.
Key challenges include land ownership issues, land-use and development restrictions, and limited availability of grid interconnection points.
“FPV presents a viable solution by leveraging underutilized water bodies,
“In addition, floating installations typically achieve 5 percent to 15 percent higher energy yield compared to ground-mounted systems, due to unobstructed solar exposure and the passive cooling effect of water bodies, which enhances panel efficiency,” it said.
Importantly, it said FPVs can function as a complementary technology to conventional ground-mounted solar farms, particularly in swampy or flood prone areas.
In such contexts, it noted hybrid solar farm (FPV + ground-mounted solar) installations can improve system resilience, allowing continuous power generation during flood events and ensuring compliance with contractual obligations under its existing power purchase agreement (PPA).
“As a result, the hybrid approach reinforces revenue visibility and provides stable cash flow throughout the PPA tenure, supporting the achievement of projected financial
returns (project internal rate of return: 7 percent to 9 percent),” it added.
UOB Kay Hian also noted that floating solar farm construction requires specialized, non-corrosive materials, including marine-grade aluminium and corrosion-resistant stainless steel, to ensure structural integrity over the asset’s lifetime.
As a result, material costs are typically inflated by 20 percent to 40 percent.
Furthermore, it said floating solar projects tend to favor string inverters for their modular design and operational flexibility, contributing additional cost.
“Overall, these structural and equipment choices raise total project costs by an estimated 30 percent, although this is mitigated by enhanced energy generation efficiency and marginally higher PPA tariffs,” it added.
The research house channel checks also suggested that tariffs awarded to floating solar farm projects are slightly higher (about 20 percent) than those for ground-mounted solar farms.
This differential reflects the higher upfront capital expenditure required for floating installations, as well as the marginally higher operating and maintenance costs incurred over the 21-year PPA.
“We believe the premium tariff structure supports broader participation in floating solar tenders, as any cost efficiencies achieved during development or operations would accrue positively to the asset owner’s returns,” it said.
However, the primary environmental concern associated with FPV relates to the potential leakage of lubricants and oils used in system operations, said the research house.
It opined that such leaks could contaminate the underlying water body and adversely affect aquatic ecosystems, potentially leading to biodiversity disruption.
In addition, the shading effect created by solar modules may influence dissolved oxygen levels by reducing photosynthetic activity, thereby affecting overall water quality and ecological balance.
To mitigate these risks, it noted FPV operators such as Cypark undertakes regular water quality monitoring programs to safeguard aquatic ecosystems.
Key parameters monitored include water temperature; pH level; turbidity; and nutrient concentrations (notably nitrogen and phosphorus).
These measures are intended to ensure balanced nutrient levels, prevent eutrophication, limit excessive algal blooms, avoid oxygen depletion, and minimize adverse impacts on aquatic life, it added.