The National Energy Efficiency Policy and Action Plan 2026-2035 (NEEAP 2.0) marks a structural shift in Malaysia’s energy-efficiency landscape, providing a clearer implementation roadmap for mandatory energy management, reporting and periodic audits for qualifying energy consumers, progressively shifting adoption from voluntary towards regulation driven, Kenanga Research said in a note on Monday.
The research house said in a note that importantly, non-compliance with certain Energy Efficiency and Conservation Act (EECA) requirements carries fines of up to MYR 50,000 ($12,324), reinforcing the mandatory nature of the framework.
It is noted that the program targets about 12 percent reduction in energy demand against the 2035 BAU scenario, supported by about MYR 37 billion of investment, of which about 99 percent is expected to be privately funded.
“We view NEEAP 2.0 as a structural catalyst for energy-efficiency adoption, with EECA enforcement progressively shifting spending towards compliance-driven investment. We expect a more pronounced impact on energy-intensive industries such as cement, iron and steel, chemicals and electrical and electronics (E&E).
In the commercial segment, it sees cooling, air conditioning and mechanical ventilation (ACMV) optimization and building energy management will require additional capital expenditure (capex) from real estate investment trust (REIT) operators as well as mall operators.
“We remain neutral on the impact for now, as the upfront capex could be partly offset by lower electricity and operating costs, pending greater clarity on the extent to which these costs can be passed through to tenants,” it said.
While data centers are currently excluded from the specific commercial-building energy-audit program under NEEAP 2.0, Kenanga opined that their high energy intensity should continue to drive demand for integrated facilities and energy-management solutions, with potential for tighter efficiency requirements over time.
It is noted that NEEAP 2.0 envisages about MYR 37 billion of total investment, nearly 6 times the MYR 6.3 billion under NEEAP 1.0.
Notably, the MYR 9.5 billion industrial and commercial investment requirement alone exceeds the entire NEEAP 1.0 investment pool, highlighting the larger scale of energy-efficiency spending targeted under the new framework, said Kenanga.
The research house sees the framework directly benefiting cooling, energy management and retrofit players.
Solar engineering, procurement, construction, and commissioning (EPCC) players could also leverage their existing commercial and industrial (C&I) customer base to cross sell energy-efficiency solutions alongside solar offerings.
Kenanga also expects secondary order opportunities for mechanical and electrical (M&E) contractors as implementation of ESMs requires modifications to existing mechanical and electrical infrastructure.
Malaysia has earlier introduced the NEEAP 2.0, a ten-year roadmap aimed at improving energy efficiency by targeting a 12 percent reduction in energy demand against BAU by 2035, equivalent to 169,528TJ of annual energy savings in 2035.
Cumulatively, the program is expected to deliver 815,382TJ of energy savings over 2026-2035, translating into MYR 85 billion of estimated energy cost savings.
Sector-wise, the industrial, commercial and domestic sectors are targeted to reduce energy demand by about 12 percent, 13 percent and 9 percent, respectively.
Under NEEAP 2.0, the average annual energy savings of about 80,000TJ are equivalent to about 15 percent of Malaysia’s utility firm Tenaga Nasional FY25 electricity sales.
“Nevertheless, we believe the firm’s capex assumptions should remain intact, supported by a strong demand pipeline, particularly from data centers,
“We also maintain a broadly neutral view as any material changes in electricity demand should, under the existing IBR framework, be reflected through corresponding tariff adjustments to preserve regulated earnings, barring any changes to the regulatory mechanism,” said the research house.
According to Kenanga, the key difference between NEEAP 1.0, which was previously established for 2016-2025, and the NEEAP 2.0 has been the introduction of the EECA which came in force on Jan 1, 2025.
Previously, implementation was constrained by the absence of a comprehensive mandatory framework. Under the EECA, large industrial and commercial energy consumers consuming ≥21,600GJ over 12 consecutive months are subject to requirements including the appointment of a Registered Energy Manager, establishment of an Energy Management System, energy-efficiency reporting and periodic energy audits.
NEEAP 2.0 estimates total investment of about MYR 37 billion over 2026-2035, comprising MYR 560 million of public funding and MYR 36bn of private investment. This implies that about 99 percent of total investment is expected to be privately funded.
Domestic accounts for the largest portion at about MYR 27 billion, followed by industrial at about MYR 7 billion and commercial at about MYR 2 billion.
“Given the heavy reliance on private funding, we expect further grants, tax incentives, concessional financing and Energy Performance Contracting structures to support project economics and accelerate adoption,” said Kenanga.
Despite commercial having the highest reduction target at about 13 percent, industrial is expected to contribute about 69 percent of cumulative energy savings, versus 21 percent from commercial and 10 percent from domestic, reflecting its larger energy consumption base, according to the research house.
“Industrial measures focus on energy management, efficient utilities, digitalized production, high efficiency motors and heat recovery, while commercial measures center on cooling optimization, building automation and recommissioning. Domestic savings will mainly come from tighter MEPS, particularly for air conditioners,” it noted.
Overall, it maintained overweight on Malaysia’s renewable energy sector, supported by continued investment across renewable generation, grid infrastructure and energy efficiency.
Hong Leong Investment Bank Research also said in a recent note that NEEAP 2.0 is expected to deliver an attractive 2.33 times benefit-cost ratio (BCR), defined as total energy cost savings relative to total investment, where a BCR above 1 indicates that the benefits exceed the costs.
“This favorable economic proposition should improve the commercial viability of the identified energy-efficiency measures and, in turn, support the achievability of NEEAP 2.0’s objectives,” said the research house.
At the same time, it noted EECA-backed enforcement should provide an additional regulatory push, supporting stronger and more sustained adoption of energy-efficiency measures.
In its opinion, the key beneficiaries are companies exposed to the industrial and commercial ESM pipeline, particularly chiller and HVAC equipment providers, high efficiency motor and Building Automation System (BAS) suppliers, as well as energy management software and solution providers.
“Beyond the direct equipment opportunity, we believe the policy could drive a longer-term shift in corporate energy management, with energy efficiency evolving from a largely ESG-driven initiative into a more measurable cost, compliance and carbon-management imperative,
“This should progressively broaden the addressable market for energy-efficiency solutions over time,” it added.