Analysts view the sixth phase of the Large Scale Solar program (LSS6) as a significant positive for Malaysia’s renewable energy ecosystem, which is now shifting towards hybrid solar-plus-storage projects.

MBSB Research said in a note on on last Friday that Battery Energy Storage Systems (BESS) is now becoming an integral component of new utility-scale renewable generation in Malaysia.

This should help mitigate solar intermittency, improve dispatchability and support grid stability as renewable penetration rises.

“The upsized LSS6 would provide sizeable order-book replenishment for engineering, procurement, construction, and commissioning (EPCC) players, keeping them busy until 2029,” it said.

The research house maintained its positive stance on Malaysia’s renewable energy subsector, underpinned by the structural policy tailwinds for a deep decarbonization trajectory in line with the targets under the government’s National Energy Transition Roadmap (NETR).

Last Thursday, the Ministry of Energy Transition and Water Transformation (PETRA) of Malaysia announced the rollout of LSS6, comprising 2.65GW of new solar capacities paired with 1.25GW of BESS, across three tender packages. Successful projects are targeted to achieve commercial operation date (COD) by end-2029.

CGS International also said in a note on last Friday that it viewed the LSS6 announcement positively as it reinforces the government’s commitment to executing the NETR.

Including LSS6, cumulative utility-scale solar quotas announced since the launch of the NETR in mid-2023 now total 6.7GW, about three times the 2.2GW awarded across the entire LSS1-LSS4 programs (2016-21), underscoring the significant acceleration in renewable energy deployment.

Beyond asset ownership opportunities, the research house estimated LSS6 could generate at least MYR 13 billion ($3.18 billion) to MYR 15 billion of EPCC opportunities.

This should benefit established utility-scale solar EPCC players while also potentially creating opportunities for broader construction and mechanical and electrical (M&E) contractors through associated civil, electrical and grid infrastructure works.

CGS International also noted several policy enhancements introduced under LSS6 versus previous rounds.

These included mandatory 2:1 solar-to-BESS integration which it viewed as a necessary step to improve grid flexibility and manage the intermittency of rising solar penetration in the system while spurring the development of Malaysia’s BESS ecosystem.

It also highlighted the priority for projects in strategic high-demand areas – which it believes reflects a deliberate effort to align renewable energy capacity expansion with rapidly growing electricity demand in Johor, the epicenter of Malaysia’s date center (DC) boom.

Besides, stricter developer qualification requirements also signaled a greater focus on execution certainty and timely project delivery, in its view, amid scaling up of the NETR.

LSS6 also emphasis on local content requirements – which, it believes, would serve to strengthen Malaysia’s domestic renewable energy supply chain while supporting opportunities for local EPCC contractors.

“We think the added complexity and capex intensity arising from mandatory BESS integration should support more disciplined tariff bidding (versus the aggressive discounting seen in the past LSSs), although this remains a key risk to monitor once bids are submitted,” it said.

Based on previous LSS timelines, it expects successful bidders to be announced by the first quarter of 2027.

Maybank Investment Bank also said in a note on last Friday that it is positive on this news as the capacity allocation came in higher than our initial expectation of 2GW.

“We estimate LSS6 to create MYR 8 billion to MYR 9 billion worth of EPCC opportunities. Key beneficiaries should be utility scale EPCC players with proven track record,” said the research house.

Notably, LSS6 is the first LSS program with a mandatory BESS integration to address the inherent intermittency of solar photovoltaic (PV) generation and enhance overall grid stability.

Maybank believes bidders with proven solar farm track record and land bank located in areas with rising energy demand (ie: Southern region) will be favored to optimize generation and energy transmission planning.

“We expect the shortlisted bidders to be announced in the first half of 2027, with the bulk of EPCC contract awards likely to materialize in the second half of 2027,

“In our view, this should provide a timely replenishment of orderbook for most EPCC contractors, as LSS5 projects are expected to be completed by end-2027,” said the research house.

Kenanga Research also said in a note on last Friday that it viewed LSS6 positively for Malaysia’s renewable energy sector, as it marks another major milestone for the industry and represents the first LSS tender round to incorporate a sizeable BESS component.

“The tender quota has expanded significantly from the previous cycle’s 2GW to a record 2.65GW, which is projected to unlock between MYR 13 billion to MYR 15 billion in private investments,

“This implies a blended investment intensity of about MYR 4.9 million to MYR 5.7 million/MW of solar capacity, inclusive of BESS, significantly above the conventional rule of thumb of about MYR 3 million/MW for utility-scale solar developments due to the additional costs of battery cells, power conversion systems, energy management systems and grid integration,” said the research house.

Given this massive capital landscape, it expects LSS6 tariffs to remain highly competitive, supported by bulk procurement economies of scale.

Its recent channel checks indicated that solar module prices have eased to about $0.11/W post-value added tax (VAT), while upstream costs have continued to decline, potentially encouraging developers to bid more aggressively in anticipation of further price reductions.

While battery cells typically account for about half of total BESS hardware costs, it noted the remaining engineering scope is relatively standardized and unlikely to support meaningful margin expansion.

“Consequently, we expect LSS6 to drive higher absolute contract volumes rather than improve net profit margins for project developers and EPCC contractors amid continued pricing pressure,” it added.

Kenanga believes the higher minimum bid size of 60MW for Packages 1 and 2, compared with 1MW under LSS5, together with the mandatory BESS component, will raise funding, technical and execution requirements.

This should favor established developers with stronger balance sheets and the ability to anchor larger consortium bids.

Similarly, the inclusion of BESS will intensify upfront procurement requirements and project complexity, as LSS developments typically require contractors to fund equipment procurement and construction costs ahead of milestone payments, it said.

Accordingly, it sees EPCC contractors with stronger balance sheets and proven execution capabilities should be better positioned to secure these technically more demanding packages.

Beyond solar EPCC, Kenanga sees strong opportunities for specialized electrical infrastructure contractors, as large solar-plus-storage projects will require sizeable grid interconnection facilities, substations and high voltage (HV) engineering works.

Malaysia to launch 2.5GW LSS6 program with battery storage, targets $3.68B investment