Malaysia’s cut in the system access charge for firm renewable energy supply is expected to accelerate the rollout of corporate renewable energy projects, with solar engineering, procurement and construction (EPCC) awards potentially starting from the fourth quarter of 2026, according to research houses.
UOB Kay Hian said in a note on Tuesday that the lower system access charge (SAC) was more favorable than its previous expectation of 15 sen/kWh and could lead to a series of CRESS project announcements over the next three months.
The research house said the new package could provide a catalyst for solar companies as developers seek to secure projects within the relatively short timeframe to qualify for the preferential SAC.
The Ministry of Energy Transition and Water Transformation (PETRA) on September 18 lowered the SAC for firm supply under the Corporate Renewable Energy Supply Scheme (CRESS) to 14 sen per kilowatt-hour from 20 sen/kWh, while requiring qualifying projects to achieve commercial operation by Dec 31, 2028.
PETRA also mandated a minimum 10-year power purchase agreement (PPA) between renewable energy developers and corporate green consumers.
Kenanga Research similarly expects CRESS EPCC awards to begin materializing from the fourth quarter of 2026, ahead of the next round of the Large Scale Solar (LSS) program.
The latest reduction marks the third cut in the firm-supply SAC since CRESS was introduced in 2024. The charge was initially set at 25 sen/kWh before being reduced to 20 sen/kWh in August 2025 and subsequently to 14 sen/kWh under the latest acceleration package.
The research house said the 6 sen/kWh reduction should improve the economics of CRESS projects by allowing developers to offer more competitive tariffs to corporate offtakers, particularly data center operators.
For firm supply, assuming a developer tariff of 35 sen/kWh and a 14 sen/kWh SAC, Kenanga estimated equity internal rates of return (IRRs) of about 10 percent to 13 percent.
UOB Kay Hian estimated CRESS project IRRs could reach 10 percent to 12 percent under the new SAC, compared with its previous estimate that a 15 sen/kWh SAC would lift project IRRs from about 7 percent to 9 percent.
The research house said the improved returns could make long-term CRESS agreements more attractive to solar EPCC companies, particularly as developers seek to diversify beyond conventional project models.
Unlike LSS projects, where competitive bidding can put pressure on tariffs and project returns, CRESS allows renewable energy developers to negotiate directly with corporate electricity offtakers.
The new ten-year minimum PPA requirement is also expected to improve project bankability by providing greater visibility over contracted revenue.
However, Kenanga noted that PETRA had not indicated a change to the existing mechanism for reviewing the SAC.
Under the current framework, the SAC is reviewed according to regulatory periods, with variations capped at 15 percent during the fourth regulatory period.
Kenanga said it therefore assumed the existing review mechanism remained in place for now, with greater clarity expected from a revised SAC methodology under Regulatory Period 5, which begins in 2028.
The December 31, 2028 COD deadline is expected to put pressure on developers to move quickly.
UOB Kay Hian said solar projects typically require about 18 to 24 months to construct and commission, meaning developers would need to finalize CRESS projects in the coming months to meet the deadline.
It expects financial close to take place within the next six months for projects targeting the preferential SAC.
Kenanga similarly estimated that projects would need to begin construction by the second half of 2027 to meet the end-2028 COD requirement, based on the construction timeline of LSS projects.
This implies that EPCC awards could begin from the fourth quarter of 2026 onwards, providing a potential source of order-book replenishment for solar contractors.
CRESS currently has 11 renewable energy developers and eight green consumers registered with the Single Buyer, representing about 3.15 gigawatts of project capacity.
Kenanga estimated that the registered capacity could represent about MYR 16 billion ($3.91 billion) of potential solar EPCC opportunities, assuming EPCC value of about RM5 million per megawatt.
UOB Kay Hian also sees significant potential from the country’s rapidly expanding data center industry.
The Data Center Task Force under the Malaysian Investment Development Authority has required new data center developments to source at least 30% of their electricity consumption from renewable energy, according to UOB Kay Hian.
Based on Tenaga Nasional Bhd’s 13GW data center project pipeline, UOB Kay Hian estimated that about 4GW of new capacity could eventually need to be developed through the CRESS pathway.
Using estimated project capital expenditure of MYR 3.5 million per MW, the research house calculated a potential CRESS orderbook of at least MYR 14 billion over the next decade.
UOB Kay Hian said the main data center clusters likely to implement CRESS would be in Johor and the Klang Valley.
It also expects data center operators to begin tendering for renewable energy requirements, citing the Elmina Google campus as having called for a CRESS tender.
The research house expects DayOne and AirTrunk data centre clusters in Johor to also tender their renewable energy requirements through CRESS.
Kenanga has estimated an even larger opportunity based on PETRA’s projections for future data centre electricity demand.
PETRA expects Malaysia’s data center power demand to reach about 21GW by 2040, compared with about 8.35GW of secured maximum demand currently.
Assuming incremental data center demand of about 12.7GW and a 30% renewable energy requirement, Kenanga estimated that around 3.8GW of green energy demand could emerge.
At an assumed MYR 5 million per MW of EPCC value, this could translate into about MYR 19 billion of solar EPCC opportunities.
The research house said the additional demand could provide a sizeable source of CRESS projects as new data center capacity comes online.
The potential scale of data center-related renewable energy demand reflects the rapid expansion of Malaysia’s digital infrastructure sector, which has become a major source of electricity demand.
For solar companies, the CRESS opportunity could also support a shift towards longer-term asset ownership.
Kenanga maintained an “Overweight” call on the solar sector and said Tenaga’s near-term earnings impact should remain limited, although faster CRESS adoption could support longer-term grid capital expenditure.
UOB Kay Hian also maintained its “Overweight” view on the renewable energy sector.
It is noted the acceleration package also includes measures to simplify CRESS procedures, enhance technical requirements for solar photovoltaic and battery energy storage system configurations, and improve the principles used to determine the SAC from Regulatory Period 5.
The technical changes are intended to support firm renewable energy supply, with battery storage helping solar projects manage intermittency and provide more predictable electricity output.
The combination of a lower SAC, mandatory long-term contracts and a fixed deadline could therefore provide developers and corporate consumers with stronger incentives to move projects from registration and negotiation towards financial close and construction.
For the solar industry, the timing is significant because the 2028 deadline leaves a limited period for developers to secure offtake agreements, arrange financing and complete construction.
With about 3.15GW of registered CRESS capacity already in the system and potentially much larger demand from data centers, the research houses expect the scheme to become a more important source of solar project awards from late 2026.
The next three to six months could consequently see greater activity as developers and corporate offtakers seek to lock in projects before the preferential SAC terms become subject to the 2028 COD deadline.
CRESS acceleration package seen driving Malaysia renewable energy deals