Malaysia’s NETR decarbonisation plan still relies on gas

Malaysia launched its NETR last year, calling for renewable energy capacity to reach 70 percent of its energy mix by 2050, the same year as its net zero pledge. Most of the increase in renewables will come from solar, with gas used for the balance as a way to pivot from coal fired power projects.

While Malaysia’s NETR earmarks have received a lot of positive press coverage, especially from domestic news outlets and energy publications, others think that the plan is overly ambitious. In a new report, UK-based think tank Ember found that the share of renewables will likely contribute only around 52 percent of Malaysia’s energy mix by 2050, with gas making up most of the balance.

Problematic gas

However, either forecast is problematic since gas will still make up a large part of Malaysia’s power sector to at least mid-century. Notably, the country is the world’s ninth-largest gas producer, with output decreasing by 0.17 percent in 2023 compared to the previous year. It’s the world’s fifth largest LNG exporter.

Gas, however, is losing its status as the ideal transition fuel away from coal due to its CO2 emissions and methane leakage across the entire gas value chain. Not only is gas challenging due to its emissions profile, relying on the fuel for its power sector could leave Malaysia vulnerable to global fuel price volatility along with domestic reserve depletion, the Ember report said.

The worst gas price volatility on record came after Russia invaded Ukraine in February 2022. Russia also started slashing pipeline gas delivery into Europe, resulting not only in gas inventory shortages on the continent but price hikes for the fuel. Gas price contagion also spread to LNG markets in the Asia-Pacific region, home to around two-thirds of global demand for the fuel.

On August 26, 2022, Asian LNG spot prices hit a record US$70.50 per million British Thermal Units (MMBtu). This forced countries across the region to stop importing LNG and to look to other fuel alternatives, including coal. LNG prices on the Asian spot market averaged about US$34 MMBtu in 2022, twice that of the previous year. Price spikes for the fuel also exacerbated severe financial instability for South Asian LNG importers Sri Lanka, Bangladesh and Pakistan. This led to more rampant inflation, public protests and IMF bailouts for the three countries, with debt problems remaining to the present day.

LNG prices stabilized by the start of 2023, however, lessons need to be learned. If Malaysia maintains an over-dependence on gas in its energy mix to 2050, it could become exposed to price instability from geopolitical developments along with seasonal market volatility.

Moreover, relying on its own gas reserves is also problematic, the Ember report added. Analysts have been warning Malaysia about domestic gas reserve depletion that could ensue as early as the next decade. At an energy conference in December, Mareena Mahpudz, the Malaysian Minister of Energy and Natural Resources, said that the depletion of gas fields offshore Kerteh in Terengganu beyond 2030 “challenged gas’ role as a transitional fuel in the plan.”

Bringing Malaysia’s gas reliance problem full circle, she foresees the country turning to more LNG imports to make up for its pending domestic gas supply shortfall.

Solar power potential

However, more renewables are the best way forward for Malaysia to bolster its energy security, the Ember report found. Since the NETR pathway aims to utilise only around 5 percent of the country’s solar potential (14 GW) by 2035, this leaves a significant amount of solar resources untapped, it said. It also advocated connecting the grids of Malaysia’s three regions to fast-track solar growth and enhance grid stability.

Moreover, the price of solar generation in Peninsular Malaysia is now 53 percent lower than fossil fuel options, while  an increase in solar power can lower the country’s overall electricity costs.

Malaysia also has solar power potential due to its location near the equator. Most of the country has at least 12 hours of sunlight and solar radiation at a direct 90° angle during most of the year. As such, it can produce more solar power per square meter than most of the other countries in the region.

Ember also discussed so-called “non-solar hours” as the largest drawback for solar power in Malaysia. It suggested that demand during these times could be met by developing more hydropower and battery energy storage systems (BESS). Though BESS is still a relatively new technology and has been mostly cost prohibitive, prices have continued to drop due to technological and manufacturing improvements.

Malaysia’s wind power potential, however, remains problematic. It has low wind speeds with a country-wide average annual speed of 1.8 m/s. This is less than the recommended 4 m/s where small wind turbines become viable, and it’s substantially less than the 5.8 m/s wind speed for a utility-scale wind turbine. Malaysia also lacks open plains or elevated areas needed for higher wind speeds. Its coastal areas, where wind potential could be higher, are also limited and over populated.