Malaysia (2012)

Source: REEEP Policy Database (contributed by SERN for REEEP)

This policy & regulatory overview is not updated anymore since 2015. We decided to keep it online due to high demand but would like to make you aware of the fact that it might be outdated.

Energy sources

Total installed electricity capacity (2009): 27,000 MW
Natural gas: 58.0%
Coal: 32.4%
Diesel: 2.2%
Biomass: 1.2%
Fuel oil: 0.1%
Others: 0.1%

Total primary energy supply (2008): 72,748 ktoe
Natural gas: 46.8%
Oil and products: 35.2%
Coal: 13.0%
Comb. Renew. and Waste: 4.1%
Hydro-electric: 0.9%

Coal is one of the primary fuels in Malaysia’s energy sector. Coal is used primarily for power generation, and by the iron and steel industry and cement manufacturers. Coal consumption in 2008 was 3,196 ktoe, while coal production was 1,476 ktoe and coal import was 18,144 ktoe. 

In 2008, total gross electricity generation was 105,803 GWh. Thermal generation, mostly from natural gas and coal, accounted for 91.8% of total generation and hydropower for the remainder. Natural gas accounted for 56.5% and coal accounted for 33.42% of the total fuel input for electricity generation.

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Malaysia imports coal from China, Australia, Indonesia and South Africa. Coal imports reached 10.7 MT in 2007, up from 10.3 MT the previous year.

In 2009, Malaysia produced an average of 693,000 barrels of oil per day, of which 83% was crude oil. During the same period, domestic consumption was around 528,000 barrels. Malaysia exports the majority of its oil to Singapore, Thailand, Japan and South Korea. Oil production in the country has been gradually decreasing since reaching a peak of 862,000 bbl/d in 2004, mainly due to the natural depletion of its offshore reserves. The economy consumes the majority of its production and exported 157,000 bbl/d in 2009.

Malaysia is one of the world’s leading exporters of liquefied natural gas (LNG), primarily to Japan, Korea and Chinese Taipei. In 2009, production of natural gas was 2.1 Tcf, and domestic consumption was 1.0 Tcf. Malaysia was the second largest exporter of LNG, exporting over 1 Tcf of LNG, which accounts for 12% of the total world LNG exports.

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Extend network

97% of people were connected to electricity in Malaysia in 2000. In some areas with small power demand, the Malaysian government sees it as uneconomical to use coal for power generation. Therefore, alternative sources of energy, such as photovoltaic and diesel battery hybrid electricity generation systems, have been implemented under the Rural Electrification Programme. Currently, there are eight villages benefiting from this programme, with power generation ratings from 10 kW to 100 kW.

Malaysia has three discrete power grid systems covering the Peninsular Malaysia, Sabah and Sarawak. The Peninsular grid is the largest, accounting for 78.7% of the total installed generation capacity. Roughly 11,000 km of 500, 275 and 135 kV transmission lines exist, with distribution lines of 33, 22, 11 and 6.6 kV serving the majority of Peninsula Malaysia. Sabah and Sarawak have their own transmission and distribution networks. Interconnection between these three networks has been considered.

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Capacity concerns

Following the system collapse of August 1996, Tenaga Nasional Berhard (TNB) has undertaken joint studies with the Tokyo Electric Power Company (TEPCO) to develop a Controlled Islanding Scheme to prevent the occurrence of a complete system collapse by ensuring continuity of supply to the Kuala Lumpur Metropolitan and Multi-media Super Corridor (MSC).

A link between Peninsular Malaysia and Sarawak in East Malaysia has been deferred indefinitely as a result of the economic slowdown in the region. Power outages have also occurred in Sabah, primarily due to vandal activity, although the failure of emergency measures also served to prolong the breakdown.

The transmission and distribution (T&D) losses on the Peninsular Grid system have been maintained at approximately 2.0% level between 2005 and 2009. Most of the T&D losses were occurred in the distribution system.

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Renewable energy

Wind energy
Although the potential for wind energy utilisation in the country has traditionally been recognised as low, studies have shown that offshore sites exhibit exploitable conditions for power generation, with average annual wind speeds of 4.1 m/s being recorded in the eastern Peninsula region of the country. Utilisation in the country is currently at the pilot project stage, with an estimated installed capacity of 0.2 MW (off-grid).

Hydropower potential is assessed at 29,000 MW and 85% of potential sites are located in East Malaysia. The role of hydropower in the generation fuel mix will be more prominent after 2010. Though most of the potential sites in Peninsular Malaysia have already been developed, there is still some untapped potential in the states of Pahang, Kelantan and Perak. However, the Bakun Hydroelectric Project, which is currently under development, has the greatest potential. The Bakun project will add 2,400 MW to hydro-electric generation capacity. The government has also approved the Peninsular Malaysia – Sarawak interconnection link via submarine cable to channel the power generated from the Bakun project, although as previously stated this project is currently postponed. The government is also studying the possibility of developing more hydropower at the Rejang Basin in Sarawak. The capacity of hydropower in 2009 was 23.8 MW of grid-connected mini-hydro.  

Solar energy
Solar PV potential is estimated at 6,500 MW. Despite the abundant resource, with an average daily insolation of 4.5 kWh/m2/day across the majority of the country, solar PV applications in Malaysia are limited to mainly stand-alone PV systems, especially for rural electrification where the systems receive a significant subsidy. Currently, roughly 1 MW of grid-connected solar PV systems are installed in the country, with a further 6.1 MW of grid-connected PV.

Biomass energy
The RE focus is on biomass, especially from palm oil and wood wastes. Being the largest palm oil producer in the world, the Malaysian economy has abundant sources of palm oil biomass. In 2004, Malaysia had 381 palm oil mills in operation, with potential to generate 2,098MW of electricity. Potential biomass and biogas from palm oil mill waste is estimated to be 1,300 MW and 400 MW from municipal solid waste. In 2009, the economy produced 32 MW of grid-connected biomass energy with a further 447 MW of off-grid biomass energy. 

Other sources of biomass waste include wood waste, rice husk and municipal solid waste.  Technical biomass potential in the country has been estimated to be as high as 29,000 MW.

Geothermal energy
The potential for geothermal power generation exists in the country, particularly at the Tawau geothermal field, which is estimated to have a potential of 67 MW. The location on Sabah has been observed as having temperatures of 220 to 236 degrees Celsius, a measurement which is very encouraging. RM1.5 million has been allocated for research into the site, and plans for its development have been included in the 10th Malaysian Plan.

The target of contribution towards the total electricity generation mix from RE is 10% by 2010, after which this ratio is envisaged to be maintained.

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Energy efficiency

In 2008, total final energy consumption was 44,901 ktoe. The industrial sector was the biggest final energy user at 18,667 ktoe, or 42.6% of total final energy consumption, followed by the transport sector at 16,395 ktoe, or 36.9%, the residential/commercial sectors at 6,205 ktoe, or 13.8%, and other sectors (agriculture and non-energy) at 3,163 ktoe. Petroleum products contributed the largest share, with 54.4% of consumption, followed by natural gas (23.9%), electricity (17.8%) and coal and coke (3.8%).  Previous energy efficiency programs were implemented after the global oil crisis of the 1970s, although many of these measures were not maintained after the crisis passed.

However, with the establishment of the Energy Commission in the 1990s, EE programs were re-implemented, include appliance labelling schemes, as well as co-generation in the power sector, and the use of district cooling. Various other projects have also been implemented, including demand-side management measures and capacity building, as well as the Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP).

Malaysia stands in the middle in terms of energy intensity per capita and energy intensity per GDP in the ASEAN region.


  • Industry Energy Efficiency Improvement Project (since 1999-in force), encompassing eight manufacturing and industrial sectors, to implement EE demonstration projects, financing for EE equipment, energy auditing services, and training projects to build EE capacity. A reduction of 10% compared to 2004 levels is targeted.


  • Promotion of cogeneration and the use of biomass in grid-connected power systems and CHP systems using palm oil mill waste (Phase I: 2003-2006).


  • Legislation for the use of 5% mix of palm oil with B5 diesel, as a trial in government vehicle fleets initially, with a view to mandated use across the country.
  • Regulations on emissions under the Road Transport Act.


  • Long-standing standards & labelling programs for appliances and lighting.


  • Institutional capacity-building for EE, particularly in the Energy Commission.
  • Education and awareness-raising campaigns for efficiency and energy conservation, particularly for schools.
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Electricity market
The electricity supply industry is mostly vertically-integrated, and monopolistic, where a utility handles all generation, transmission and distribution activities for electricity in a region. The main utility companies are Tenaga National Berhad (TNB,, the Syarikat SESCO Berhad, formally known as the Sarawak Electricity Supply Company (SESCO, and Sabah Electricity Limited (SESB,, each covering the region of the Peninsula Malaysia, Sarawak and Sabah respectively. Each company was initially established under British rule before the nation’s independence. In 1998, SESB became one of the subsidiaries of TNB. In all three regions, there are also independent power producers (IPPs) supplying some portion of the electricity supply to the utility companies. All three of the main electricity utilities in Malaysia are government-linked companies (government is the main shareholder).

Oil and gas market
Malaysia's crude oil and gas deposits are owned entirely by Petroliam Nasional Berhad (Petronas,, a corporation wholly owned by the government. Under the Petroleum Development Act 1974, Petronas has exclusive rights of ownership, exploration, and production of petroleum, is responsible for the planning, investment, and regulation of all upstream activities, and is subjected to the prime minister, who controls appointments to the company board. Petronas is also the biggest contributor to the government budget, accounting for 39% of the federal government's revenues in 2008, up from 36% in 2007.

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Currently the electricity industry in Malaysia is still highly vertically and horizontally integrated. The vast majority generation activities are conducted by a corporation heavily controlled by the government, and at the wholesale level, there is no competition. Transmission and distribution are vertically integrated with three main electricity utilities – in Peninsular, Sabah and Sarawak, and monopolised in all three islands. IPP projects are few in the country, and supply the state electricity monopolies with power.

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Energy framework

Malaysia is continuously encouraging the development of renewable energy in the economy through policy and various strategies. The Five-Fuel Policy has made renewable energy one of the components in the fuel mix for power generation after oil, coal, gas, and hydro.  The Small Renewable Energy Power Program was launched, encouraging production of renewable energy by small power generators and allowing the sale of generated electricity to utilities. The Ninth Malaysia Plan specified a target for electricity grid-connected renewable energy generation—300 MW in Peninsular Malaysia and 50 MW in Sabah.

The Tenth Malaysia Plan 2011-2015 emphasises on green technology including short term goals vested in National Green Technology Policy and new renewable energy act and feed-in tariff mechanism to be launched. It details on the strategy to restructure the energy subsidies the country has been providing on natural gas and electricity used by the industry sector as well as the discounted energy pricing mechanism for selected industrial users. The 10th MP also includes a plan to improve public transport into an energy efficiency transport mode to ease the traffic congestions and to address the high usage of private cars for passenger transport which is making the country’s level of energy use by the transport sector higher than the world average. In the 10th MP, the new energy target to achieve is of 985 MW by 2015 contributing to 5.5% of Malaysia’s total electricity generation mix. In order to achieve its target, the National Renewable Energy Policy 2010 has been launched.  

Malaysia’s energy sector is guided by the National Energy Policy, formulated in 1979. It has the following objectives:

  • ensuring the provision of adequate, secure and cost-effective energy supplies by developing indigenous energy resources, both non-renewable and renewable,
  • using least-cost options,
  • diversifying supply sources;
  • promoting the efficient utilisation of energy and the elimination of wasteful and non-productive patterns of energy consumption; and
  • ensuring that factors pertaining to environmental protection are taken into consideration in the production and use of energy.

The National Depletion Policy was formulated in 1980 to prolong and preserve the economy’s energy resources, particularly oil and gas resources. Under this policy, total annual production of crude oil should not exceed 3% of oil originally in place, which currently limits oil production to around 680 thousand barrels per day (bbl/D). In 1981, the Four-Fuel Policy was introduced to reduce the economy’s over-dependence on oil and to aim for an optimal fuel mix of oil, gas, hydro-electric and coal for use in electricity generation. As a result, oil’s domination of the generation fuel mix has been significantly reduced and replaced with gas and coal. In 2002, the Four-Fuel Policy was expanded to incorporate renewable energy as the fifth fuel after oil, gas, coal and hydro-electric.

National Bio-fuel Policy 2006 is launched in support of the Fifth Fuel Policy and it is aimed to reduce the country’s dependency on depleting fossil fuels, and promoting the demand for palm oil as a source of RE. Five key thrusts include: transport, industry, technologies, export and cleaner environment.  

The government is formulating various strategies to promote RE, including an action plan to assist RE project developers, especially Small Renewable Energy Plan (SREP) projects. SREP was launched in the 8th Malaysia Plan in 2001 and designated as sub-10 MW and within grid-connection distance. The plan included:

  • in the short term (up to 2010), a review of the obstacles faced by prospective RE developers. Measures to remove the obstacles and to stimulate the RE program, particularly the SREP, will be proposed;
  • a review of the Renewable Energy Power Purchase Agreement (REPPA) to recommend how the terms and conditions can be simplified and differentiating between larger projects and smaller and rural projects;
  • in the longer term (beyond 2010), new targets for RE utilisation by the type of RE source and by region;
  • economic support through fiscal and financial incentives improvement.

SREP was targeted to contribute 5% (600MW) of the country’s electricity demand by 2005 but despite various fiscal incentives, only 2 plants of 12 MW total capacity have been commissioned. Major challenges have been securing project funding and fuel supply security issues. A new SREP target of 350 MW of electricity generation from RE such as biomass, biogas, municipal waste, solar and mini-hydro as alternatives to fossil fuel was set in the 9th Malaysia Plan. Though it gained momentum with concerns about increasing oil prices, higher feed-in tariff and Clean development Mechanism (CDM), RE contribution towards the country’s total energy mix through grid-connected power generation from SREP only achieved 56.7 MW by the end of the 9th MP.

To enhance Malaysia’s EE, the Efficient Management of Electrical Energy Regulations 2008 was gazetted on 15th December 2008. The regulations required users with a total electricity consumption of 3 million kWh or more over six consecutive months to appoint electrical energy managers, and to implement efficient electrical energy management.

Renewable Energy Fund under Feed-in Tariff (Fit) collects 1% of bills from consumers who utilise electricity more than the set minimum point; and the collected fund will then be used to equalise the price between non-renewable and renewable sources of energy.

Renewable Energy Business Fund (REBF)’s objective is to mainly for BioGen implementation programmes to support the financial need for Full Scale Model Biomass Power Project. The REBF is expected to act as a successful model in financing RE Project in Malaysia in order to give better perspective to other developers ad financial institutions towards developing and financing the same mechanism of RE project in the country.

In August 2009, the Malaysian Government launched the National Green Technology Policy. One objective of the policy is to provide a path towards sustainable development. The policy is built on four pillars: energy -seek to attain energy independence and promote efficient use; environment- conserve and minimise the impact on the environment; economy -enhance economic development through the use of technology; and society- improve the quality of life for all.
The policy covers four key areas:

  •       Energy. Application of green technology in power generation and in energy supply-side management including cogeneration by the industrial and commercial sectors, in all energy-use sectors, and in demand-side management.
  •      Buildings. Adoption of green technology in the construction, management, maintenance and demolition of buildings.
  •      Water and waste management. Use of green technology in the management and use of water resources, wastewater treatment, solid waste and sanitary landfill.
  •      Transport. Incorporation of green technology in transportation infrastructure and vehicles, in particular biofuels and public road transport.

To promote the development of green technology activities, the Malaysian Government has established a MYR 1.5 billion fund. The fund will provide soft loans to companies that supply and use green technology.

To expand the use of green technology, including energy-efficient technology, in buildings, the government launched the Green Building Index (GBI) on 21st May 2009. In line with this effort, the government is providing the following incentives:

  •      Building owners obtaining GBI certificates from 24th October 2009 until 31st December 2014 are given income tax exemption equivalent to the additional capital expenditure in obtaining such certificates,
  •      Buyers purchasing buildings with GBI certificates from developers are given stamp duty exemption on the instruments of transfer of ownership. The exemption amount is equivalent to the additional cost incurred in obtaining the GBI certificates. This exemption is given to buyers who execute sales and purchase agreements from 24th October 2009 until 31st December 2014.

Renewable Energy and Energy Efficiency Scheme offers wide range of financing facilities for RE and EE projects especially on biomass, biodiesel, mini-hydro, solar, MSW and energy efficiency.

The Ministry of Energy, Green Technology and Water introduced the Renewable Energy Policy and Action Plan in 2010 to overcome the main hurdles to renewable energy development in Malaysia, such as market failure, policy inconsistencies, mixed signals to investors and the lack of a robust and long term orientation. The policy seeks to enhance the use of indigenous renewable energy sources to contribute in electricity supply security and independence, increase the share of renewable energy in the national electricity mix, support the expansion of a local renewable energy manufacturing sector, ensure reasonable renewable energy generation costs and protect the environment. In order to reach these objectives the Action Plan shall provide for the introduction of a feed-in tariff, implement fiscal incentives and measures to reduce the transaction cost of financing, attract skilled workers in the sector and initiate a long term research and development programme. It also established generation targets to 2050 when renewable energy should make 24% of the total energy mix, from 1% in 2011 and 9% in 2020, therefore avoiding 30,503,589 tonnes of CO2 emissions.

In April 2011, Malaysia launched a Renewable Energy Feed-in Tariff system and annual installed capacity caps to 2030. Electricity consumers pay an additional fee on their electricity bills to distribution licensees, the FIT-ALL. Licensees are then required to allocate 1% of their total revenue to the Renewable Energy Fund administered by SEDA Malaysia and dedicated to financing the FIT. About 56% of the utility customers who consume less than 200 kWh/month will be exempted from contributing to the RE Fund. To benefit from tariffs, renewable developers need to conclude a RE Power Purchase Agreement with Distribution Levels (eg. TNB, SESB, tec, public power utilities). Households already falling under the Small Renewable Energy Programme (SREP) can convert previous support into a Feed-in tariff.
FITs are ranging over a 21 year period for PV and mini hydro and 16 year period for biomass and biogas. In April 2010, RE Act and Act for Fit Implementing Agency has been approved by the Cabinet.

Sustainability Achieved Via Energy efficiency rebate programme (SAVE) was introduced in 2011: rebated are given to encourage the purchase of energy efficient equipments to initiate market development of energy efficient appliances. The anticipated savings from SAVE is 127.3 GWh.

UNDP-GEF Biomass Power Generation and Demonstration (BioGen) Project was launched in 2002 to demonstrate biomass and biogas grid-connected power generation projects. With this project, 13 MW (export 10 MW) and 500 kW power plants will be grid-connected in July 2009; and ~447 MW off-grid electricity is produced by private palm oil millers.

UNDP-GEF Malaysia Building Integrated Photovoltaic (MBIPV) Project was implemented between 2005 and 2010 to reduce unit cost of solar PV technology by 20% and increase capacity by 330% via PV application in buildings. With this project, ~0.4 MW of cumulative grid-connected PV installations are carried out, and PV system unit cost has dropped by 16% on average.

Other energy efficiency programmes are: Energy Efficiency Showcase Models; Auditing and Retrofitting Existing Buildings into Energy Efficiency Building, Green Building Certification (Green Building Index, GRI), Electrical Equipments Labelling Programme, introduced in 2005, and Energy Efficiency Campaign, including the compilation of handbook on energy efficiency practice in the household in 2008.

The Energy Efficiency and Conservation (EE&C) goals submitted to the 5th East Asia Summit Energy Ministers Meeting, held on 20 September 2011 in Brunel Darussalam, state that Malaysia uses Final Energy Demand as the EE Indicator, and aims at 8.6% reduction from business as usual by 2020.

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Energy debates

To speed up the implementation of energy efficiency and conservation initiatives, the Ministry of Energy, Green Technology and Water prepared a final draft of the National Energy Efficiency Master Plan (NEEMP) for the period between 2011 and 2020 in 2010. The NEEMP builds on the experiences from past projects and programmes that were lacking coherent framework to ensure sustainability in the long term. It will address and mitigate previous barriers, including lack of overall national plan for energy efficiency, lack of legal and regulatory framework for energy efficiency, low energy prices, and lack of funding and finance.

Its aim is to encourage energy efficiency to ensure productive use of energy and minimize waste to contribute to sustainable development and increase welfare and competitiveness. The plan has six objectives: to establish an overall long-term national plan for energy efficiency; to create legal and regulatory framework for energy efficiency; to create a champion for energy efficiency; to create adequate and sustained funding mechanism for energy efficiency; to implement energy efficiency programmes, and to enable commercial finance institutions to support energy efficiency. The target of the plan is to reduce the electricity consumption by 10% in the year 2020 compared to a business-as-usual scenario; the total energy savings of the proposed programmes in the plan will be about 181 TWh, which is about two times the yearly energy consumption in the country at present. Savings of fuel consumption will also lead to less environmental impact from combustion and the greenhouse gas emission reductions of the plan is projected to be 144 million tonnes of CO2 over the lifetime of the energy efficiency initiatives.  

In July 2010, the government introduced subsidy reductions for gasoline, diesel and liquid petroleum gas (LPG) with the aim of gradually rationalizing the fuel subsidy system to reduce expenditures. Further cuts in fuel subsidies are expected.

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Energy studies

Malaysia addresses energy security by cooperating closely with its neighbours under the Association of Southeast Asian Nations (ASEAN) framework. Malaysia and ASEAN members have agreed to strengthen the region’s energy security by signing the ASEAN Petroleum Security Agreement. Malaysia is also working with ASEAN members through the Trans-ASEAN Gas Pipeline Project. The project is expected to provide the region with a secure supply of energy by means of an interconnected gas infrastructure. The ASEAN Power Grid Project aims to strengthen energy security by integrating the power grids of ASEAN members. Development of the grid will provide the necessary interconnectivity for the regional mobilisation of electricity sales, and will optimise the development of energy resources in the ASEAN region.

A new World Bank study on sustainable energy in East Asia, “Windows of Change: East Asia’s Sustainable Energy Future”, supported by the Australian government thorough AusAID, suggests that a progressive removal of the subsidies beginning in 2009 would reduce emissions in Malaysia by 7% by 2030, as a result of lower energy use and relative increases for fossil fuels. According to the report, Malaysia increased energy intensity over the last 25 years and lags behind China and Vietnam in conserving energy. It therefore suggest that the country would have to reduce energy intensity by 2.5% per year till 2030 if it is to meet the carbon emissions reductions recommended by the sustainable energy development scenario in the report. By reducing its carbon footprint, Malaysia can also increase energy security and improve local environment.

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Role of government

The key ministries and agencies for Malaysia’s energy sector are the Energy Unit of the Economic Planning Unit of the Prime Minister’s Office (; the Ministry of Energy, Green Technology and Water (KeTTHA,; and the Energy Commission ( The Economic Planning Unit and the Implementation and Coordination Unit (ICU) sets the direction and strategies for energy policy and determines implementation. The Sustainable Energy Division, Energy Sector, under the Ministry of Energy, Green Technology and Water, has its key role in formulating policies related to sustainable energy including energy efficiency.

The role of the Ministry of Energy, Green Technology and Water is to facilitate and regulate the electricity sector and to ensure that affordable energy is available to consumers. This includes formulation of energy policy in coordination with the Economic Planning Unit. The Energy Commission is responsible for regulation of the electrical power sector, as well as the piped gas supply industry.

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Government agencies

The Malaysia Electricity Supply Industry Trust Account (MESITA) fund provides financial assistance for rural electrification, energy efficiency and renewable energy projects. Research studies funded by the MESITA include grid-connected power generation from landfill gas, photovoltaic systems and palm oil residues.

The development of SDI indicators is also being attempted under the Sustainable Penang Initiative (SPI), conducted by the Penang State Government through its Socio-economic and Environmental Research Institute (SERI). The indicators are intended to help in assessing and monitoring the direction of economic development, in relation to social well-being and environmental health. Increasingly, development will have to take into account the impending effects of climate change.

The Environmental Research and Management Association of Malaysia (ENSEARCH) has been providing training in a variety of environmental areas. More recently, ENSEARCH has expanded its focus to ISO 14000 related issues. The Centre for Environmental Technologies has been concentrating on issues involving the reduction of ozone-depleting substances, and cleaner production technologies.

Centre for Education, Training and Research in Renewable Energy and Energy Efficiency (CETREE) is a body funded by the Ministry of Energy, Green Technology and Water to conduct programmes to create awareness and disseminate knowledge on energy efficiency and renewable energy among energy users in Malaysia. The main target groups for CETREE’s programmes are school children and higher institution students.

As a proactive measure on the part of the private sector, the Business Council for Sustainable Development in Malaysia was established in 1992 to solicit and foster the active participation of the business and industrial community in caring for the environment.

Other organisations, such as the Federation of Malaysian Manufacturers (FMM) and the Malaysian International Chamber of Commerce and Industry (MICCI), also encourage their members to include environment considerations in corporate operations

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Energy procedure

Strategic planning and management of energy resources have been given high priority in Malaysia’s development plans. The sustainability of energy resources have been strategically planned over the years. Energy policies were developed after careful evaluation of the current and future energy needs and the supply of energy. This has resulted in the transformation of Malaysia’s fuel mix for power generation from mostly oil to natural gas and coal. 

Malaysia signed the United Nations Framework Convention on Climate Change in 1993 and ratified the Kyoto Protocol in 1994. Malaysia actively participates in the clean development mechanism (CDM) under the protocol. As of October 2009, 67 CDM projects had been registered with the CDM Executive Board; 53 of which were energy-based projects. On 17th December 2009, at the 15th Conference of the Parties to the United Nations Framework Convention on Climate Change in Copenhagen, the Malaysian Prime Minister pledged that Malaysia would adopt a voluntary greenhouse gases emissions reduction of up to 40% of the 2005 level by 2020.

Malaysia has a reliable and stable electricity supply system, which is regulated by the government. In the light of volatile global energy prices and declining gas production particularly in Peninsular Malaysia, under the Tenth Malaysia Plan the government is focusing on ensuring the continued security of electricity supply as well as creating a sustainable electricity supply industry. In addition, it will enhance the productivity and efficiency of utility providers. During the plan period, the government intends to increase and diversify generation capacity; strengthen transmission and distribution networks; restructure the electricity supply industry; and improve customer service delivery.

The main means of increasing and diversifying generation capacity will be the development of alternative sources of energy, particularly hydro, and increasing the importation of coal and liquefied natural gas (LNG) by 2015. To improve the efficiency of coal use and to reduce carbon dioxide emissions, the government will explore super-critical coal technology for new investments. Specific initiatives to increase generation capacity include:

  •      Peninsular Malaysia. Two hydroelectric plants will be commissioned during the plan period in Ulu Jelai and Hulu Terengganu with a combined capacity of 622 MW.
  •      Sabah. Three new power plants will be commissioned with a combined capacity of 700 MW. These include two gas-based power plants on the west coast, and one coalbased power plant on the east coast using clean coal technology.
  •      Sarawak. The 2400 MW Bakun Hydroelectric Project will be commissioned in stages.

Transmission and distribution systems will be strengthened and expanded to reduce losses. By 2015, the System Average Interruption Duration Index (SAIDI), a measure of supply reliability, is expected to improve from 68 to 50 minutes per customer per year in Peninsular Malaysia. The potential of implementing a Smart Grid system to minimise losses, reduce costs and increase reliability will also be considered.

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Energy regulator

The Energy Commission ( has been fully operational since January 2002. The Commission, formed under the Energy Commission Act 2001, has assumed all the responsibilities of the Department of Electricity and Gas Supply as established in the Electricity Supply Act 1990 and the Gas Supply Act 1993 respectively.  The Electricity Supply Act 1990 and Gas Supply Act 1993 have both been amended to allow the Energy Commission to take over these responsibilities from the previous Department.
Its main tasks are to provide technical and performance regulation for the electricity and piped gas supply industries, to act as the safety regulator for electricity and piped gas, and to advise the Minister on all matters relating to electricity and piped gas, including energy efficiency and renewable energy issues.

The Demand Side Management Unit under the Energy Commission performs regulatory functions in the efforts to promote energy efficiency which enforces the Efficiency Management of Electrical Energy Regulations 2008. It also implements provisions on energy efficiency improvement under the Electricity Supply Act 1990, and develops standards and rate electrical appliances under the labelling programme.

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Degree of independence

The Commission consists of 7 members who are appointed by the Minister of Energy, Communications and Multimedia, after consultation with the minister in charge of matters relating to gas supply. Funding for the Commission comes from allocated government funds, any fees charged for the licensing of electrical operators, and fees derived from consultancy services offered by the commission. The Commission is, by law, obliged to accept general direction from the Minister of Energy, consistent with the energy supply laws.

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Regulatory framework

The Electricity Supply Act 1990 and the Electricity Supply Act (Amended) 2001 or Act A1116 are the main legislation relating to energy regulation. Act A1116 also has provisions on the efficient use of electricity.
The Efficient Management of Electrical Energy Regulations 2008 was gazetted on 15th December 2008, and required any installation with total electricity consumption of 3 million kWh or more over six consecutive months to appoint electrical energy managers, and implement efficient electrical energy management measures.

The Code of Practice on the Use of Renewable Energy and Energy Efficiency in Non-Residential Buildings (MS1525:2007) provides design recommendations for non-residential buildings.

The Renewable Energy Bill 2010 was adopted on 9 April 2011 and was to be enacted in May 2011 along with the creation of the Sustainable Energy Development Authority. It aims to meet a 3,000 MW renewable target by 2020, with one-third of that expected from solar PV and another third from bioenergy.

Tax Scheme

  • Amongst other benefits, National Incentive Guidelines indicate that companies providing services for energy efficiency  are eligible for the following:
  • Pioneer status - an income tax exemption of 100% of statutory income for 10 years; or
  • An investment tax allowance of 100% on the qualifying capital expenditure incurred within a period of five years.; and
  • An import duty and sales tax exemption on energy-efficient equipment that is not produced locally, and a sales tax exemption on the purchase of equipment from local manufacturers;
  • Household appliances such as refrigerators, air conditioners, lighting, fans and televisions are also eligible for tax exemptions.
  • Owners of buildings with a Green Building Index Certificate are eligible for:
  • A tax exemption equivalent to 100% of the capital expenditure incurred to obtain the GBI certificate. New and retrofitted buildings are eligible.
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Regulatory roles

  • To advise the Minister on all matters concerning the national policy objectives for energy supply activities;
  • To advise the Minister on all matters relating to generation, production, transmission, distribution, supply and use of electricity;
  • To advise the Minister on all matters relating to the supply of gas through pipelines, and the use of gas as provided under the gas supply laws;
  • To implement and enforce the energy supply laws;
  • To regulate all matters relating to the electricity supply industry and to protect any person from danger arising from the generation production, transmission, distribution, supply and use of electricity, as provided under the electricity supply laws;
  • To regulate all matters relating to the supply of gas and to protect any person from danger arising from the supply and use of gas;
  • To promote efficiency, economy and safety in the generation, production, transmission, distribution, supply and use of electricity and in supply and use of gas ;
  • To promote and safeguard competition and fair and efficient market conduct or, in the absence of a competitive market, to prevent the misuse of monopoly or market power in respect of the generation, production, transmission, distribution and supply of electricity and the supply of gas through pipelines;
  • To promote the use of renewable energy and the conservation of non-renewable energy.

Other objectives of the institution include: the promotion of research and development of new techniques relating  electricity and gas; the review of energy supply laws, and  making  recommendations to the Minister.

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Energy regulation role

The creation and implementation of energy policy, including regulation for the sector, is the responsibility of the Energy Unit under the Prime Minister's Office. In addition, the Ministry of Energy has the ability to give direct instruction to the Energy Commission for its operations, although the extent to which this power is utilised is unknown.

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Regulatory barriers

Malaysia has policies that govern her energy sector, including its electricity industry. These have been supported by numerous implementation efforts. Besides the improvement in the country’s electrification rate and supply quality, and the recently-diversified electricity generation mix, the penetration of RE is still developing. The end of the Ninth Malaysia Plan will provide a useful insight as to whether a more intensive approach towards RE and EE is required. The delegation of powers currently held by the Minister of Energy to the Energy Commission would improve perception of the Commission's activities, through increased independence.

Close Regulatory barriers


APEC (2011) Peer Review on Energy efficiency in Malaysia. Available at: [Accessed 13th September 2013]

IEA Country Statistics 2011. Available at: [Accessed 13th September 2013]

Energy Information Administration (2010) Country Analysis Briefs: Malaysia. Available at: [Accessed 13th September 2013]

Hasan, A. F. (2009) Energy Efficiency and Renewable Energy in Malaysia, power point presentation, 15 July 2009. Available at: [Accessed 13th September 2013]

UNEP and BCA (2011) Country report on sustainable building policies on energy efficiency in Malaysia. Available at: [Accessed 13th September 2013]

ADB (2012): Pacific Energy Update 2012. Available at: [Accessed 13th September 2013]

Hashim, H. and Ho, W. S. (2011) Renewable energy policies and initiatives for a sustainable energy future in Malaysia, Renewable and Sustainable Energy Reviews. Available at: [Accessed 13th September 2013] Restricted access

APERC (2011): APEC Energy Overview 2011. Available at: [Accessed 13th September 2013]

AEEC (2011) Action plans for EMM5, September 2011. Available from: [Accessed 13th September 2013]

AEEC (2011) EE&C goals of EAS countries submitted to EMM5. Available at: [Accessed 13th September 2013]

World Bank (2010) Winds of Change: East Asia’s Sustainable Energy Future. Available at: [Accessed 13th September 2013]

REN21 (2011) Renewable 2011 Global Status Report, Paris: REN21 Secretariat. Available at: [Accessed 13th September 2013]
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