Analysts foresee Malaysia’s energy transition to sustain momentum moving into 2026

Analysts have foreseen Malaysia’s energy transition to sustain momentum moving into 2026, underpinned by the country’s strong policy. In its recent report, Ta Securities said it expects Malaysia’s energy transition theme to sustain its momentum moving into 2026 given strong policy backing and the National Energy Transition Roadmap’s (NETR) aggressive 70 percent renewable energy (RE) mix target by 2050. This will be underpinned by rollout of an aggregate 4GW solar projects under the large scale solar 5 (LSS5) and LSS5+ program which are targeted for commercial COD operation data by 2027-2028. Beyond these and as per Budget 2026, the LSS6 program is expected to be rolled out next year entailing possibly another 2GW auction with a requirement for Battery Energy Storage Systems (BESS) integration, it added. In addition, Ta noted an additional 300MW Feed-in-Tariff (FiT) quota is expected to be rolled out for the biogas/biomass and minihydro RE sub-segments, as outlined in Budget 2026. In the rooftop segment, it highlighted the Solar ATAP program guidelines are expected to be launched by December 31, 2025 and applications are expected to be opened from January 1, 2026. Meanwhile, it opined that the introduction of a carbon tax in 2026 could artificially raise the cost of grid power and in turn boost demand for RE as consumers seek to minimize the impact of higher electricity cost. “The strong RE capacity rollout over the next two years is likely to drive orderbooks and revenues of RE engineering, procurement, construction, and commissioning (EPCC) players to new heights,” it added. CIMB International also in its recent report expects the Malaysian government to continue pushing ahead with the NETR agenda in 2026. This will be done through the launch of more projects that increase RE installed capacity, RE penetration into the grid and RE adoption by consumers. Meanwhile, MBSB Research has in its recent report maintained its positive stance on Malaysia’s RE subsector, underpinned by a sustained electricity demand growth, clearer tariff visibility and a strong multi-year RE pipeline. “Demand fundamentals remain robust, supported by the commercial sector and an accelerating ramp-up in data center load which provides long-term visibility for generation, transmission and distribution investments,” said the research house. MBSB noted sector catalysts will intensify in 2026 with the award of new gas-fired generation capacity, the anticipated launch of LSS6 which is expected to incorporate mandatory BESS requirements and the upcoming award of the 400MW/1,600MWh Malaysia Battery Energy Storage Technology (MyBEST) program, which will mark the beginning of Malaysia’s grid-scale storage deployment, further improving system flexibility and enabling higher RE penetration. CGS International also said in its recent report that it expects to see increased adoption of the corporate renewable energy supply scheme (CRESS) following the reduction in access charges in late 2025, which further narrows the cost gap between brown and green energy. According to the research house, this improves RE competitiveness for corporates, supported by stable offtake structures and better project economics. “Utilities and developers are well positioned to capitalize on this demand-driven model, accelerating solar and broader RE rollout while diversifying revenue beyond quota-based mechanisms, “We expect waste-to-energy and biomass projects to garner more attention in 2026, supported by the government’s push to advance the Circular Economy Roadmap and growing urgency to address landfill constraints,” it added. Meanwhile, the enactment of Malaysia’s Carbon Capture, Utilization, and Storage (CCUS) Act in 2025 provides a clear regulatory framework for deploying carbon mitigation technologies, opening avenues for utilities to integrate CCUS into the country’s energy system, said the report. “We also expect the deployment of BESS to accelerate, driven by rising RE capacity, corporate demand for firm green energy, and the need for grid flexibility, “While still in the early stages, we also anticipate more active discourse around nuclear energy in 2026,” it added. Meanwhile, Nomura Research highlighted in its recent report that ASEAN Power Grid (APG) could be a transformative growth driver for Malaysia, elevating local power players from domestic generators to regional RE exporters. It is noted that under the NETR, Malaysia is actively positioning itself as a central hub for cross-border power trading, exemplified by the operational Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS PIP). “We believe the APG integration offers a strategic avenue to monetize excess RE capacity, which according to a study by the United Nations study, it is projected that system cost could reduce by up to 8 percent regionally,” said the research house. However, Nomura also opined that this requires accelerated smart grid investments to manage bi-directional flows and intermittent renewables, which could impose a challenge for other partnering countries in the region. Other issues to be addressed includes harmonizing the diverse regulatory frameworks and grid codes across ASEAN member states, which complicates seamless technical integration. “Furthermore, navigating issues of national energy sovereignty and security presents political challenges require deep diplomatic trust-building, “Financing is another critical hurdle – require public private partnerships to bridge the funding gap,” it added. Analysts stay upbeat on Malaysia’s renewable energy sector