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07 Apr 2025
6 Min Read
Afrina Arfa (Alumni Columnist)
With 2,190 hours of sunshine each year, Malaysia's solar power remains underutilised. What's casting a cloud over it—and what will it take to 'clear the skies'?
As a tropical country near the equator, Malaysia enjoys one of the sunniest climates in the world, receiving about six hours of direct sunlight daily. With only sunny and rainy seasons on rotation—and some of the highest solar irradiance globally—Malaysia is an ideal candidate for widespread adoption of solar power. Yet, despite this natural advantage, coupled with ambitious renewable energy targets and government incentives, solar power still contributes only a tiny fraction to the national grid. Fossil fuels dominate at 81%, followed by hydropower at 17%, while solar and wind lag far behind at just 1.5%.
So, what's blocking the sun? Why are rooftops across Malaysia still dominated by conventional tiles rather than solar panels? Though geographically well-suited for solar power, the country struggles to harness its abundant reserves, held back by financial, policy, and technical barriers.
As climate change accelerates and countries shift towards clean, renewable energy, Malaysia is striving to keep pace. The country is moving away from fossil fuel dependence, with a goal to increase its renewable energy share to 31% by the end of the year.
Introduced in 2016, the Net Energy Metering Scheme (NEM) encourages renewable energy use in households and businesses. The first version allowed solar power generated by the public to be consumed first, with any excess exported to Tenaga Nasional Berhad (TNB). The second version debuted a 'one-to-one' offset model, rewarding individuals with one unit of credit for each unit of electricity used. The most recent version, NEM 3.0, expanded its quota to 2,400 MW from 2021 to 2025, allocating 100 MW for residential users (NEM Rakyat) and 300 MW for commercial and industrial users (NEM Nova). This helps reduce electricity costs while advancing the country's renewable energy objectives.
The Supply Agreement - Renewable Energy (SARE) scheme, introduced in 2018, offers another avenue for solar adoption by allowing users to lease solar panels with minimal upfront costs. This cost-effective alternative to traditional ownership enables users to install panels and pay for the electricity generated through a long-term agreement with energy providers. Following closely is the Community Renewable Aggregation Mechanism (CREAM), introduced in early 2025, which allows homeowners to lease or rent out rooftop space to third parties. By shifting the focus from personal energy consumption to income generation, this initiative further encourages solar adoption and expands the use of renewable energy.
Despite these government initiatives and growing public awareness of climate change, the statistics show that Malaysia still lags in the race towards a more renewable future.
To promote the widespread adoption of solar power and attract large-scale investments in green technologies, the government announced the Green Investment Tax Allowance (GITA). Through this scheme, businesses investing in qualifying activities like green hydrogen, electric vehicle (EV) charging stations, and renewable energy projects—including solar and wind energy—can receive tax exemptions of up to 70% for a period of up to 10 years. However, accessing these incentives can be time-consuming, as it involves navigating complex bureaucratic procedures, including permit approvals and quota systems, which may discourage some businesses from pursuing solar power projects.
Although reforms are underway to promote solar adoption at both the residential and commercial levels, these policies are still in the early stages of implementation. This has resulted in delays in project development and a lack of public awareness, ultimately slowing progress in the renewable energy sector.
Caught between financial constraints and policy inefficiencies is another formidable barrier to solar power adoption in Malaysia—the lack of advanced infrastructure and technology. While the country benefits from high solar irradiance, it lacks the necessary infrastructure to support the increased supply and demand associated with solar power integration. In areas with abundant sunlight, the existing power grid—comprising transmission lines, transformers, and substations—is not yet capable of handling large amounts of renewable energy. This limits the ability to store excess solar power, which becomes problematic during periods of low sunlight.
Older buildings in Malaysia also pose a challenge. Their structural limitations often require costly retrofitting to accommodate solar panel installations. Even when buildings qualify, the high costs of maintenance and advanced systems to manage the fluctuations in power throughout the day—due to unpredictable weather—are necessary to ensure the grid's reliability and safety. From initial installation issues and hardware faults to unexpected damage caused by rodents chewing through wiring, installing solar panels can be far from straightforward for the average consumer.
Despite the seemingly endless challenges, recent technological advancements and policy changes offer hope for Malaysia's solar power sector. In addressing grid and storage issues, two innovative technologies are leading the charge: bifacial solar panels and perovskite solar panels. Bifacial solar panels capture sunlight from both the front and rear sides, harnessing additional reflected light and boosting energy generation by up to 30%. Perovskite solar panels, on the other hand, offer high conversion efficiencies, further improving solar power generation. At the same time, investments in energy storage technologies, such as lithium-ion and sodium-ion batteries, are tackling intermittency issues by enhancing the reliability of solar power.
As artificial intelligence (AI) continues to transform our daily lives, digitalisation has made its way into smart grids, maximising their performance, dependability, and control with solar power integration. AI capabilities enable efficient energy storage management, grid monitoring, defect detection, and security enhancements. In 2023, the Malaysian government lifted its ban on renewable energy exports, with the goal of reaching a renewable energy capacity target of 70% by 2050.
Alongside green tax incentives for businesses, solar subsidies for households, and streamlined regulations, the coming years will likely see solar power become a financially viable option and a well-developed alternative to fossil fuels.
Blessed with abundant sunshine and ambitious renewable energy targets, Malaysia stands at a crossroads, facing financial, policy, and technical barriers. To unlock its solar potential, the country must streamline bureaucratic processes, raise public awareness, and foster collaboration between policymakers, businesses, and the general public. While the solar power sector remains largely untapped, recent innovations and policy changes provide a glimmer of hope. With the right efforts, Malaysia has the opportunity to move beyond aspiration and into a future powered by renewable energy.
Afrina Arfa is a Bachelor of Finance and Economics (Honours) alumna of Taylor's University. She spends her time indulging in economic news, hoping to inspire others to think beyond the constraints of society.
