KUALA LUMPUR, Feb 13 — Despite the positive growth potential for renewables in the market, growth in Malaysia’s power infrastructure sector will continue to be dominated by thermal sources, BMI Research said today.
According to its Key Projects Database, 78 per cent of the 12,300MW of capacity in planning or construction stages are conventional thermal power plants.
Malaysia’s position as a major oil and gas producer means that the country’s power infrastructure has historically been dominated by thermal sources — a trend that it expects will persist as the country expands power generation capacity to meet rising demand.
The vast majority of ongoing and planned power projects in peninsular Malaysia are coal- or gas-fired facilities, and are being implemented by a mix of state-owned and private companies.
At the same time, regulator Suruhanjaya Tenaga also has plans to gradually build out renewables capacity and has set a target to implement 500MW of large-scale solar projects per year through 2020. Hydropower projects are also underway in the East Malaysia provinces of Sabah and Sarawak.
Investment in renewable projects will be further facilitated by market reforms in the sector, which is currently in its second generation of power purchase agreements (PPAs).
BMI Research forecasts that Malaysia’s power infrastructure sector will grow at an annual average of 5.4 per cent in real terms between 2018 and 2027. The vast majority of Malaysia’s ongoing and planned power-sector investments are in conventional thermal sources — perhaps unsurprising, given that the country has substantial oil and natural gas reserves.
According to BMI Research’s Key Projects Database, 78 per cent of the 12,300MW of capacity in planning or construction stages are conventional thermal power plants; together, these projects account for more than US$8.2 billion in value.
Despite the rapidly falling costs of renewables technologies and Malaysia’s growing role as a manufacturer of solar panels, BMI Research opines that the domestic electricity market will remain dominated by thermal sources. The dominance of thermal projects is particularly pronounced in peninsular Malaysia.
Major conventional thermal power projects in the country that are driving BMI Research’s forecasts include: Projects 3A and 3B, consisting of two 1,000MW coal-fired power plants currently under construction. The Energy Commission of Malaysia awarded the projects to 1Malaysia Development Berhad and Mitsui in 2014.
The projects are advancing at a good pace, and are expected to come online on schedule in 2017 and 2018, respectively. Projects 4A and 4B, consisting of two gas-fired power plants, are making progress after an earlier setback in which YTL Power withdrew from the RM 3 billion 4B project following concerns about preferential treatment. TNB and SIPP Energy have decided to go ahead with the Track 4A power project.
Malaysia’s renewables industry will become increasingly attractive for investors in the Asia region and BMI Research expects robust growth in non-hydro renewables capacity over our 10-year forecast period to 2027. It forecasts total non-hydro renewables capacity to expand by nearly 150 per cent between 2017 and 2027, with growth mostly in the biomass and solar segments.
While at a regional level, the size of the market remains limited compared to regional counterparts — notably India, China and Thailand — it expects the market to outperform in terms of its attractiveness to investors and balance between rewards on offer and risks to investment.
