Current Energy Supply in Malaysia

Energy Demand

Malaysia is a developing country that recorded gross domestic product (GDP) of RM1.79 trillion and gross national income (GNI) of RM1.73 trillion in 2022. Its population, which was 32.7 million in 2022, is projected to reach 40 million by 2050. Concurrently, the urbanisation rate is expected to rise from 75% in 2020 to 85% by 2040. Economic and population growth, together with rapid urbanisation, are expected to drive a rise in energy demand. Estimates by the Energy Commission indicate that the country’s net energy demand will grow from 18,808 MW in 2020 to 24,050 MW by 2039. 

Primary Energy Supply

Fossil fuels contribute the largest share of Malaysia’s energy supply and continue to shape the country’s energy landscape. As of 2023, four energy sources dominated the total primary energy supply (TPES) mix. Natural gas made up the largest portion at 42%, followed by crude oil and petroleum products at 32% and coal at 22%. Meanwhile, renewable energy, including hydropower, solar and bioenergy, made up only 4%.

National Energy Transition Roadmap (NETR): Strategic Pathways towards a Sustainable Green Economy

Malaysia recognises the need for a forward-thinking approach to reduce its reliance on fossil fuels and invest in clean and sustainable alternative energy sources. To accelerate the pace of energy transition, the Ministry of Economy developed the NETR to steer the transition from traditional energy systems to greener and low-carbon energy systems. The NETR requires a whole-of-nation approach, encompassing federal and state governments, industry, public, and international community. Crucially, the NETR aims to achieve net-zero emissions by 2050. The NETR outlines a gradual increase in renewable energy shares, targeting 31% by 2025, 40% by 2035, and 70% by 2050.

NETR: Implementation of Energy Transition Levers

To accelerate the pace of energy transition, the NETR identifies ten flagship catalyst projects and initiatives based on six energy transition levers, namely: energy efficiency (EE); renewable energy (RE); hydrogen; bioenergy; green mobility; and carbon capture, utilisation, and storage (CCUS).

NETR: Introduction of Responsible Transition (RT) Pathway 2050

The NETR introduces the RT Pathway 2050, which guides Malaysia’s energy mix, greenhouse gas (GHG) emission reduction, and energy transition initiatives towards 2050.

Under the pathway, the TPES is projected to grow modestly from 95 million tonnes of oil equivalent (MTOE) in 2023 to 102 MTOE by 2050 (a 2% capacity compound annual growth rate (CAGR)). The pathway demonstrates a clear commitment to decarbonisation by phasing out coal and reducing fossil-fuel reliance from 96% in 2023 to 77% by 2050. During this transition, natural gas will serve as both a transitional fuel and the primary contributor of TPES at 57 MTOE (56%), followed by renewables, including solar, hydropower and bioenergy, which collectively contribute 23% in 2050 from a mere 4% in 2023.

By 2050, renewable energy is expected to constitute 70% of installed power capacity, with the energy sector achieving a 32% reduction in GHG emissions compared to 2019, reaching 4.3 MT CO2eq emissions per capita.

In addition, the pathway is expected to create investment opportunities amounting to RM1.2 to RM1.3 trillion by 2050. These investments are projected to contribute an additional RM220 billion to the country’s GDP and generate approximately 310,000 green job opportunities by 2050.

Green Incentives for a Sustainable Green Economy

(A) Green Technology Assets (Own Consumption)

Companies investing in the following green technology assets for own consumption are eligible for the following Investment Tax Allowance (ITA) of Qualifying Capital Expenditure (QCE):

Tier 1: ITA of 100% of QCE against 70% statutory income for QCE incurred during the period 01 January 2024 to 31 December 2026 in relation to battery energy storage system, green building, and qualifying assets approved by the Minister.

Tier 2: ITA of 60% of QCE against 70% statutory income for QCE incurred during the period 01 January 2024 to 31 December 2026 in relation to renewable energy project, energy efficiency, and qualifying assets approved by the Minister.

Applications are open until 31 December 2026.

(B) Green Technology Projects (Business Purposes)

Companies investing in the following green technology projects for business purposes are eligible for the following ITA of QCE:

Tier 1: ITA of 100% of QCE against 100% or 70% statutory income for QCE incurred for a period of up to 10 years in relation to green hydrogen.

Tier 2: ITA of 100% of QCE against 100% statutory income for QCE incurred for a period of 5 years in relation to integrated waste management, and electric vehicle charging station.

Tier 3: ITA of 100% of QCE against 70% statutory income for QCE incurred for a period of 5 years in relation to biomass, biogas, mini hydro, geothermal, solar, and wind energy.

Applications are open until 31 December 2026.

(C) Solar Leasing

Companies providing solar leasing services are eligible for income tax exemption of 70% of statutory income for 5 or 10 years based on the energy production capacity.

Applications are open until 31 December 2026.

Conclusion

While Malaysia’s energy system remains heavily dependent on fossil fuels, rising energy demand and growing environmental concerns are accelerating the country’s transition towards cleaner energy sources. Through the NETR, the country has committed to achieving net-zero emissions by 2050, alongside a target of increasing renewable energy to 70% of installed power capacity. This transition is supported by key policy initiatives, energy transition strategies, and green incentives aimed at promoting green investments. Overall, the company is progressively moving towards a more sustainable and low-carbon energy future.

Published on 29 May 2026