The Malaysian Ministry of Economy has launched the National Energy Transition Roadmap (NETR) as part of the government’s interim measures to meet net-zero targets. ISFI has learned that the initiative under the roadmap to develop Southeast Asia’s largest hybrid solar photovoltaic (PV) power plant will be financed through Islamic finance instruments.
The newly launched roadmap follows a number of policy decisions by the Ministry of Economy and the Ministry of Energy and Natural Resources in the past two months including the lift of the export ban of renewable energy and the establishment of the central electricity exchange.
“The NETR launched today puts these policies in motion by introducing 10 wide-ranging catalytic initiatives that will open up investment opportunities between RM435 billion (US$96.06 billion) to RM1.85 trillion (US$408.52 billion) by 2050,” Rafizi Ramli, the Malaysian minister of economy, remarked at the launch of the roadmap.
The 10 flagship projects under the first phase of the program are expected to generate private and public funding in excess of RM25 billion (US$5.52 billion), which is notably only a fraction of the RM637 billion (US$140.66 billion) of investment needed to achieve the government’s targeted 70% renewable energy installed capacity mix by 2050.
One of the initiatives under the program will be championed by the Malaysian sovereign wealth fund Khazanah Nasional (Khazanah), which will see the development of Southeast Asia’s largest hybrid solar PV power plant with a one-gigawatt capacity.
The project will be carried out as a joint venture between UEM Group, Khazanah’s construction and engineering services provider, and ITRAMAS.
In a response to ISFI, a spokesperson from UEM Group remarked on the use of Islamic financing instruments to fund the newly announced project.
“We are a big proponent of Islamic financing as can be seen with all our Sukuk issuances across our group; this should be no different,” the spokesperson told ISFI.
Notably, UEM Group recently established UEM Lestra to drive Malaysia’s decarbonization agenda in the green sector. The group is set to establish a RM7 billion (US$1.54 billion) Sukuk program to finance investments undertaken by the new subsidiary.
The yet-to-be revealed second phase of the NETR will focus on establishing the low-carbon pathway, energy mix and emission reduction targets. It will also further explore provisions of green financing through multilateral cooperation and targeted investments.
Also revealed in the NETR is the collaboration between the Malaysian Ministry of Finance and the World Bank where the parties are conducting a feasibility study for carbon pricing instruments.
Focusing on determining the carbon pricing instrument suitable for Malaysia, the viability of partnership for market implementation (PMI) and a PMI Readiness Support Plan, the study is expected to be completed in 2025.
In a sober account of Malaysia’s current standing in relation to renewable energy investments compared with its peers in Southeast Asia, Rafizi highlighted how the nation has been lagging in the past few years.
While Malaysia was among the earlier players in the renewable energy space in the region, its counterparts that started renewable energy projects much later have already matched or exceeded Malaysia’s installed capacity.
According to the minister, this is a result of past administrations not making the renewable energy industry a sufficiently profitable venture for businesses to undertake such projects.