Malaysia
Singapore
Philippines
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Kuala Lumpur – Malaysia’s solar energy sector is set for a banner year in 2025, driven by rising electricity costs, corporate sustainability commitments, and robust government initiatives. Solar engineering, procurement, construction, and commissioning (EPCC) players are expected to see their order books reach all-time highs, according to a research note by Kenanga Investment Bank Bhd.
Key Growth Catalysts
The surge in solar adoption will be fueled by several pivotal developments:
- Corporate Green Power Programme (CGPP): This initiative, with RM2.4 billion in EPCC contracts for an 800-megawatt (MW) capacity, will start contributing to earnings from the first quarter of 2025.
- Large-Scale Solar (LSS5): A new round of RM5 billion in EPCC contracts under the LSS5 scheme is expected to be awarded within the same timeframe.
Kenanga anticipates that Solarvest Holdings Bhd could emerge as one of the major winners in the LSS5 round, despite details about winning bids and bidders being withheld by the Energy Commission due to timing sensitivities.
Market Dynamics and Panel Pricing
The solar industry’s growth is further supported by a multi-year decline in solar panel prices, which have dropped to a historic low of 9 US cents per watt.
“This price point, now below production costs, reflects an oversupply in the solar panel market,” Kenanga noted.
However, the investment bank cautioned that many Chinese manufacturers are struggling under sustained price pressures. Some, such as Longi, Trina, and others, have already begun halting operations in Southeast Asia due to declining export outlooks and increased tariffs on Chinese solar panels in the United States, now at 50% from 25% as of August 1, 2024.
While the oversupply may ease in the long term, the bank predicts that solar EPCC players will continue to benefit from favorable margins through 2025.
Renewable Energy Certificates (RECs): A Growing Market
The demand for Renewable Energy Certificates (RECs) is also on the rise, driven by corporate commitments to sustainability, particularly the RE100 initiative, and by data centers seeking “green” status.
- Data Center Demand: Tenaga Nasional Bhd has received over 70 applications from data centers, with a combined demand of 11 gigawatts, which could generate RM1.1 billion annually in the REC market.
- Competitive REC Pricing: Solarvest offers RECs at a competitive US$5 to US$6 per megawatt, undercutting Tenaga’s US$10 per megawatt green electricity tariff.
Long-Term Outlook: Electrification and AI Integration
Kenanga emphasized that the long-term outlook for the solar industry is bright, with the electrification of the economy expected to triple current electricity usage by 2050. Key drivers include the shift to electric industrial processes and rising power demands from artificial intelligence (AI) technologies.
Sectoral Momentum Through 2028
“Government initiatives to expand solar quotas, combined with declining panel costs, are expected to sustain the sector’s growth trajectory until at least 2028,” Kenanga stated.
Challenges Ahead
While the outlook remains positive, challenges persist, including ensuring compliance with corporate sustainability requirements and navigating fluctuating international trade dynamics.
The confluence of rising electricity costs, sustainability commitments, and declining solar panel prices has positioned Malaysia’s solar energy sector for record growth in 2025. With continued government support and increasing corporate demand for green energy solutions, the country is poised to become a regional leader in renewable energy adoption.