As part of the on-going effort to make the power industry more efficient and competitive, the Malaysian Cabinet had last month approved a 10-year master plan known as Malaysia Electricity Supply Industry 2.0 (MESI 2.0) to reform the power industry.

MESI 2.0 aims to liberalize the generation to distribution components of the power industry in Peninsular Malaysia as well as to better promote the use of green energy in Malaysia. The reforms include:

New Breed of Power Purchase Agreements (PPAs)

The government is doing away with the guaranteed capacity and energy payments that are commonly found in Malaysian PPAs. In addition, developers will be looking at PPAs with shorter tenures as opposed to the current 21-25 years fixed period.

Sourcing of Own Fuel

The introduction of this independent sourcing mechanism will hopefully allow for any cost-savings to be shared between IPPs and end consumers.

Third-party Grid Access

The transmission grid and distribution lines will be opened for third-party access (TPA) by non-renewable producers. To promote the increase of renewable energy in Malaysia’s energy mix, there will also be a quota of 100MW for renewable energy generators to directly sell the electricity generated to end buyers while Tenaga Nasional Berhad (TNB), being the owner of the grid, will be entitled to payment of certain access charges.

The abovementioned reforms will be scrutinized closely by both local and foreign investors with further details to be revealed over time. Overall, the gist of the reforms should be seen as a positive indication that the energy industry in Malaysia will continue to be a viable source of business opportunity.