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IDEAS: Rethink National Energy Policy; Replace coal with gas and turbo-charge renewables

  • As Malaysia plans the next phase of its energy policy, it will need to increase the share of sustainable energy whilst trying to balance other demands of access, affordability, and job creation.
  • Malaysia has made progress towards reducing emissions and increasing the share of renewables but has also increased its use of coal in recent years and is not on track to achieve the Paris Climate agreement targets
  • IDEAS recommends replacing coal with gas in the short term while taking ambitious steps to adapt and seize the opportunities of the transition to renewables and reduce the overall dependency on fossil fuels

Kuala Lumpur, 1 October 2020 IDEAS has published Policy IDEAS No. 64, “The Future of Malaysia’s Energy Mix”, co-authored by IDEAS Senior Fellow, Renato Lima-de-Oliveira and Mathias Varming. The paper notes that Malaysia has a diverse energy mix as a result of successive energy policies. In recent years this has included increased use of renewables but also significant increase in the use of coal.

The paper argues that natural gas is the superior choice to coal, since it is less polluting and is better suited to the role of supporting renewables, since it is cheaper to cycle up gas-fired plants to support intermittent renewables. However, the authors note that this will not be enough to sustain the energy transition for Malaysia. The paper therefore recommends further bold polices to adapt the business and fiscal landscape to prepare for the transition and to seize the new opportunities the transition can bring. Policies the government should consider include incentivising oil and gas players to diversify into renewables, reduce government reliance on fiscal revenues from oil and gas and supporting development of new renewables, for example through higher penetration of intermittent renewables by adopting smart grids with real-time pricing.

Malaysia has signed up to ambitious carbon reduction targets as part of the UN Framework Convention on Climate Change (UNFCC) in Paris 2015. Malaysia has made progress towards its targets, but ambitious further policies are needed to meet the commitments in full. More broadly, Malaysia’s energy transition faces a number of challenges. Although the price of solar power has fallen dramatically, supply is variable and intermittent. Malaysia’s options for dispatchable renewable energy are hampered by a lack of infrastructure and technology. Therefore, conventional fuels – coal and natural gas – will continue to play a role in Malaysia in the medium term.

Commenting on the release of the paper, IDEAS Senior Fellow Renato Lima-de-Oliveira said that “As Malaysia plans the next phase of its energy policy it needs to think strategically about the changing energy landscape and how best to adapt to and seize the opportunities of the transition. Replacing coal with gas is a low hanging fruit – beyond that, Malaysia needs to pivot its strengths in O&G into renewables and reform the energy framework to further promote the use of renewables.”

The paper, “The Future of Malaysia’s Energy Mix” can be downloaded here.

*Note to editors: The paper will be discussed at a public webinar on Friday 2nd October 2020, 3.00pm. The discussion will be streamed live at


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2020-10-16T16:47:38+08:00 1st October 2020|Media Statements|Comments Off on IDEAS: Rethink National Energy Policy; Replace coal with gas and turbo-charge renewables