This article first appeared in The Edge Malaysia Weekly on August 22, 2022 - August 28, 2022

The transition to a low-carbon economy requires a greater reliance on renewable energy. But this shift is not straightforward, as it means grappling with the intermittent nature of renewable energy resources, which could threaten the stability of the grid.

At the same time, reliance on fossil fuels to generate energy will shove the world deeper into the impacts of climate change. Having diverse sources of energy is also important. Many countries are now struggling with energy security, following Russia’s invasion of Ukraine, as they were reliant on natural gas from Russia. 

These are challenges that Malaysia has to address in its efforts to ensure energy security for its people while sticking to its climate commitments. The growing demand for energy is another factor.

Energy demand growth in the region is expected to be between 1.5% and 1.7% annually, says Datuk Fazlur Rahman Zainuddin, chief strategy and ventures officer at Tenaga Nasional Bhd.

To meet that demand, there must be investments in power generation and network systems, he says. In Malaysia, the Energy Commission looks at energy demand growth projections and plans the right energy mix to meet that demand. 

The network system has to be expanded to meet higher demand as well as accommodate new energy sources and technologies. 

“It has to be ready for new types of energy sources of the future, namely renewable energy, and, on the customer demand side, trends such as the growing demand for electric vehicles. Network players have to support all of that,” says Fazlur.

“We are talking about a RM7 billion to RM8 billion annual investment over the next three years for what we call ‘the grid of the future’, or smart grid. That will enable the energy transition.”

The good thing is that Malaysia’s grid is quite secure because of its high energy reserve margin, observes Davis Chong, president of the Malaysian Photovoltaic Industry Association (MPIA). Currently, however, renewable energy does not comprise a huge portion of the energy mix. According to the Malaysia Renewable Energy Roadmap (MyRER), the share of renewable energy (excluding hydropower) in 2020 in installed capacity was just 8%. 

Chong believes that Malaysia should speed up its adoption of renewable energy, while taking into account the energy trilemma of sustainability, affordability and security. 

He says affordability is the factor that is slowing down the adoption of renewable energy, and that energy subsidies have made renewable energy unattractive in comparison. 

“In countries such as Singapore, Thailand, Vietnam and the Philippines, the affordability gap is there, whereby the use of renewable energy or solar panels will translate into a lot of savings,” says Chong. 

It is not that Malaysia does not have plans to incorporate more renewable energy into its energy mix. While there is the MyRER, which was commissioned by the Sustainable Energy Development Authority (SEDA), Chong believes the renewable energy targets could be more aggressive. 

The MyRER sets out to displace coal with renewable energy and natural gas. The renewable energy share in the capacity mix (including hydropower) is to increase to 40% by 2035, while natural gas will increase to 41%. The percentage of coal will drop to 18%. 

Chong says coal should be taken out of the mix completely and substituted with natural gas. More renewable energy sources such as solar, hydropower and biogas should be added.

“Using hydropower as the battery bank of the grid is possible, as we consider it to be a form of clean energy. Natural gas can be used as a backup during the energy transition, which means we can add more renewable energy into the mix,” he says.

“This is what we should do to balance between energy security, affordability and sustainability. The MyRER is moving in the right direction, but it really can be more aggressive [on renewable energy goals].”

Darshan Joshi, climate consultant affiliated with The Asia Foundation and the World Bank, believes carbon pricing can help the nation balance the use of renewable and non-renewable energy. 

It is a misconception that carbon pricing aims to eradicate the use of fossil fuels in favour of renewable energy and other low-carbon technologies, says Darshan.

Carbon pricing simply applies a monetary cost to the economic damages from carbon emissions. It is a way of saying that these emissions, which cause climate change, have a cost to it. The consequences include rising temperatures and flooding. 

“Instead of having society bear the costs of these emissions, carbon pricing shifts the burden to companies and other entities that cause these emissions,” he says.

Carbon pricing also levels the playing field between low-carbon and carbon-intensive solutions. Generating electricity from coal, for example, becomes more expensive when there is a carbon tax or emissions trading scheme in place.

“Producers of electricity or prospective producers of electricity will thus have an incentive to shift [energy] production from coal to renewable energy where possible, as long as it is more profitable to generate energy from renewable sources. But it does not mean there are zero profits to be made by generating electricity from coal or even natural gas. It just becomes less competitive than renewable energy,” says Darshan.

“And if the price of carbon is set at the scientifically established level based on calculations of the social cost of carbon, which has been estimated at US$50 per tonne of carbon dioxide in 2020, we are then implicitly striking this balance between the economic benefits and environmental costs of fossil fuel use.”

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