Malaysia: Malaysian National Energy Policy 2022-2040

In brief

The Malaysian Government had, on 19 September 2022, launched the National Energy Policy 2022-2040 ("NEP") with the following objectives:

  • Enhancing macroeconomic resilience and energy security
  • Achieving social equitability and affordability
  • Ensuring environmental sustainability

In order to achieve these objectives, numerous action plans have been developed and laid out in the NEP and this client alert aims to provide an overview of the Low Carbon Aspiration 2040 initiative ("Aspiration") and highlight key action plans that would be of interest to all types of investors and companies intending to comply with environmental, social and governance (ESG) requirements. The NEP is a 'live document' and subject to periodic reviews every 3 years to ensure that the targets are achievable and to keep in line with international development in the energy transition space.


Low Carbon Nation Aspiration 2040

  1. As part of the NEP, the Malaysian Government had developed the Aspiration which is aimed at producing a low carbon economy with particular focus on:




a. Increase in urban public transport modal share



b. Increase electric vehicle (EV) penetration



c. Alternative lower carbon fuels in heavy transport

B5 blend

B30 blend

d. Usage of LNG as alternative fuels in marine transport



e. Increase in percentage of industrial and commercial energy efficiency savings



f. Increase in percentage of residential energy efficiency savings



g. Increase in total installed capacity of renewable energy (RE)



h. Reduction of coal in installed capacity



i. Increase in percentage of RE in total primary energy supply



  1. It is worth highlighting that one of the short-term implementation plan of the Aspiration is the creation of a new Energy Efficiency and Conservation Act ("EECA") which will set out minimum energy performance standards for a range of energy intensive industrial equipment, establish mandatory energy audits for certain categories of energy consumers (e.g. large industrial) as well as penalties for non-compliance.
  2. It is expected that the Aspiration will create significant positive economic development impact with a higher GDP of RM13 billion per year for Malaysia and the creation of approximately 207,000 new jobs. The Government also intends to introduce new initiatives to attract investments to spur the development of low carbon technologies to achieve the goals and targets of the Aspiration.

Source: National Energy Policy, 2022-2040

NEP Key Action Plans

1. Energy

  1. Long-term pipeline of large scale solar (LSS) projects to ensure domestic energy self-sufficiency and environmental sustainability.
  2. Incentivise dual-use-agri-voltaic solar farms to increase land productivity and environmental sustainability.
  3. Consider feasibility of the usage of floating solar including its synergy with hydropower.
  4. Extend net energy metering (NEM) to continue spur solar development prior to transitioning to an alternative form of compensation scheme.
  5. Increase capital access for distributed solar with rooftop solar aggregation and unlock attractiveness of distributed solar with P2P and virtual Power Purchase Agreements (VPPAs).
  6. Conduct studies to identify potential alternative energy supply such as waste-to-energy, 3rd generation bioenergy, solar thermal, ocean thermal, geothermal and wind energy in specific targeted regions.
  7. Match private sector investment with government grants especially in early proof-of-concepts as well as deployment and scale-up for high potential alternative energy supply sources.
  8. Identify bio-based resources strategy for energy and non-energy uses to utilise the advantage of having ample amount of bio-based feedstock.
  9. Improve the use of bioenergy for power generation (biomass or biogas plants) which may result in an increase of waste-to-energy projects, particularly to support cost-effective rural electrification.
  10. Improve the use of biofuels penetration in existing transport and industry uses.
  11. Invest in grid infrastructure upgrade and energy storage to accommodate greater variable RE penetration, including the digitalisation and modernisation of the power system (i.e. smart grids).
  12. Promote the implementation of green VPPAs to increase offtake choice to attract ESG investments (e.g. by RE100 companies).
  13. Undertake market reform studies in connection with electricity market liberalisation and a conducive third party grid access scheme.
  14. Invest into the timely expansion of cost-effective energy import infrastructure to improve security of supply.


2. Hydrogen

  1. Establish a clear framework and strategy to encourage the development of a hydrogen economy.
  2. Develop a domestic hydrogen ecosystem supported by research and development (R&D), technology deployment and commercialisation capabilities across targeted areas along the hydrogen value chain of production, distribution and end-use application
  3. Develop hydrogen specific regulation which applies to production, transportation and end-use applications. 


3. Carbon Footprint Reduction

  1. Encourage, and gradually mandate private sector carbon footprint accounting and reporting through internationally recognised standards.
  2. Permit voluntarily certify carbon footprint position through endorsed certification entites.
  3. Ensuring the natural gas infrastructure build out (for both physical and virtual pipeline systems) is strategic, timely and cost-effective.


4. Energy Vehicle

  1. Support the promotion of energy vehicles (EV) with investments, financing and capability building to enhance local EV manufacturing and supply chain ecosystem.
  2. Undertake focused planning and support with initial public-private funding to support charging infrastructure build out and other relevant physical enablers to achieve the desired EV penetration.
  3. Introduce regulations to assist in the development and adoption of EV.


5. Oil and Gas

  1. Continue the development of petrochemical hubs in Sabah (Sipitang Oil and Gas Industrial Park) and Sarawak (Bintulu Petrochemical Hub) to improve and strengthened Malaysia's natural gas advantage.
  2. Enhance the positioning of existing Peninsular petrochemical hubs such as Kerteh and Pengerang to create spillover effects to local supply chains and communities to boost socioeconomic development.
  3. Ensuring the natural gas infrastructure build out (for both physical and virtual pipeline systems) is strategic, timely and cost-effective.

Source: National Energy Policy, 2022-2040


The NEP has clearly laid out the roadmap for Malaysia to achieve the Aspiration targets by the year 2040, improve its socioeconomic position and is in line with its other policies to achieve net-zero greenhouse gas emissions by 2050.

Although the action plans laid out in the NEP are broad initiatives and does not specify specific timelines, it should still be regarded as a welcome sight for the industry participants who now have a clearer picture on how the Malaysian energy sector will shape up and what can be expected in the forseeable future. In time, we expect the Malaysian Government will (via the relevant Ministries and agencies) roll out detailed implementation plans for each of the initiatives set out in the NEP, including changes to the relevant regulatory framework and introduction of investment incentive mechanisms.

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This client alert was issued by Wong & Partners, a member firm of Baker McKenzie International, a global law firm with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner or equivalent in such a law firm. Similarly, reference to an "office" means an office of any such law firm. This may qualify as "Attorney Advertising" requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.

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