Malaysia Power Sector and Grid Modernization

A recent influx of data center investments in Malaysia, led by U.S. firms, could increase electricity demand by 11,000 megawatts (about 40 percent of Peninsular Malaysia’s installed capacity). As these firms look to reduce their global carbon footprint, their data centers will need electricity generated from renewable energy (RE) sources.

In September 2024, Malaysia introduced guidelines for the Corporate Renewable Energy Supply Scheme (CRESS) as part of its goal of achieving 70 percent RE in the national power generation mix by 2050. CRESS aims to liberalize the power sector by allowing RE producers to directly negotiate electricity tariff rates with corporate customers. The state-owned utility company will operate the power grid, connecting suppliers and consumers, and impose a system access charge. A lower access charge will apply if the RE producer provides ‘firm electricity output’ by integrating battery storage and other technologies to stabilize its power supply.

Peninsular Malaysia’s power utility company, Tenaga Nasional Berhad (TNB), wants to increase both the flexibility and the robustness of its grid. This will be critical as more RE capacity comes online and more users buy and sell electricity off the grid. It also aligns with a regional plan to establish cross-border electricity trading infrastructure with neighboring Thailand and Singapore.

A few days after the CRESS introduction, TNB announced it would invest $10.3 billion between 2025 and 2027 to enhance the national grid infrastructure. Investments would go towards grid modernization, accommodating RE power, connecting new power generation projects to the grid, meeting large demand growth, customer service enhancement, and grid resilience.

U.S. firms offering smart grid technologies, advanced metering infrastructure, battery storage technology, cybersecurity, advisory services, and engineering expertise in grid modernization could play a key role in this emerging sector. If you represent a U.S. company and want to learn more, please contact Commercial Specialist Mohan Gurusamy at office.kualalumpur@trade.gov.