Malaysia is striving for energy transition and underwent a cabinet reshuffle on Tuesday (12/12). The previous Ministry of Natural Resources, Environment and Climate Change has been split into two departments, seen as an effort to enhance administrative efficiency and demonstrate a commitment to green energy development. Recently, officials have urged businesses to incorporate "decarbonization" into their long-term strategic development. However, they also acknowledge that the insufficient funding for upgrading the national power grid is the current major challenge.
On the first anniversary of his administration, Anwar Ibrahim reshuffled the cabinet for the first time. The Ministry of Natural Resources, Environment and Climate Change (NRECC) has been divided into the Ministry of Energy Transition and Public Utility and the Ministry of Natural Resource and Environmental Sustainability. Central News Agency reports Ted Lee, a researcher at the Merdeka Center for Opinion Research, said that the Anwar government identified the biggest financial burden on the country as petrol subsidies. Therefore, a focus on encouraging electric vehicle use and gradually reducing dependence on oil will be a key policy, especially with measures to address wealth inequality.
The newly appointed Minister of Natural Resource and Environmental Sustainability, Nik Nazmi Nik Ahmad, expressed in an interview with Nikkei Asia before the reshuffle that the government is attempting to communicate the concept of decarbonization to businesses. He mentioned that there is a widespread perception among them that achieving net-zero comes with high costs. Some businesses may say, "We don't need it; we are not big, international." According to Nik Nazmi, there is a need to change this mindset.
Nik Nazmi stressed Malaysia’s commitment to addressing climate change at COP28. (Photo: UNclimatechange)
Malaysia's power structure relies primarily on natural gas and oil. According to research data from Ember, a European environmental and energy think tank, in the year 2022, Malaysia's electricity generation was composed of 42% from coal, 38% from natural gas, 17% from hydroelectric power, with other renewable energy sources contributing a minimal percentage.
Nik Nazmi mentioned that the current design of the power grid is tailored for large power plants, such as coal or natural gas, allowing them to control electricity generation steadily. However, with the increasing integration of small and diverse power sources like solar energy, the grid should be redesigned. The associated costs are substantial, estimated to reach MYR 180 billion (about 385 billion USD) by the end of 2050, constituting about one-fourth of the total budget for energy transition.
The Anwar government plans to reduce electricity subsidies starting in 2024, raising rates for businesses and affluent households gradually. This aims to make the public gradually face the real costs of power supply. Besides curbing increasing electricity demand, encouraging conservation, and improving energy efficiency, the government aims to make investors clearer about electricity pricing. Additionally, there is an emphasis on encouraging grid development. The government also hopes to export renewable energy to Singapore, providing funds for updating the grid.
As Malaysia strives to expedite its energy transition, the government has raised its renewable energy supply target from 40% to 70% by 2050. Nik Nazmi also expressed the government's commitment not to build new coal-fired power plants, but acknowledged challenges and expressed the need for assistance from developed countries.