KUALA LUMPUR: The government aims at the growth of renewable energy (RE) of the mix of production mix from the present 2% to 20% by 2025-2030, due to rising fuel prices for electricity supply.
This is in line with the Electricity Industry (ESI), which is now struggling with the rising global price of coal.
Eventually, this new target could provide more stable tariffs in the future, analysts say.
About 53% of Malaysian electricity comes from coal, 42% natural gas and the rest of hydro and RE.
The price of coal is currently above $ 100 per ton, which is an increase of more than 100% after it reached ten years in 2016 when it fell below US $ 50 per tonne.
The price increase since July has triggered the key in ESI's production costs as coal is 100% imported.
Over 60% of coal is purchased from Indonesia and the rest from Australia, South Africa and Russia.
The demand for coal in the next two years is expected to remain stable around the current levels, "said Hans van Cleef, ABN Amro's senior energy economist.
"Although newspaper headlines may indicate that coal demand will soon become the highlight, in reality, demand will remain strong in the coming years," he added.
To prepare for such a scenario, the industry has taken steps to achieve greater efficiency in electricity generation through coal power plants.
All new coal-fired power plants now use ultra-supercritical (USC) technology that burns less coal for more power while meeting emission standards.
Tenaga Nasional (TNB), 1,000 MW (MW) Power Plant Manjung 4, which began operations in 2015, is the first American US power company to produce coal for 2 million households with a 3% reduction in coal consumption.
Further, the government has established several mechanisms to increase renewable energy in electricity production, including Net Energy Measurement, Large Scale Solar (LSS), Green Sukuk Financing Scheme and Feed-in Tariff Mechanisms.
TNB has gone to the largest LSS park in the country with a 50MW project in Kuala Lumpur, Selangor, as well as several joint ventures in biomass and biogas plants.
TNB's latest venture is via its RE affiliate, where the company plans to offer the financing of self-generating packages for solar photovoltaic panels for residents by the end of the year.
These packages are already offered to commercial and industrial users.