The renewable energy sector is set to experience unprecedented growth in engineering, procurement, construction, and commissioning (EPCC) revenues, with analysts predicting a surge in order books driven by large-scale solar (LSS) and Corporate Green Power Programme (CGPP) projects in the coming years.
According to TA Research, the sector’s growth trajectory will be underpinned by the rollout of 800 megawatts (MW) of CGPP projects and an anticipated record-breaking 2,000MW from the upcoming fifth round of the Large-Scale Solar (LSS5) initiative. These projects are slated for commissioning by the end of the 2025 financial year (FY25) and will extend into FY26 and FY27.
Falling Solar Module Prices to Drive Competitive Bids
A significant factor contributing to this optimistic outlook is the sharp decline in global solar module prices, which have fallen by over 60% since their peak in late 2021. These modules, which previously accounted for nearly half of EPCC costs during the LSS4 phase, have substantially reduced overall project costs.
TA Research estimates that EPCC costs have decreased by approximately 30% since LSS4, which is expected to result in lower tariff bids for LSS5 projects, ranging between 14 and 16 sen per kilowatt-hour (kWh). This marks a significant drop from the 20 sen per kWh average observed in LSS4.
However, the research house clarified that lower tariff bids should not be interpreted as reduced profitability for LSS5 projects. Instead, the cost efficiency brought about by cheaper solar modules is expected to maintain healthy margins for EPCC players.
The evaluation process for LSS5 bids has been concluded, and shortlisted bidders will be notified by the Energy Commission starting from December 23, 2024.
Expansion of the SelCo Programme Unlocks New Opportunities
In addition to the LSS initiatives, recent enhancements to the Solar for Self-Consumption (SelCo) programme have added further optimism. Announced by the Energy Transition and Water Transformation Ministry, these updates complement the existing Net Energy Metering (NEM) scheme.
While NEM allows excess solar energy to be exported to the grid in exchange for credits to offset power costs, SelCo is designed strictly for self-consumption. Both programmes primarily focus on rooftop solar installations, but NEM remains constrained by government-imposed quotas.
A key update in the SelCo programme is the inclusion of ground-mounted and floating solar configurations. This expansion opens up vast opportunities beyond rooftop installations, which currently account for only 16% of Malaysia’s solar capacity. In contrast, ground-mounted solar installations contribute a dominant 78% of total solar output, according to data from the Sustainable Energy Development Authority.
The broadened scope of the SelCo initiative is expected to reduce reliance on quota-driven programmes like LSS and CGPP, creating a more flexible and sustainable growth pathway for the renewable energy sector.
Sector Outlook: Overweight Rating Maintained
TA Research maintains an “overweight” rating on the power and utilities sector, citing factors such as demand-supply tightness in energy generation, a record-high renewable energy rollout, increased capital expenditure on grid infrastructure, and the anticipated commencement of Malaysia’s renewable energy exports.
The sector’s growth will be further driven by Malaysia’s ambitious National Energy Transition Roadmap (NETR), which targets a 70% renewable energy mix by 2050. Additionally, the rapid expansion of data centres is expected to fuel robust demand growth, underscoring the urgent need for new generation capacity.
Key Beneficiaries Identified
Within the EPCC sub-sector, companies poised to benefit include Samaiden Group Bhd, Solarvest Holdings Bhd, Sunview Group Bhd, and Pekat Group Bhd. Meanwhile, asset owners expected to gain from the LSS5 rollout include Tenaga Nasional Bhd, Malakoff Corp Bhd, and YTL Power International Bhd.
As Malaysia accelerates its renewable energy ambitions, stakeholders across the power and utilities sector are well-positioned to capitalise on what is set to be a transformative period for the industry.