Understanding Why the Lift on Export Ban on Renewable Energy Matters
Malaysia has decided to lift the export ban on renewable energy. After initially placing a ban in October 2021, this leap of change brings improvement in the country’s renewable energy sector. The lift will allow Malaysian companies to export their electricity to other countries, including Singapore. During the meeting, the Malaysian Government also agreed on a targeted 70% renewable energy mix by 2050.
This would require an eleven-fold increase compared to the current capacity. The previous 40% target by 2035 was set in late 2021. While the details of the renewable energy trade mechanism are yet to be announced, additional policy frameworks and incentives will be unveiled in the upcoming months. The Minister emphasised a step-by-step approach for smooth implementation and consistency in focusing on energy transition projects, incentives, frameworks, and easing regulations.
A Win-Win Situation for Countries All Around
According to an equity research analyst at Maybank Investment Bank, lifting the export ban on renewable energy would allow Malaysian renewable energy providers to generate more revenue beyond the market rates via the existing power purchase agreement system. This would subsequently open up more room of avenue for renewable energy players.
Malaysia depended heavily on fossil fuels and income from oil and gas-related activities for years, constituting over 15% of government revenue. However, there is a growing realisation to reduce this dependence gradually. The development of the renewables sector is could demand investments of up to 637 billion ringgit. This includes funding for new renewable energy sources, grid infrastructure, energy storage systems, and grid operation costs.
Why Is Singapore Rejoicing this Export Ban Lift?
The lifting of the export ban on renewable energy received a warm response in Singapore. The Energy Market Authority aims for 30% renewable energy imports by 2035. Due to the neighbouring countries’ export bans, Singapore resorted to importing hydropower from Laos and solar power from Australia using undersea cables stretching over a whopping 4,000 kilometres.
Amidst the opportunities, challenges emerge. Energy Institute’s Godfrey emphasised removing direct and indirect subsidies in conventional energy value chains to support renewable energy. Asia CarbonX Change’s Johl added that Malaysians should consider affordable renewable energy options from other regional countries. For example, such as Vietnam’s renewable energy certificates are below US$1. He emphasised that addressing inter-country regulatory challenges, inadequate utility infrastructure, and market risks needs ASEAN’s joint effort in order to enhance electricity connectivity.
What This Means for the Future of ASEAN
Malaysia’s decision to lift its renewable energy export ban marks a significant milestone for Singapore and the ASEAN region. It creates opportunities for Singapore to achieve its renewable energy targets and promotes greater cooperation in cross-border energy trade. However, addressing challenges such as subsidies, regulatory hurdles, and infrastructure gaps will be crucial to capitalise on these opportunities fully. With a united effort and collective determination, ASEAN can pave the way for a greener future for the entire region.
Start a Company in Malaysia Today
Discover the impact of Malaysia’s lifted export ban on renewable energy. Aiming for a 70% renewable energy mix by 2050, the move opens avenues for Malaysian providers and aids Singapore in reaching its targets. Embrace the opportunities for a greener future in the ASEAN region by contacting 3E Accounting.
