Is the solar energy boom in Malaysia sustainable?

More auctions are needed to sustain growth, analysts say.

Analysts from BMI Research believe that whilst the sector’s short-term prospects remain sunny, more government auctions are needed to sustain the industry’s growth.

For instance, the country’s second competitive bidding round for large-scale solar photovoltaic (PV) projects was significantly oversubscribed. The target aggregate capacity for the February 2017 auction was 460 MW; however, it received over 1.6GW of submissions. This later culminated in a total of 563MW of capacity being awarded in December 2017.

“Recent developments within the Malaysian solar power sector attest to the fact that the renewables sector is becoming an attractive investment destination for renewables developers. The continuation of auctions in the country and the successful commissioning of the projects contracted presents a sizeable upside risk to our forecasts,” the report said.

Thankfully, Malaysia’s well-established solar manufacturing sector ensures that there is a reliable and low-cost supply chain for solar project developers.

“As a result, the project pipeline, notably for biomass and solar projects, is strengthening accordingly. The government’s commitment to the domestic renewables sector has strengthened of late, and a number of regulations have been put in place to encourage investment into the sector, including feed-in tariffs, tax incentives and, more recently, renewable energy auctions,” the report noted.

“We expect robust growth in non-hydro renewables capacity over the coming decade, with annual average growth rates of 8.5% between 2018 and 2027. This will result in non-hydro renewables capacity totalling 3.3GW by 2027,” it added.