Malaysia must accelerate renewable energy deployment and strengthen grid flexibility ahead of planned coal retirements to prevent the country’s transition from coal becoming an unintended shift towards greater dependence on gas, according to a recent World Economic Forum (WEF) report.
The insights report, Beyond Coal: Building a Flexible, Resilient and Clean Power System for Malaysia, said the country had established strong foundations for an orderly transition away from coal, including a commitment not to build new coal-fired power plants and a target to completely phase out coal power by 2044.
But the pace at which renewable energy and other clean power resources are brought online will be critical as ageing coal plants begin to retire from the end of this decade.
The report identified scaling up renewables “to take over from coal rather than gas” as one of the key priorities for Malaysia’s energy transition, alongside investments in energy storage and grid upgrades to integrate increasing volumes of variable renewable energy (VRE).
Malaysia’s electricity system remains heavily dependent on fossil fuels. In 2024, coal accounted for 32.3 per cent of installed capacity, or 13.1 gigawatts (GW), while gas accounted for 37.6 per cent, or 15.3 GW. Solar represented 10.3 per cent, or 4.2 GW, while hydropower accounted for 15.6 per cent, or 6.3 GW.
Under the National Energy Transition Roadmap (NETR), Malaysia aims to increase renewable energy capacity, including hydropower, from around 13 GW in 2025 to 68 GW by 2050, with renewables making up 70 per cent of installed capacity.
The WEF report said achieving this target would allow Malaysia to capitalise on its natural resources and develop cheaper and more sustainable sources of electricity, while reducing exposure to fuel import costs and price volatility.
However, the transition will take place against a backdrop of rapidly rising electricity demand. Power consumption in Peninsular Malaysia is expected to grow by about 4.5 per cent annually in the medium term, driven by economic and population growth, electrification, rising cooling demand and data centre investment.
Data centres alone could account for around 11 per cent of Peninsular Malaysia’s peak electricity load by 2035, according to estimates cited in the report.
This creates a risk that retiring coal capacity could be replaced by gas-fired generation if renewable capacity and system flexibility do not expand quickly enough.
Gas had been earmarked as an interim source of firm and balancing power as coal is phased down. But greater reliance on gas could expose Malaysia to both emissions and supply risks, particularly as domestic gas reserves decline in Peninsular Malaysia and the country becomes more exposed to liquefied natural gas (LNG) imports.
The disruption to the Strait of Hormuz earlier this year has further highlighted the vulnerability associated with reliance on imported LNG, the report said.
Turning coal sites into clean energy assets
One of the report’s key recommendations is for Malaysia to establish a National Coal Site Repurposing Framework to accelerate the conversion of retiring coal power sites into clean energy hubs.
Existing coal sites could be repurposed for technologies such as solar power and battery storage, allowing Malaysia to make use of existing grid connections and other infrastructure while minimising disruption to electricity supply.
WEF described coal site repurposing as a potential “no-regrets” solution, particularly as a number of plants are already scheduled for retirement.
Repurposing could offer a way to accelerate renewable energy deployment while helping address one of the central challenges of the transition: ensuring sufficient clean power and system flexibility are available when coal capacity comes offline.
It also recommended that Malaysia ensure renewable energy availability “leads coal retirements”, rather than allowing coal capacity to be replaced primarily by gas, calling for stronger system flexibility through energy storage, grid upgrades and other measures that can enable greater integration of VRE.
The report’s nine strategic recommendations extend beyond simply replacing coal with renewables.
They also include using coal-flex, where appropriate, to support the integration of VRE and avoid gas substitution; unlocking financing for coal repurposing and early retirement; and using fuel blending as a transitional option to contribute to the coal phase-down.
It also recommended managing gas as a transitional fuel while avoiding long-term lock-in.
Over the longer term, there are two potential ways for Malaysia to reduce its reliance on gas for firm and balancing power. First, through greater regional integration through the Asean Power Grid (APG) and also tapping into nuclear energy.
The APG could allow Malaysia to draw on regional electricity resources to manage variability and balance the system, while nuclear could provide a source of firm, low-carbon electricity if it becomes a viable option for the country.
The report added that Malaysia’s regional leadership could be leveraged to advance the APG, progressively reducing the need for gas as more renewable energy comes onto the system.
The transition away from coal therefore presents Malaysia with a broader opportunity to redesign its power system around renewables, storage, stronger grids and regional interconnection, rather than simply changing the fossil fuel mix.
With coal retirements beginning in earnest from 2029, the sequencing of these investments will be crucial to ensuring that the country’s shift away from coal strengthens rather than undermines energy security.
