Malaysia’s energy transition should expand focus from cleaning supply to managing consumption
Energy efficiency (EE) is widely acknowledged as a low-hanging fruit to reduce fossil fuel dependence and decarbonise the energy sector.
Malaysia recognised the need for EE as far back as the 1979 National Energy Policy. However, EE was only introduced into the legal framework governing the electricity sector 22 years later via the 2001 amendment to the 1990 Electricity Supply Act.
Several piecemeal initiatives followed, such as the Efficient Management of Electrical Energy Regulations (EMEER) in 2008, the incorporation of EE guidelines into the Uniform Building By-Laws in 2012, and the Minimum Energy Performance Standards (MEPS) for appliances and lighting in 2013.
A concerted approach to EE was attempted in 2015 through the National Energy Efficiency Action Plan (NEEAP), which targeted savings of 8% in electricity demand growth over 10 years from 2016 to 2025.
NEEAP outlined strategies to enhance the role of EE across multiple sectors and identified barriers that impeded previous efforts, some of which – such as low energy prices and lack of financing – are hurdles even now.
It is challenging to determine the effectiveness of these EE initiatives because of the scarcity of primary data but secondary metrics suggest that the impacts have not been significant.
For example, the 2019 National Energy Balance indicates that electricity consumption from 2016 to 2019 exceeded the NEEAP baseline scenario by an average of 22%, while Malaysia’s energy intensity, in terms of electricity consumption per unit of gross domestic product, over that period was the same as the preceding decade.
In addition, the Energy Commission (EC) lists 525 entities nationwide that still did not comply with the 2008 EMEER as of 17 July 2023.
Catch-up game
Despite its limited historical impact, EE continues to be regarded as an important element in the energy landscape. The 2023 National Energy Transition Road map (NETR) rightly places EE as the first of six levers and targets energy savings of 22% by 2050. However, the benchmark for this long-term trajectory is not stated, making progress tracking difficult.
Six key EE initiatives identified in the NETR are enhancing public awareness, improving equipment energy standards, audits for large facilities, green building codes, streamlining financing and major retrofits for government buildings. Two additional measures earmarked as flagship projects are rail sector energy audits and enacting an EE law.
The need to strengthen EE legislation was, in fact, recommended in NEEAP. After an extended gestation period, its inclusion in NETR has provided the necessary impetus for the Energy Efficiency and Conservation Act (EECA) 2023 to be passed in the Dewan Rakyat on 10 October 2023. With this milestone, Malaysia has caught up with regional peers that have standalone EE laws, such as Thailand (1992), Vietnam (2010) and Singapore (2012).
EECA broadens the scope of applicability for the industrial and commercial sectors. The 2008 EMEER was limited to electricity and applied to large consumers utilising at least 3 million kilowatt-hours for six months, while the new act will now apply to facilities with a minimum annual consumption of 21,600 gigajoules across all forms of energy use. However, both these thresholds equate to the same value – an average monthly energy consumption of 1,800 gigajoules.
Facilities exceeding this limit will have to carry out energy-saving measures, including appointing a registered energy manager, implementing energy management systems, conducting energy audits, and reporting periodically to the EC. The new act will cover 1,500 industrial and 500 commercial facilities that consume 70% and 21% of sectoral energy respectively.
EECA also mandates energy intensity labelling and energy performance compliance for buildings more than 8,000sqm while strengthening efficiency standards for electrical appliances sold, manufactured or imported in Malaysia. Recognising the human capital needs for these initiatives, the act outlines requirements for certifying and registering energy managers, auditors and training institutions which form a crucial aspect of the ecosystem.
Non-compliance penalties include maximum fines ranging from RM 20,000 to RM 100,000 and/or a prison term not exceeding two years.
Not resting on laurels
Mitigating climate change by reducing greenhouse gas (GHG) emissions is the foundational driver of the global energy transition. Viewed through this lens, it is estimated that EECA, in its current form, could cut domestic carbon dioxide emissions by about 200,000 kilotonnes up to 2050, an average of 8,000 kilotonnes annually over 25 years.
This represents only 2.4% of Malaysia’s total GHG emissions in 2019 of about 330,000 kilotonnes.
EECA is a crucial piece of the puzzle for Malaysia’s energy transition goals but there are opportunities to move the needle further as the EE ecosystem matures. Since the law does not yet define the magnitude of energy savings that should be made, mechanisms to incentivise affected facilities based on this metric are worth exploring.
Tax rebates for EE measures implemented or conditional grants tied to future sustainability initiatives are examples that may help propagate a self-reinforcing cycle.
The savings from EE that can be realistically and economically achieved by facilities governed by the law will eventually plateau. This would necessitate the minimum energy threshold to be lowered progressively, broadening the scope of applicability and bringing more consumers that must implement EE measures into the fold.
While this would be a positive development, it must also consider the differentiated capabilities of large facilities, small-medium enterprises and even domestic consumers to comply with the legislation.
EECA should also evolve beyond the industrial, commercial, and domestic sectors. Emulating other Asean countries with similar legislation, the transport sector, as the second largest source of domestic emissions after electricity, should be considered the prime candidate for future inclusion within the ambit of the push for energy efficiency.
With NEEAP ending in 2025, it is timely for the next iteration to be developed within the framework of NETR and EECA. This should address the information gap of NETR by clearly articulating the expected trajectories of Malaysia’s energy consumption so that the effectiveness of EE measures can be objectively tracked.
To complement the legislation and action plans, EE awareness must also be reinforced via effective public engagement and given a prominent role in the Malaysia Energy Literacy Programme launched in March 2023.
In parallel with climate-centric messaging, the financial savings that could be realised by consumers via EE measures must also be highlighted, as this may resonate more strongly once the momentum of energy subsidy rationalisation intensifies.
The expeditious enactment of EECA soon after the launch of NETR is a positive indication that Malaysia’s energy sector is leaning in the right direction by beginning that journey with the maxim that “the cleanest unit of energy is the one that isn’t wasted”.
