Power Play: Malaysia’s Race to Electrify While Leading ASEAN’s Grid

alecasolutions
Jun 26
3 min read

Updated: Jul 4

Peninsular Malaysia Initiative	What’s Happening	Why It Matters for the Grid Race
4.6 million smart meters + 7.2 million myTNB users	Real-time usage data, bill tracking and apps	Puts digital demand-side control in citizens’ hands, a prerequisite for a responsive, trans-national grid
Grid modernisation upgrades	Sensors, automation, AI-driven dispatch	Hardens the network and enables cross-border power swings under the ASEAN Power Grid
PM Electrical Generation Capacity 2024	~16.3 GW	Capacity has increased due to demand growth of ~6% annually.
Data centres > 50 % of Peninsular demand by 2035	6–8 GW extra gas needed as a bridging fuel	Highlights urgency to balance reliability with clean-power goals while load soars
Hydrogen & ammonia pilots (Manjung, Jimah)	Co-firing trials with PETRONAS	Builds future-proof, lower-carbon baseload options once the regional hydrogen economy scales
Carbon-capture pilots	Capturing flue-gas CO₂ at legacy plants	Buys time to keep lights on without locking in unabated emissions
Time-of-Use tariffs	Price signals for off-peak consumption	Shifts demand curves, easing strain as variable renewables and interconnectors ramp up

Malaysia stands at a transformative moment in its energy history. The convergence of surging digital demand, geopolitical pressure for decarbonization, and regional energy integration is catalyzing a fundamental shift: from fossil-heavy energy generation to a diversified, interconnected, and cleaner power system. As the nation balances domestic energy security with ASEAN leadership ambitions, electrification and cross-border energy trade are becoming critical strategies.

The gas pivot: A transitional necessity

To meet the explosive demand from data centres that are projected to consume over 50% of Peninsular Malaysia's power by 2035, the government plans to expand gas-fired power capacity by 50% by 2030, adding 6 to 8 GW to the grid (Business Times, 2025). Natural gas, including LNG, offers a comparatively cleaner and more flexible baseload option to displace coal, especially as intermittent renewables scale.

However, this pivot is not without challenges. Analysts warn that Malaysia could become a net LNG importer within the next 5 years due to rising domestic demand (ALECA, 2025). Thus, gas serves as a bridge fuel, buying time for renewables and grid-scale storage to mature.

Coal phase-out: Cautious but committed

Malaysia remains reliant on coal for approximately 35% of its power generation. While the official roadmap doesn't set an immediate phase-out date, government policy is firmly against new coal-fired plants. The shift away from coal is being pursued through gradual decommissioning and replacement with gas and renewables, aiming for a pragmatic, secure transition (ALECA, 2025).

ASEAN power grid: Malaysia as a regional anchor

Cross-border interconnectivity is central to Malaysia's energy strategy. Key projects include the Sarawak–Singapore and Sarawak–Peninsular Malaysia transmission lines, as well as enhanced ties with Thailand and Indonesia (Dayak Daily, 2024). These initiatives form part of the ASEAN Power Grid (APG), a long-term plan to integrate electricity markets across Southeast Asia.

Malaysia is well-positioned to play a central role due to its geographic location and grid readiness. Sarawak, in particular, has emerged as a regional renewables hub, leveraging large-scale hydropower from Bakun and future projects like the Baleh dam.

In conclusion

Malaysia’s energy future is being defined not by a single technology, but by a strategic convergence of diversification, digitalisation, and regional cooperation. The pivot to natural gas offers a critical buffer as the nation cautiously phases out coal and ramps up renewable deployment. At the same time, Malaysia’s taken a leading position in the ASEAN Power Grid and its bold infrastructure push, especially through Sarawak’s hydropower and cross-border interconnectors. This places Malaysia as a central hub in Southeast Asia’s energy transformation.

Navigating this complex transition will demand steady policymaking, investment in innovation, and collaboration across borders. If successful, Malaysia won't just electrify its own economy, but ultimately help power the region’s clean energy future.