Malaysia Cuts Clean Energy Tax to Speed Up Transition

In a move aimed at accelerating Malaysia’s shift to clean energy, the government will remove the 1.6% surcharge from electricity bills for power sourced through certified green energy programs starting August 1, 2025.

The announcement was made by the Ministry of Energy Transition and Water Transformation (PETRA), which said the decision is part of broader efforts to encourage more businesses and households to embrace renewable energy while strengthening the country’s green energy ecosystem.

“The government has approved the exemption of the 1.6% Renewable Energy Fund (KWTBB) surcharge from electricity tariffs for renewable energy initiatives under this Ministry,” PETRA stated in a press release on Wednesday.

The KWTBB levy, introduced in 2011, was designed to fund the Feed-in Tariff (FiT) system managed by the Sustainable Energy Development Authority (SEDA) Malaysia. Since its inception, the country’s renewable energy capacity has surged from just 5 MW in 2011 to 5,100 MW today, primarily driven by solar power. Additional contributions come from biogas, biomass, and small hydro sources, which collectively provide 855 MW.

With new electricity tariffs set to be implemented on July 1, 2025, PETRA conducted a review of ongoing renewable energy initiatives and decided to exempt electricity supplied under three main programs from the levy:

• Green Electricity Tariff (GET)

• Corporate Renewable Energy Supply Scheme (CRESS)

• Community Renewable Energy Aggregation Mechanism (CREAM)

  
  

The levy exemption will officially begin on August 1, 2025, and is expected to further incentivize corporate and industrial players to participate in Malaysia’s energy transition efforts.

PETRA expressed optimism that the policy shift would support the nation’s goal of achieving 70% renewable energy in the electricity mix by 2050, while also stimulating a more vibrant and future-ready green energy industry.

“This measure is aligned with our long-term responsibilities to future generations and reflects the core principles of Malaysia MADANI,” the ministry added.