Malaysia’s Power Sector May Require Up to RM95 Billion in Investment Over Next Decade

Malaysia’s power sector could require RM4 billion to RM5 billion in annual capital spending over the next five years, with total investment of up to RM95 billion over the next decade to meet rising electricity demand and replace ageing generation capacity, according to Moody’s Ratings.

The agency estimates that 14–17GW of additional installed generation capacity will be required over the next 10 years by Tenaga Nasional Bhd (TNB) and independent power producers (IPPs).

The estimate assumes that incremental demand will be met predominantly through firm gas-fired generation operating at a plant load factor of 50%–60%. However, Moody’s noted that investment requirements could be lower if a larger proportion of demand is met through solar generation combined with energy storage, given the declining cost of solar relative to combined-cycle gas turbine capacity.

Moody’s also highlighted the importance of timely power infrastructure development. Delays in commissioning new generation could compress reserve margins and affect supply reliability, while cost overruns or project delays could place pressure on the credit quality of TNB and IPPs.

In the near term, extensions of power purchase agreements with existing generators could help maintain electricity supply while new generation capacity is developed.

A major source of future demand is expected to come from data centres. Government projections indicate that data centres could account for 31% of total electricity consumption in Peninsular Malaysia by 2035, compared with 4% in 2025 and 6% in the first half of 2026.

Beyond incremental demand, Malaysia also faces significant generation replacement requirements. Around 13GW of generation capacity is scheduled to reach PPA expiry between 2026 and 2035, comprising approximately 7GW of coal-fired capacity and 6GW of gas-fired capacity.

The replacement of ageing assets will need to be managed alongside Malaysia’s energy transition objectives. Under the National Energy Transition Roadmap (NETR), the country does not envisage the development of new coal-fired power plants and intends to phase down coal generation in line with natural retirement timelines.

Sarawak is also pursuing opportunities to expand its electricity exports. Sarawak Energy Bhd aims for power exports to contribute 15% of revenue by 2030, up from around 4.5% in 2025, and is discussing the potential export of around 1GW of renewable electricity to Singapore via submarine cables.

According to Moody’s, the timing and scale of export-related earnings will depend on commercial arrangements, project execution and the development of cross-border transmission infrastructure.

Overall, Malaysia’s power sector faces simultaneous requirements to expand generation capacity, replace retiring assets and support the transition toward a lower-carbon electricity mix, creating substantial investment needs across generation and related infrastructure.