Potential CRESS Charge Reduction Could Unlock New Solar Opportunities in Malaysia

A potential reduction in the System Access Charge (SAC) under Malaysia’s Corporate Renewable Energy Supply Scheme (CRESS) could improve the economics of renewable energy projects and create additional opportunities for solar engineering, procurement, construction and commissioning (EPCC) companies, according to UOB Kay Hian Research.

Based on channel checks cited by the research house, the SAC for firm renewable power backed by battery storage could potentially decline from RM0.20/kWh to RM0.15/kWh.

UOBKH Research said the reduction could improve project returns and encourage new contract awards, particularly as the market awaits further CRESS project opportunities from data-centre operators.

Under current assumptions, a 15-year CRESS agreement based on a RM0.20/kWh SAC would generate a project internal rate of return (IRR) of approximately 7%. A RM0.05/kWh reduction in the charge could increase project IRR to around 9%, potentially making long-term CRESS agreements more attractive to solar EPCC players.

The research house noted that solar is expected to be the fastest-growing energy source in Malaysia’s energy mix through 2035, supported by the country’s renewable-energy policies and its target of achieving net-zero greenhouse gas emissions by 2050.

Data centres are expected to be a major driver of CRESS demand. The Data Centre Task Force under the Malaysian Investment Development Authority requires new data-centre developments to source at least 30% of their electricity consumption from renewable energy.

Based on Tenaga Nasional Bhd’s 13GW data-centre project pipeline, approximately 4GW of new renewable capacity could potentially be developed through the CRESS pathway.

At an estimated capital expenditure of RM3.5 million per MW, this could translate into a potential RM14 billion order-book opportunity over the next decade, with Johor and the Klang Valley expected to be key data-centre clusters.

The grid system operator expects peak electricity demand to increase by around 50% by 2035, driven largely by data-centre development. To meet this growth, solar capacity is expected to expand significantly over the coming decade.

For solar EPCC companies, the increasing renewable-energy requirements of data centres could therefore provide opportunities for order-book replenishment and support medium-term business growth, subject to the development and awarding of CRESS projects.