Power over grid: how Malaysia is surrendering its energy sector

Power generation is a strategic asset that shapes our living costs, industrial growth, national security and long-term fiscal and economic stability.

The recent long-term concession given to a China-based company to develop combined-cycle gas power plants on the East Coast is not a routine investment.

It is a test of leadership, and, so far, Malaysia’s energy governance has failed it.

That test matters because the Energy Commission (EC) has a new chairman, and the economy ministry a new minister.

Both now preside over a sector where speed has replaced energy security strategy, with expedience invoked to justify surrender.

The rationale offered is flimsy and all too familiar: foreign-owned data centres need reliable electricity, so Malaysia must rapidly expand its electricity generation capacity.

This logic is dangerously shallow. Power generation is not only about megawatts; it is a strategic asset that shapes our living costs, industrial growth, national security, and long-term fiscal and economic stability.

Handing it over through long-term concessions is not neutral policy. It is a decision with consequences that will last for decades.

Energy security is national security 

Malaysia’s electricity sector is often discussed in either technical or commercial terms. That is a big mistake because energy security is national security.

At approximately 27,000MW of installed generation capacity, Tenaga Nasional Berhad controls only about 52% of actual generation, with the remainder supplied by independent power producers (IPPs).

All electricity generated by IPPs is supplied to TNB’s grid, as TNB functions as the sole system aggregator.

With the exception of Sarawak, TNB retains its monopoly as the sole electricity supplier in Malaysia and owner of all transmission infrastructure. Yet despite this centralised grid control, pricing power does not rest squarely with TNB.

The price TNB pays independent power producers (IPPs) is not based on a transparent, publicly listed tariff per kWh. Instead, it is governed by individual Power Purchase Agreements (PPAs), many of them long-term and commercially confidential, structured around two components: capacity payments and energy payments.

PPA payment structure 

•  Capacity payments: These are fixed payments made to IPPs for making a defined generation capacity available to the grid, irrespective of whether the power is dispatched. Capacity payments cover fixed operating costs, debt servicing, and a pre-agreed return on investment. In effect, they socialise risk while privatising returns.
• Energy payments: These are variable payments tied to actual electricity generated and dispatched by TNB. Energy charges are largely driven by fuel costs, primarily coal and gas, which are passed through to TNB and ultimately to consumers via the Automatic Fuel Adjustment (AFA) mechanism.

Power generation, therefore, is not merely a utility function. It is a highly lucrative, contract-driven industry, insulated by long-term PPAs that lock in returns while transferring fuel price volatility and demand risk back to the government.

This is why the National Energy Transition Roadmap (NETR) must clearly define its role and play a meaningful function.

In combination with domestic investment policy preference, NETR can be designed to provide a potential platform for domestic companies to participate and provide growth for our future power generation.

But this is not happening.

The NETR speaks of decarbonisation, new capacity, and domestic capital market participation.

What it avoids confronting is whether Malaysia is deepening its structural dependence on external players — fossil fuel suppliers, technology vendors and foreign-owned generators — while local capability, system control and pricing sovereignty continue to erode.

Energy infrastructure under NETR is increasingly treated as a transactional asset class — something to be concessioned, outsourced or monetised, rather than as strategic national infrastructure that underpins economic resilience, political autonomy, and long-term security.

NETR: rhetoric without enforcement 

Malaysia’s NETR is cited as the guiding framework for the country’s future energy.

In practice, it has become policy cover for decisions that contradict its stated purpose.

What it does not enforce is sovereignty over profits, domestic capability over foreign outdated technologies, and local industrial development against foreign direct investments (FDIs).

Strategic generation assets are increasingly developed, financed or controlled by foreign entities. These cannot be considered as FDIs.

Local companies and SMEs are sidelined — denied opportunities to build expertise, expand supply chains or capture intellectual property.

What remains is dependence, not transition. Such poor decisions are not new. One only needs to recall the EDRA Energy debacle under 1MDB.

In that case, public funds were raised at high costs, and then used to buy ageing, inefficient power plants at inflated prices.

Malaysia paid heavily for assets that offered little domestic benefit, enriching external investors while local capabilities were ignored and stagnated.

The current concession mirrors the same pattern: national control traded for speed and perceived efficiency, with little oversight and minimal local gain.

A direct challenge to the new EC chairman 

The new EC chairman must answer plainly: is the commission a guardian of national interest, or a facilitator of expedient deals?

To date, it has behaved as the latter.

It has allowed foreign players to dictate generation planning around ad hoc commercial profits, while conditions on ownership, EPC participation and technology transfer remain unenforced.

Renewable energy, grid modernisation and energy storage should anchor forward energy planning — as stated in NETR.

Instead, Malaysia favours large projects mooted by foreigners that bypass local firms and generate minimal domestic spillover.

This is not a lack of capacity. It is a lack of regulatory will, and yet politicians continue to harp on Bumiputra participation and constant lack of equity among them.

Where is the economy ministry? 

The economy ministry exists to align sectoral decisions with long-term economic strategy.

However, in the energy generation sector, it has been conspicuously absent.

Three absences define the failure: sovereignty, capability building and strategic coordination.

Malaysia does not suffer from a lack of capacity. It suffers from a loss of control.

Until NETR places energy sovereignty, domestic capability building and public interest risk allocation at its core, it risks becoming yet another policy framework that optimises returns for foreign investors while locking the nation into decades of strategic vulnerability.

Such responsibility sits squarely with the EC and the economy ministry.

The new EC chairman and economy minister now have a narrow window to signal an important change in this power policy. - FMT

The author can be reached at: rosli@mdsconsultancy.com

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.