KUALA LUMPUR: Malaysia's power sector is flushed with a strong visibility of renewable energy (RE) pipeline under the latest large scale solar (LSS) and net energy metering (NEM) programmes over the next 12-24 months.
Analysts estimate that the latest large scale solar (LSS) and NEM programmes will translate into RM7.2 billion-RM8.4 billion worth of engineering, procurement, construction and commissioning (EPCC) jobs.
Last week, Energy Transition and Public Utilities Minister Datuk Seri Fadillah Yusof announced a cumulative 2.8 gigawatts (GW) of new RE quotas.
This included a 2GW allocation for Malaysia's fifth LSS photovoltaic programme which will be open for bids soon. A developer can bid for up to 500MW.
Another initiative was Low Carbon Energy Generation boasting 400MW through the New Enhanced Dispatch Arrangement mechanism for non-solar energy such as wind, minihydro, biogas, biomass and hydrogen, among others.
The 400MW quota under the NEM mechanism, meanwhile, comprises 100MW for the household segment and another 300MW for the commercial and industrial segment.
"The 2.4GW combined solar quota under the latest LSS and NEM program translates into an estimated RM7.2-8.4b worth of EPCC jobs which we expect to be tendered out in the next 12-24 months," MIDF Research said.
Big players within the utilities sector such as Tenaga Nasional Bhd and YTL Power International Bhd are likely to come in as anchors in their consortiums, especially for larger capacity bids, rthe firm added.
"One of the key changes in the latest LSS is the rise in capacity bid limit to 500MW which is five times the previous 100MW limit for LSS3 and 10 times the 50MW limit for LSS4."
A project of such size could entail a huge capital expenditure of some RM2 billion-RM2.3 billion which requires fairly demanding balance sheet capacity, it said.
MIDF Research, however, noted that the prior LSS winners also included non-utilities players from the property, plantation and construction sectors.
Landowners could come in as strategic partners given the huge requirement for landbank as a 500MW solar farm is estimated to require at least 2,000 acres of total landbank.
"It is uncertain at this point if the regulators will allow multiple locations for each LSS bid pending official details of the program," the firm said.
It highlighted that one of the key pain points in prior LSS programmes was the excessive competition to supply energy to a single buyer which has driven down returns to single-digit levels.
The Corporate Green Power Programme (CGPP) model is viewed to be a more liberalised model allowing players to seek their own offtaker, thereby allowing better price discovery in the market.
"Having said that, we also take note of the fact that the CGPP are essentially exclusive arrangements between solar power producers and their offtaker that requires a fair allocation of grid upgrade costs (to accommodate more injection of intermittent RE sources to the grid), which is currently absent.
"Once such fair cost allocations and third-party access to the grid (TPA) are established, we believe a more liberalised model for large scale RE could be expected," MIDF Research said.
Hong Leong Investment Bank Bhd (HLIB) expects the cumulative RE quotas to uplift the sector and for stocks under its coverage namely Solarvest Holdings Bhd and Samaiden Group Bhd.
"This sets in motion the government's 2050 70 per cent RE share target as outlined in the National Energy Transition Roadmap unveiled last year.
"In our view, the key highlight was the comeback of LSS5 with a significantly larger quota size of 2GW (2.4 times larger than LSS4 awards).
"We are conservatively estimating solar EPCC opportunities of about RM7 billion from the LSS5 programme," it said in a note.
Quota awards for LSS5 could come in the first half of 2025 with EPCC contracts to be formalised thereafter, HLIB said,
"It is unclear if foreign participation limits will still be in place as it was with LSS4 considering the increased scale. Nevertheless, we reckon with panel prices continuing to decline (US$11 cents per watt) bid tariffs could reach a new low," it said.
Meanwhile, RHB Research identified EPCC solar players to benefit from the Integrated Clean Energy programme as it will inject a potential RM5 billion worth of contract opportunities.
Key beneficiaries included Solarvest, Samaiden, Sunway Group and Pekat Group.
Reservoir Link Energy Bhd stands to benefit from sub-contracting jobs and more mounting structure orders.
"With the allocation to a single developer of up to 500MW, we believe this will attract more established players with strong war chests such as TNB and Petroliam Nasional Bhd/Gentari to participate more aggressively.
"Other potential winners will be asset owners of past LSS rounds, given their track records. Previous winners include Advancecon Holdings Bhd, Ranhill Utilities Bhd, Uzma Bhd, JAKS Resources Bhd, Gopeng Bhd and TNB," RHB Research.