Malaysia’s power sector is expected to require significant new investments over the next decade to meet rising electricity demand and replace aging infrastructure, according to a recent analysis by Moody’s Ratings. The estimate calls for between 14 and 17 gigawatts (GW) of additional installed generation capacity, translating to investment needs of up to RM95 billion.

The projection assumes that most of the new capacity will come from firm, gas-fired generation facilities operating at a plant load factor of 50% to 60%. However, Moody’s noted that medium-term investment needs could be reduced if a larger share of demand is met through solar power coupled with energy storage, reflecting the decreasing costs of solar technology relative to combined cycle gas turbine plants.

The report highlighted risks associated with potential delays in commissioning new power infrastructure, which could tighten reserve margins and affect supply reliability. Moreover, any cost overruns or project delays may exert pressure on the creditworthiness of Tenaga Nasional Bhd (TNB) and independent power producers (IPPs). To mitigate supply risks in the near term, extensions of power purchase agreements with existing generators are expected to play a supportive role while additional capacity is brought online.

Data centre electricity consumption is a key driver of long-term demand growth in Peninsular Malaysia, with the government projecting its share to rise sharply from 4% in 2025 to 31% by 2035. This surge has been accompanied by the introduction in 2025 of a separate tariff category along with demand-based charges for data centres, aimed at improving cost recovery from the sector.

To support the required expansion, capital expenditures are estimated to average between RM4 billion and RM5 billion annually over the next five years. In Sarawak, efforts are underway in line with the state’s Post Covid-19 Development Strategy 2030, which targets power exports to make up 15% of Sarawak Energy Bhd’s revenue by 2030, up from approximately 4.5% in 2025. Discussions are ongoing for the export of around 1 GW of renewable electricity to Singapore via submarine cables, though the timing and scale of such earnings remain dependent on commercial agreements and the establishment of cross-border transmission networks.

In addition to accommodating growing demand, Malaysia’s power sector faces the challenge of replacing a substantial amount of aging generation capacity to ensure continued supply reliability and meet long-term energy needs.