TNB Energy Transition Conference 2023 addresses the urgency in the energy industry’s transition journey while navigating the delicate balance between the energy trilemma: security, sustainability and affordability. Expert speakers emphasised the need for transformative measures and diversified investment in sustainable technologies whilst acknowledging the inherent tradeoffs in the transition. Accelerating a responsible energy transition is a collaborative effort requiring strong partnerships between public, private and philanthropic sectors to solve challenges and maximise opportunities.
Climate change is no longer a far-off threat – it is an ongoing disaster that is already affecting many weather and climate extremes in every region across the globe. Without urgent action, scientists warn that destructive weather events like heatwaves, wildfires, droughts, floods, and tropical cyclones will only become more frequent, bringing unprecedented destruction to both people and the planet.
Fossil fuels like coal, oil and gas are by far the largest contributor to global climate change, accounting for over 75% of global greenhouse gas (GHG) emissions and nearly 90% of all carbon dioxide (CO2) emissions . As the world races to mitigate the impacts of climate change, a swift and broad transition to a net-zero emissions energy system is no longer optional but is now inevitable.
With impending risks from climate change to human health, infrastructure, food and water security, as well as the biodiversity of our planet’s ecosystems, there is no other choice but to develop scalable, affordable, and reliable alternatives to fossil fuels. The clean energy transition will be essential for limiting global temperature rise to well below 2 °C, as per the goals of the Paris Agreement.
To accelerate Malaysia’s own energy transition efforts, Prime Minister Anwar Ibrahim has initiated the complete unveiling of the National Energy Transition Roadmap (NETR) at Tenaga Nasional Berhad’s (TNB) inaugural Energy Transition Conference. This comprehensive roadmap will be vital for steering Malaysia’s shift from a traditional fossil fuels-based economy to a high-value green economy.
Inspired by the NETR announcement, expert speakers at the conference highlighted the need for bold, transformative measures that reflect the urgency of the energy transition. During a plenary session, Humayun Tai, Senior Partner and Leader of McKinsey’s Global Energy and Materials Practice, warned that the world is still far from meeting its global emissions reduction targets.
With global energy-related CO2 emissions reaching a new high of more than 36.8 billion metric tonnes last year, there is a rapidly closing window of opportunity to secure a liveable and sustainable future for all. According to Tai, bold choices and actions implemented in the next decade will be instrumental in setting the tone for many decades to come.
“If you want to reduce transport emissions, for example, spending money over the next decade to develop the electric vehicle (EV) infrastructure is critical to sustain and propel business models that drive the EV industry from 2030 to 2050. The same goes for carbon capture technologies, it takes time to build the reservoirs and get them into place by 2040 or 2050. So, this decade becomes critical”.
However, Tai also acknowledges the need to address perceived trade-offs and risks that come with the clean energy transition – especially for emerging economies in Asia that remain highly reliant on coal for power generation. These countries have the challenging task of decarbonising their energy sectors while simultaneously satisfying the increasing demand for electricity.
Ensuring a reliable and resilient energy system requires careful management of the energy trilemma: security, sustainability, and affordability. Managing this trilemma involves a delicate balancing act with a mix of policies, innovations, and investments that aim to harmonise these three objectives to the greatest extent possible while acknowledging the inherent trade-offs.
As such, the energy system pathway outlined in the NETR is designed to accelerate Malaysia’s energy transition journey while safeguarding energy security, energy equity, and socioeconomic development. Coal will be close to fully phased out, with natural gas (which emits up to 50% lower CO2 emissions than coal ) set to play a significant role, accounting for 56% of the total primary energy supply by 2050.
Moving forward, Malaysia will look to reduce its dependence on natural gas by further scaling up renewable energy (RE) capacity and exploring potential non-carbon energy sources. Energy efficiency initiatives will also be pursued, particularly from demand side management, which includes optimising energy consumption across commercial, residential, and transport sectors to prevent energy wastage.
Due to the investments required to rapidly increase RE’s installed capacity within the country’s power generation mix, Malaysia is expected to face higher energy system costs by 2050. Such an increase is inevitable given the potential scenario of higher reliance on natural gas imports, following the projected diminishing of Malaysia’s natural gas reserves by 2050.
Although higher system costs are to be expected, the NETR’s responsible transition pathway is poised to catalyse growth in nascent areas such as green mobility ecosystems, RE, energy storage, and alternative new energy ecosystems. Taking a pioneering role in these emerging areas will enhance Malaysia’s competitive edge, which will yield positive outcomes for both GDP and job creation.
Indeed, if Malaysia successfully undertakes the transition pathway laid out by the NETR, it could generate additional GDP amounting to RM220 billion and create approximately 310,000 green growth job opportunities in 2050. Economic benefits will be felt across the social spectrum, with 70% of income gains flowing to medium- and low-income households.
Finding a Cost-Effective Pathway to Net-Zero
While the benefits and opportunities of the energy transition are clear, unlocking them will not be easy – or cheap. During a dialogue session on “The Price of Going Green” at TNB’s Energy Transition conference, experts from the financial and energy industries discussed the dual imperatives of achieving carbon neutrality and reducing costs, and why both need to be understood as one.
By applying the right levers to concurrently reduce carbon emissions and costs, countries can pursue the most cost-effective pathways to reaching net-zero. For Malaysia, the NETR identifies six energy transition levers, of which energy efficiency is the most important due to cost-efficiency, alongside developing RE, hydrogen, bioenergy, green mobility, and carbon capture, utilisation & storage (CCUS).
“The question of how to minimise costs depends on the specific circumstances of each nation. Some countries have a large potential for RE, other countries may utilise nuclear power or hydrogen – from blue or green to pink,” explained Dr Ken Koyama, Chief Economist and Senior Managing Director of the Institute of Energy Economics, Japan (IEEJ).
Beyond the six levers, the NETR also highlights financing as a cross-cutting enabler for the overall energy transition, with required clean energy investments totalling RM1.2 trillion to RM1.3 trillion by 2050. In the next decade alone, approximately RM60 billion to RM90 billion will be required for crucial projects, including expansion of public infrastructure, and strengthening of grid infrastructure.
Responsibly Financing the Energy Transition
In the words of Zarihi Hashim, Chief New Energy Officer at TNB, “In terms of our investment strategy, it has always been a norm that most of our capital is invested into the national grid. As we all know, there can be no energy transition without transmission. The remaining half of our capital will be focused on developing renewable energy assets.” These words reflect TNB’s strategic vision and unwavering dedication to fostering sustainability while ensuring energy security.
As the incumbent power company for Malaysia, TNB has been at the forefront of pioneering change within the energy sector. Its unwavering commitment to the energy transition movement has not only set a precedent but has also solidified its position as a trailblazer in the industry. Such dedication to the cause is exemplified by their substantial investments aimed at leading Malaysia’s energy transition. These projects include the solar park, hybrid hydro-floating solar PV, and co-firing hydrogen and ammonia initiatives, all of which underscore TNB’s pivotal role in reshaping Malaysia’s energy landscape.
While public sources of finance will continue to be vital, mobilising capital on a much larger scale will require an enhanced role for private and philanthropic institutions. Shahril Azuar Jimin, Chief Sustainability Officer at Maybank, explained how the Bank is already leveraging ESG principles to foster the transition of emission-intensive sectors like coal, as well as to invest in lower-carbon alternatives.
Nonetheless, nascent markets like CCUS or green hydrogen that are marginally bankable and yield below-market returns might fail to attract the attention of major investors and financial institutions. The provision of innovative financing instruments like blended finance thus becomes essential for attracting private investment into markets and sectors at early stages of readiness.
For this reason, the government has allocated RM2 billion as the seed fund of the National Energy Transition Facility (NETF) to ensure a seamless flow of financial resources towards energy transition projects. The facility will adopt an innovative blended finance instrument that aims to mobilise capital from private and philanthropic channels to triple or quadruple the initial seed amount.
Ashok Lavasa, Vice President of the Asian Development Bank (ADB), compared the NETF’s innovative financing model to ADB’s own Energy Transition Mechanism (ETM). Developed in partnership with developing member countries across Southeast Asia, the ETM uses blended finance to accelerate the retirement of coal power plants while developing green, renewable energy to replace them.
Leading the Way to a Sustainable Energy Future
With the launch of the NETR, the stage is now set for Malaysia’s journey to a net zero emissions future. In the words of YB Rafizi Ramli, Minister of Economy, “this decade is the decade of action – and the NETR is the start of remaking the next generation”. The initiatives set forth will not only bring Malaysia closer to our net zero aspirations but at the same time unlock the economic value that underlies it.
Nonetheless, in an increasingly complex world, no single player will be able to cover the intricacies, risks, and capital requirements of the energy transformation alone. Strong partnerships between public, private, and philanthropic sectors will be the decisive factors in addressing the tradeoffs and solving the financial challenges to advance a just and responsible energy transition going forward.