IEEJ：September ©IEEJ 2022
Special Bulletin
A Japanese Perspective on the International Energy Landscape (602)September 16, 2022

Participating in Discussions on Malaysian Energy Policy
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanIn Malaysia on September 12 to 15, I had opportunities to discuss Malaysian energy policy
with Malaysian government officials, researchers and energy industry people, as well as Japanese
government and industry representatives there. I also gave a lecture on the Ukraine crisis and energy
security and exchanged views with lecture participants at University Tenaga Nasional (UNITEN) to
which I have served as an international adviser since 2015. Through these opportunities, I understood
Malaysian energy policy stakeholders’ perceptions and matters of interest and acquired implications
about the direction of future Malaysian energy policy initiatives and about potential cooperation
between Malaysia and Japan. In the following, I would like to summarize key points of the discussions:First, I felt that the Ukraine crisis has led Malaysian energy policy stakeholders to growinterested in international energy market destabilization and price hikes, and energy security.
Government officials explicitly indicated a perception that energy security and stable energy supply
are a top energy policy priority. Under this perception, needs are growing for policy research toenhance energy security for Malaysia. As explained later, how to combine the 2050 carbon neutrality
goal, another important challenge for Malaysia, with the energy security enhancement trend based on
the Ukraine crisis has become a top priority challenge for Malaysia’s energy policy.
Energy price spikes’ adverse impacts on the global economy and the Asian economy becomea negative macroeconomic factor for Malaysia. In addition, we must pay attention to the regressivityof energy price spikes’ impacts. Energy price spikes’ adverse impacts are greater for lower-income
countries or groups. To counter the regressivity, many developing countries including Malaysia haveintroduced energy subsidies as a key social policy tool. As international energy market prices haveshot up under the impacts of the Ukraine crisis, however, Malaysian energy subsidies to protect
consumers are predicted to total as much as 80 billion ringgits (about 2.5 trillion yen) this year. Suchmassive subsidies may cause a great burden on Malaysia’s public finance. For Malaysia, energy pricespikes trigger complex and difficult problems.
For Malaysia, a matter of concern regarding energy security is related to coal-fired powergeneration. As of 2021, coal-fired power plants accounted for 44% of Malaysia’s total power
generation, serving as its largest electricity generation source. How to position coal-fired power
generation in Malaysia’s decarbonization initiative has become a key issue regarding stable electricity
supply. In a related development, Indonesia, a key coal supplier for Malaysia, banned coal exports togive priority to domestic consumption in early 2022, leading stable coal supply to become a key topic
for Malaysia. While the effective utilization of existing coal-fired power plants remains indispensable
for securing electricity supply at affordable prices, its balance with the decarbonization goal, insecurity
about Indonesian coal supply and remarkable hikes in international coal prices have made stable coalsupply a complicated energy policy challenge for Malaysia.
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Meanwhile, Malaysia is required to depict a path to its carbon neutrality goal. Although
hopes on renewable energy are growing in this respect, I felt that Malaysia is greatly interested in andconcerned about the renewable energy promotion’s impacts on stable electricity supply and electricity
costs. At a time when Malaysia is socially and politically required to supply electricity or energy ataffordable prices, it is seemingly agonizing over how to depict a path to decarbonization.
As price spikes for energy as one of the daily necessities under the Ukraine crisis havebecome a big political, social issue even in developed countries, it is natural for energy price spikes toloom as an even more serious issue for emerging and developing countries including Malaysia. In thisrespect, the decarbonization initiative may be required to suppress cost hikes as much as possible. I
felt that Malaysia has grown more interested in a step-by-step transition, rather than a leap-frog
transition, to decarbonization. Japan has given priority to a pragmatic, inclusive approach tocooperation with Asian or other emerging and developing countries in promoting steadydecarbonization and energy security enhancement. This approach may be significant for Japan torepresent Asian countries at the next annual Group of Seven summit.
One of the impressive points regarding my discussions with Malaysian energy policy
stakeholders is their greater-than-earlier interest in nuclear energy. The position of nuclear energy in
Malaysia's energy policy discussions has changed in line with government changes. This time,
however, I felt that changes in the international nuclear energy situation might have exerted someinfluence on Malaysia, irrespective of any government change. Under the impacts of energy pricespikes since the second half of 2021 and the Ukraine crisis, France and the United Kingdom turned
policy to construct new nuclear reactors. Moves to extend the service life of existing nuclear reactors
and reconsider their decommissioning have been seen. Hopes are growing on new nuclear reactors
including small modular reactors. Malaysian energy policy stakeholders indicated great interest inthese recent changes regarding nuclear energy. In a related development, they asked many questions
about Prime Minister Fumio Kishida’s nuclear energy promotion policy and growing public support
for the restart of nuclear reactors in Japan, indicating their high interest in nuclear energy as a means
to promote both decarbonization and energy security. As a matter of course, discussions on nuclear
energy in Malaysia are still in the initial phase, with the nuclear energy issue remaining politically andsocially sensitive. How Malaysia would tackle nuclear energy is not at all certain. This time, however,it was interesting for me to hear an opinion that Malaysia should take up nuclear energy for strategic
research to consider energy policy.
Through my latest discussions with Malaysian energy policy stakeholders, some of them
indicated that the Malaysian government would publish its new energy policy soon. An opinion given
there said the new policy could mention the nuclear energy issue. Carbon capture and storage, CO2free hydrogen, critical minerals and other topics taken up at the discussions may be mentioned in thenew policy. Its details are attracting attention. As 40 years have passed since Malaysia came up withthe so-called Look East policy, it may be significant and timely for Japan to deepen cooperation with
Malaysia in tackling energy policy challenges.

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