Why Energy Efficiency Is Important In Malaysia?

Malaysia has experienced rapid economic growth and industrialization over the past few decades. This has led to a substantial increase in energy consumption, with demand rising faster than GDP (The Malaysia Energy Policy at a glance)

According to government [statistics from the Malaysia Energy Information Hub](https://www.energy.gov.my/statistic), total primary energy supply increased from just 37.9 Mtoe in 1980 to 91.8 Mtoe in 2021. The industrial sector accounts for the largest share of energy use at 44.6%, followed by transport (24.4%), residential (16.5%), commercial (7%), agriculture (4.9%) and non-energy use (2.6%).

Malaysia relies heavily on fossil fuels, which make up 87% of its energy mix according to 2021 data. Natural gas is the largest source (45.5%), followed by crude oil & petroleum products (36.6%), coal (23.5%) and renewables (5.3%). This dependence on imported fossil fuels raises concerns regarding energy security.

High Energy Consumption

Malaysia has one of the highest per capita energy consumption rates in Asia. This is largely driven by the country’s strong economic growth over the past few decades, rising incomes, and heavily subsidized energy prices. Malaysia’s energy consumption per capita increased by over 80% between 1990 and 2013, reaching about 7,200 pounds of oil equivalent in 2013. This level of energy use per person is much higher than other Southeast Asian countries like Thailand, Vietnam, and Indonesia.

The industrial sector accounts for the largest share of Malaysia’s energy consumption, at about 44%. This includes energy-intensive manufacturing industries producing electronics, chemicals, cement, and more. The transport sector is second, accounting for 22% of energy use with high rates of private vehicle ownership and road freight transport. Commercial and residential buildings make up another 25% driven by rising use of air conditioning and electrical appliances as incomes increase.

If Malaysia continues on its current high energy consumption path, it may face challenges in ensuring adequate energy supply, affordability of energy, and environmental sustainability. There are clear economic and social benefits to pursuing greater energy efficiency and conservation moving forward.

Economic Impact

Improving energy efficiency can reduce energy costs for consumers and businesses in Malaysia. According to a study by Solaymani (2014) [1], energy subsidy reform initially led to decreased demand for electricity, gas and petroleum products, reducing energy costs. However, inflation has since caused energy prices to rise again, impacting households and industries. A 2022 report notes that electricity and fuel prices rose 4% year-on-year, accelerating from 3.8% in July [2]. Adopting energy efficiency measures can help counteract rising energy costs for consumers and businesses.

Environmental Benefits

Increased energy efficiency can provide substantial environmental benefits for Malaysia. As an emerging economy, Malaysia’s energy use and greenhouse gas emissions have been rising steadily. According to Statista, Malaysia’s carbon dioxide emissions from energy consumption increased from 204.97 million metric tons in 2013 to 251.38 million metric tons in 2022 [1]. Data from Our World in Data shows Malaysia’s total greenhouse gas emissions were 284 million metric tons in 2014 [2]. By improving energy efficiency across sectors, Malaysia can curb its greenhouse gas emissions and dependence on fossil fuels. Using energy more efficiently will directly reduce the amount of coal, oil, and natural gas needed to power economic activities. This brings environmental benefits like cleaner air, lower pollution levels, and mitigating Malaysia’s impact on climate change. As an emerging Asian economy, demonstrating leadership on energy efficiency and sustainability can also boost Malaysia’s reputation.

Reduce Energy Subsidies

The Malaysian government spends billions of ringgit annually on energy subsidies, especially for petroleum, electricity, and natural gas (Reuters, 2023). In 2022 alone, Malaysia allocated RM67.2 billion for petrol, diesel and LPG subsidies (Nikkei Asia, 2023). While subsidies allow consumers access to affordable energy, they strain public finances. Reducing blanket subsidies and targeting only lower-income groups would help cut wastage and incentivize energy efficiency.

Transitioning to market-based pricing through targeted subsidies would encourage consumers and businesses to utilize energy more efficiently. It would also drive investments into renewable energy and greener technologies. The savings from reduced energy subsidies could be redirected towards sustainable infrastructure and energy programs that benefit society.

Power Capacity Issues

Malaysia may face power shortages without efficiency gains. The country’s reserve margin, which measures excess capacity, has been declining. According to Tenaga Nasional Berhad, Malaysia’s reserve margin was 34% in 2019 and was projected to rise to 40.4% by end-2020 (source). However, beyond 2025 the margin is expected to drop again, falling to 32% by 2030 according to government projections (source). Lower reserve margins indicate less flexibility to meet demand spikes and potential reliability issues. Without improved efficiency, Malaysia may struggle to keep up with electricity demand growth while maintaining adequate reserves.

Energy Security

Malaysia is heavily dependent on fossil fuel imports to meet its energy needs, making it vulnerable to global price fluctuations and supply disruptions. In 2021, Malaysia imported over 80% of its primary energy supply. This high reliance on imported oil, gas and coal creates an energy security risk and exposes the economy to external shocks. For instance, when global crude oil prices spiked in 2022, it led to higher electricity tariffs and inflationary pressures in Malaysia.

Being a net importer of energy also drains foreign exchange reserves and creates trade deficits. In 2021, Malaysia’s net energy imports accounted for nearly 15% of total imports, costing over RM100 billion. Reducing energy imports through efficiency and alternative sources would strengthen Malaysia’s trade balance and macroeconomic resilience.

Improving energy efficiency in industry, buildings and transport would lower fuel and electricity needs. This enhances energy security by relying more on domestic energy resources. For example, retrofitting buildings to be more efficient reduces natural gas and electricity consumption, thereby decreasing energy imports. Energy efficiency is a cost-effective way to strengthen Malaysia’s energy independence and self-sufficiency.

Technology Upgrades

A key component of improving energy efficiency in Malaysia is upgrading outdated and inefficient equipment and infrastructure. Much of Malaysia’s energy infrastructure, from power plants to transmission lines, was built decades ago and lacks modern efficiency capabilities (Energy Commission Malaysia). Older technologies like incandescent lightbulbs, inefficient air conditioners, and poor building insulation are still prevalent and waste significant amounts of electricity.

According to the International Energy Agency (IEA), simply replacing inefficient lighting, air conditioning, fans, and pumps could reduce Malaysia’s electricity demand by around 20% (https://www.iea.org/reports/malaysia-energy-policy-review). Investing in newer high-efficiency appliances, lighting, HVAC systems, industrial motors, and other technologies can dramatically curb energy usage. The IEA estimates that upgrading commercial buildings and industrial equipment alone could save 8.8 terawatt-hours of electricity by 2035, equal to 10% of Malaysia’s demand.

Larger investments in smart grid technologies, distribution automation, and advanced metering infrastructure can also help manage and reduce electricity usage across Malaysia’s grid. By upgrading outdated technology and infrastructure to leverage modern energy efficiency capabilities, Malaysia can greatly reduce electricity demand and consumption nationwide.

Behaviour Change

Individual actions and habits drive large-scale change. Small changes in our daily lives can lead to significant energy savings when adopted widely across the population. For example, simply turning off lights and appliances when not in use can reduce a household’s electricity usage by 10-15% (1). Other simple behaviour changes like using fans instead of air conditioning, line drying clothes instead of dryers, and taking shorter showers can also accumulate major energy savings.

Public awareness campaigns play a key role in inspiring these small daily actions. Media advertisements, educational programs, and government initiatives can demonstrate the collective impact of individual choices. Malaysia’s “Cuti Tenaga” campaign by the Energy Commission successfully encouraged people to reduce energy use during holiday periods, leading to 100MW in avoided energy generation (2). Continuing these motivational messages and social encouragement will be important to sustain energy conservation behaviours long-term.

Smart home technologies like programmable thermostats, app-connected appliances, and real-time energy monitoring systems can also empower consumers to easily track and manage their electricity usage. Wider access to these technologies, along with digital literacy programs, can enable large swaths of the public to reduce energy waste.

With the right mix of public engagement, technology assistance, and social encouragement, small steps by each household can add up to massive energy savings and emissions reductions for Malaysia.

Policy Reforms

The Malaysian government has introduced several policy reforms and initiatives aimed at improving energy efficiency in the country. In 2015, the National Energy Efficiency Action Plan was launched with the goal of reducing energy intensity by 40% by 2030 [1]. This plan focuses on cost-effective implementation of energy efficiency measures across all economic sectors. Key initiatives include mandatory energy audits and management systems for large energy users, energy performance contracting, and skills training programs [2].

In October 2022, the Malaysian Parliament approved a new Energy Efficiency and Conservation Act aimed at regulating and incentivizing efficiency improvements among large electricity users who consume 3 million kWh or more per year. This legislation empowers the Energy Commission to set efficiency targets and minimum performance standards while providing rebates and tax incentives for companies meeting targets [1]. Overall, Malaysia’s policy reforms demonstrate a strong government commitment to leveraging regulations, incentives, and capacity building to unlock the country’s large energy efficiency potential.