Energy Transition Toward a Low-Carbon Economy in Malaysia: Do We Need a Liberalizing Electricity Market?

Introduction

Climate change has become a global issue with profound implications for the economies and societies simultaneously directed countries to enforce policies to minimize carbon dioxide emissions to secure long-term economic growth and development (Ponce et al., 2020). However, high reliance on natural gas might impede the transition to an economy with minimal carbon emissions. Natural gas is not only known as a part of a climate change mitigation strategy but rather a transitional resource (Najm & Matsumoto, 2020). The development of affordable and sustainable energy solutions and measures requires technological advancements, increased energy efficiency, competitive economies, enhanced energy security, and a focus on addressing climate change (Kabeyi & Olanrewaju, 2022). Employment, poverty, pollution, and ecosystem concerns, directly and indirectly, connect to the energy sector. The nation is still underdeveloped and suffers from widespread hunger due to its limited access to energy (Büyüközkan et al., 2018). On the other hand, self-electrification in rural areas has significantly increased this access to electricity due to the remarkable expansions of renewable energy in the power sector (Kitchen & O'Reilly, 2016).

To maximize the potential of these renewable resources and ultimately get towards Target 7 of the Sustainable Development Goals (SDG 7), comprehensive and effective renewable energy legislation and regulations are essential. By ensuring that everyone has access to affordable and clean energy, especially concerning electricity, the world can address issues like poverty, climate change, health, and unsustainable urban development (Mustafa et al., 2022). In Southeast Asia, in particular, the region's energy mix can be significantly improved by utilizing renewable energy sources (Mustafa et al., 2022). Nevertheless, it will need more effort, especially for a developing country. Therefore, a country must find ways to expand its generation capacity while maintaining and maybe even increasing its share of renewable energy in order to meet the difficulties posed by the consequences of climate change (Santos et al., 2021).

Electricity is a primary driver of economic growth for all countries worldwide, and Malaysian economic progress will be significantly reliant on providing excellent infrastructural services, particularly in the power sector (Nerini et al., 2018). Electricity infrastructure is not only critical for development but also has a significant impact on global competitiveness and economic growth (Paryono et al., 2020). To promote the growth of physical and social infrastructures and to eradicate poverty, existing energy infrastructures should be enhanced. Centralized and decentralized energy infrastructures are preferred to meet Target 7 of the Sustainable Development Goals (SDG 7), as more than a billion people have insufficient access to energy (Nerini et al., 2018). Issues related to access to energy can only be resolved through meticulous infrastructure planning that is transparent and focused, as well as long-term project implementation (Paryono et al., 2020).

With the increasing movements towards private ownership and competition through power liberalization, many countries can rationalize the sector's development by treating electricity as a commodity that needs optimal allocation (Bryne & Mun, 2003). Although energy and power infrastructure are critical for economic development, thus, the legal framework is required to construct and implement nationally and internationally. Nevertheless, various challenges concern using renewable energy sources and the execution of laws and policies (Schwartz, 2009). He et al. (2016) argued that policies must be revised to promote renewable energy development. For example, profits on liberalized electricity markets must be increased to stimulate private investment in renewable energy production. Thus, diverse economic instruments are required in order to make renewables a profitable investment (Zipp, 2017). Moreover, variable renewable energy needs direct reliance on natural resources, which may cause an interruption in generation as they cannot supply demand at any moment (Pietzcker et al., 2014; Zipp, 2017).