KUALA LUMPUR: Rising electricity costs and increasing corporate accountability for energy-saving initiatives are expected to significantly boost solar adoption by 2025. This surge is anticipated to lead solar engineering, procurement, construction, and commissioning (EPCC) companies to experience unprecedented growth in their order books.
According to BERNAMA News Agency, Kenanga Investment Bank Bhd has identified key catalysts including RM2.4 billion in EPCC contracts from the 800 megawatt (MW) Corporate Green Power Programme. Earnings recognition for these contracts is expected to begin in the first quarter of 2025. Additionally, RM5 billion in large-scale solar bidding round (LSS5) EPCC contracts are set to be awarded during the same period. The winners of LSS5 have been partially disclosed, and there is an expectation that Solarvest Holdings Bhd might be among them.
Bidders for these projects have been shortlisted, but the Energy Commission has yet to announce the winners or the range of winning bids, which may be due to timing considerations. Kenanga Investment Bank stated that these initiatives are poised to sustain sector growth until 2028. This is further supported by a decline in solar panel prices due to oversupply, which is expected to enhance the margins of solar EPCC contractors and encourage investment in solar power systems.
Kenanga Investment Bank has maintained an “Overweight” stance on the sector, supported by the government’s strong implementation of renewable energy initiatives and the expansion of solar quota allocations. The bank noted that solar panel prices, nearing an inflection point in 2025, have reached an all-time low of 9 US cents per watt. This price is below production costs, with indications that the severe oversupply in the solar industry may be easing.
In the current competitive landscape, Chinese solar manufacturers are facing challenges in maintaining market share, with sustained low prices exerting significant financial pressure. Kenanga Investment Bank anticipates that most solar manufacturers will incur losses this year, with some unable to withstand the financial strain, potentially exiting the market.
The investment bank also highlighted that Chinese solar manufacturers are halting production at their Southeast Asian plants due to a weak export outlook, following a U.S. tariff increase on solar panels imported from China, which rose to 50 percent from 25 percent as of August 1, 2024. Longi, for instance, has ceased operations at its plant in Vietnam and is downsizing in Malaysia, while Trina is closing its plants in Thailand and Vietnam.
Despite these adjustments, global solar panel supply remains abundant, and prices are projected to reach 9 US cents per watt by year-end, continuing their multi-year decline. Additionally, the growing market for Renewable Energy Certificates (RECs) is driven by corporate commitments to the RE100 initiative and data centers seeking “green” status. Tenaga Nasional Bhd has received over 70 applications for electricity supply to data centers, with a combined demand of 11 gigawatts, potentially generating RM1.1 billion annually in the REC market.
Solarvest is offering RECs at a competitive rate of US$5 to US$6 per megawatt, compared to Tenaga’s US$10 per megawatt green electricity tariff. By 2050, the electrification of the economy is expected to require at least three times the current electricity usage, driven by the transition to electric processes and increasing power demands from artificial intelligence technologies, according to Kenanga Investment Bank.