RP4 has materially strengthened the case for BESS and solar PV adoption across both MV and HV users, as higher electricity prices make energy savings from peak shaving more economically meaningful for MV users, while HV users benefit more from solar PV given the dominance of the energy component in their electricity costs. While Solar ATAP is less lucrative than NEM due to the absence of capacity and network charge rebates, it allows for larger installations. At the utility scale, LSS and CRESS remains supportive, despite near-term pressure from elevated solar module costs. Maintain OVERWEIGHT on the RE sector, with SLVEST (BUY, TP: RM3.57) as our top pick.
RP4 structurally raises electricity costs. We view the implementation of Regulatory Period 4 (RP4) as a structural reset that has materially increased electricity costs across consumer segments. Under the unbundled tariff framework, demand-related and energy-based charges now account for a larger share of total electricity bills, increasing sensitivity to usage and peak demand. Compared with RP3, electricity costs are now more closely linked to consumption patterns, fundamentally reshaping cost structures for commercial and industrial users.
Higher cost of electricity in RP4 strengthen the investment case for BESS and Solar PV. In this environment, battery energy storage systems (BESS) have become significantly more relevant than in the past. Under RP4, capacity and network charges now form a larger share of electricity bills for MV users, making peak demand reduction economically valuable. Based on our scenario analysis, MV users, particularly those with high or volatile usage profiles, can achieve a payback period of up to c.5 years after incentives. In contrast, for HV users, solar PV remains the more effective solution for reducing electricity costs, as tariffs are largely driven by the energy component.
Solar ATAP is less lucrative than NEM. The recently released Solar ATAP framework reinforces the shift away from the more generous economics under NEM, as excess electricity exports are compensated at energy value only, with no recovery of capacity and network charges. Nevertheless, rooftop solar installers should continue to benefit, as higher-consumption households and commercial users remain incentivised to install or upgrade systems to maximise self-consumption, particularly amid higher electricity tariffs under RP4.
Utility-scale solar pipeline remains supportive. Utility-scale solar activity remains supported by LSS5 and LSS5+, with EPCC awards expected to accelerate following financial close. Looking ahead, LSS6 is anticipated from 2QCY26, with greater integration of BESS. Separately, the introduction of the Ultra-High Voltage (UHV) tariff class under RP4 has increased electricity costs for data centres by c.26%, enhancing the attractiveness of CRESS, supporting sustained demand for renewable energy solutions over the medium term.
Solar module prices expected to trend higher. Based on our channel checks, prices of key inputs such as polysilicon, wafers, solar glass, EVA, and silver paste have increased amid tighter supply and higher utilisation rates. This reinforces our view that module prices could move above the current USD0.10-0.11/W range, creating near-term cost pressure for solar EPCC players, particularly those with exposure to fixed-price contracts.
Sector outlook remains constructive. The outlook for Malaysia’s renewable energy sector remains constructive, supported by higher electricity costs under RP4, which strengthen the case for BESS and Solar PV adoption. Continued support from LSS5 and LSS5+, the anticipated rollout of LSS6, and higher power costs for data centres under the UHV tariff should sustain renewable energy demand over the medium term, despite near-term solar module cost pressures. We remain OVERWEIGHT on the sector, with SLVEST (BUY, TP: RM3.57) as our top pick, supported by its strong execution track record across both rooftop and utility-scale solar solutions.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
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| EUR | 4.715299 | 4.720174 |
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