BESS Key To Malaysia’s Grid Stability, Says Aurora Energy Research
KUALA LUMPUR, July 4 (Bernama) -- As Peninsular Malaysia’s solar capacity surpasses 2.5 gigawatt (GW) in 2025, grid challenges from intermittent generation are becoming more pronounced, according to global consultancy and analytics firm, Aurora Energy Research.
It noted that to address rising risks of congestion and curtailment, the Energy Commission has initiated a 400 megawatt (MW)/1,600 megawatt per hour (MWh) battery energy storage system (BESS) programme.
“Now in the Request for Proposal (RFP) stage, the initiative marks a strategic shift toward integrating storage early, positioning BESS as a critical enabler of future solar growth and grid stability,” the firm said in a statement today.
Although official interconnection points for Malaysia’s 400 MW BESS programme have not been released, solar deployment patterns offer key clues.
Aurora Energy Research noted that states like Perak, Kedah, Terengganu, and Pahang host the bulk of large-scale solar capacity, often in areas served by lower-voltage transmission lines.
These are often in areas served by lower-voltage transmission lines, making them more exposed to grid congestion and curtailment risks.
“Strategically locating BESS in or near these areas can improve solar utilisation, reduce grid strain, and enable higher battery cycling rates.
“Developers should assess solar penetration, local transmission capacity, and net load profiles to identify sites with strong technical and commercial potential,” it added.
Aurora Energy Research highlighted that energy arbitrage - buying electricity when it is cheap and selling it when prices rise - can become a key revenue stream for BESS in Malaysia.
While price spreads are modest through 2030, it is projected that they would widen to about RM400 per MWh by 2040, driven by growing midday solar output and evening reliance on gas.
“This ‘duck curve’ dynamic creates ideal conditions for batteries to charge low and discharge high. Although regulatory frameworks are still evolving, future reforms like the New Enhanced Dispatch Arrangement (NEDA) may open wholesale market participation.
“Developers can benefit by stacking revenues and designing systems ready for merchant arbitrage, thereby improving returns and futureproofing project viability,” it said, adding that for the auction, developers must carefully structure their bids to balance revenue certainty with market exposure.
The firm noted that projects could recover costs through fixed capacity payments, usage-based energy payments, and potentially, future merchant revenues from electricity price arbitrage.
It highlighted three main strategies to be explored, including recovering all costs via a fixed capacity payment, which offers high revenue certainty and strong bankability, but results in a less competitive, higher bid.
Another strategy blends capacity and energy payments -- aligning revenue with system use and improving competitiveness.
“However, this assumes reliable dispatch and introduces moderate financial complexity.
“Meanwhile, the third strategy adds a merchant tail -- assuming revenue in 16 to 25 years, further lowering the power purchase agreement (PPA) bid but exposing the project to long-term market risks and regulatory uncertainty,” it said.
It noted that each strategy has trade-offs across competitiveness, bankability, and revenue forecast stability.
Beyond revenue design, developers must account for technical and commercial risks -- high dispatch rates may breach battery warranties, long-term performance guarantees might require costly repowering, and energy service payments must cover not only operating expenses but lifecycle costs, it said.
“Success will hinge on robust modelling, Original Equipment Manufacturer (OEM) engagement, and aligning bid strategy with operational and financing capabilities. As Malaysia’s market evolves, more risk-exposed strategies like the aforementioned third strategy may become increasingly viable,” said Aurora Energy Research.
For full details and strategic recommendations, Aurora Energy Research’s comprehensive primer is available via their website (https://auroraer.com/resources/aurora-insights/articles/malaysias-400-mw-1600-mwh-bess-auction-mybest-a-strategic-primer-for-rfp-bidders).
Additionally, Aurora Energy Research will host a Zoom webinar covering our latest analysis for Malaysia’s power and renewables sector. If you would like to join the webinar, sign up here https://auroraer.zoom.us/webinar/register/8417509417705/WN_Ovj-NnQTTzyPv9t9ImyeXA
-- BERNAMA