Malaysia increases coal power production and imports to meet growing demand

A data analysis showed that Malaysia was boosting its coal-fired electricity output and importing fuel at record-high levels. It is taking advantage of the low prices, even though it has pledged to increase the use of gas-fuelled power generation on a longer-term basis.

Southeast Asia's nation is the 5th largest exporter of liquid natural gas, but it has stated that due to dwindling reserves and rising demand for the fuel, they may start importing super-chilled fuel. The nation has gradually increased coal-fired electricity production to meet the surge in demand from data centres.

In May and June, coal-fired electricity production in Peninsular Malaysia grew by nearly 9%. This accounts for around 80% of the power demand. Data from Malaysia's Grid System Operator showed that this was three times faster growth than the 3% increase in power demand.

The data shows that output from coal-fired plants increased 16.8% during the first half July while demand for electricity increased by 5.2%.

Data from analytics firm Kpler revealed that Malaysia imported a record number of 20.9 million tons of coal during the first half this year.

Kesher Sumeet is an LNG analyst with Energy Aspects. He said that low coal prices combined with the regulated and cap power prices in Malaysia have discouraged gas-fired generators this year.

The GSO data revealed that coal's share in power generation increased to almost 60% in the first six months of 2025. This is on track to reach the highest levels annually since the COVID-19 Pandemic. Meanwhile, natural gas-fired electricity's share may fall to its lowest level since demand was curtailed by the economic shutdown caused by the pandemic.

The gas-fired electricity output fell for ten consecutive months, with an average monthly decline of 11.3%. It also dropped 15.3% during the first half July.

Raksit pattanapitoon is an analyst at Rystad energy. He said that Malaysia will continue to rely on coal as the fuel costs are almost 40% lower.

The tipping point is when the solar penetration in Malaysia's grid becomes sufficient to force baseload coal, which is rigid, to shut down at daytime. Rystad Energy doesn't expect this to occur on a regular schedule until the 2030s.

Malaysia will increase its gas-fired power by 50%, and double the renewable capacity to meet data centre demand.

Tenaga Nasional Bhd, the state-run utility, says that power demand decreased during the first quarter because of a tepid demand from residential customers. However, it is expected to rise by as much as 4,5% this year.

(source: Reuters)