Early coal power phase-out in Malaysia could cost USD 1.43 billion to renegotiate PPAs, according to new TransitionZero analysis

London, 14 May 2025: New TransitionZero’s research finds that phasing out six of Malaysia’s newest coal power units by 2040 would cost an estimated USD 1.43 billion, excluding replacement and grid costs. This would bring the country’s coal phase-out five years ahead of the target set in the National Energy Transition Roadmap (NETR), aligning Malaysia with recommendations from the International Energy Agency.

The investment could unlock significant emissions reductions, avoiding 80 million tonnes of CO₂, and position Malaysia to fully capitalise on surging interest in clean energy investments.

This scenario, based on data from TransitionZero’s latest Coal Asset Transition dataset (TZ-CAT Malaysia), involves the early closure of Tuanku Muhriz Units 1 and 2, Manjung Five, Tanjung Bin Energy, and Balingian Units 1 and 2 ahead of their power purchase agreement (PPA) expiry. These plants are among the largest emitters in Malaysia’s coal fleet through 2044, based on current operating conditions and the existing retirement schedule.

The average abatement cost is estimated at USD 19 per tonne of CO₂, but depending on the asset, this may range from USD 10 to USD 24 per tonne of CO₂, providing a benchmark for identifying cost-effective targets for intervention.

Malaysia’s policy on phasing out coal by 2045 is based on the principle of allowing existing PPAs to expire naturally, without extension. Accelerating this timeline would require renegotiating the PPAs for early termination, which would incur buy-out costs for the offtakers.

Under the 2040 phase-out scenario, TZ-CAT analysis indicates that the capacity and timeline involved are manageable, potentially allowing for an orderly transition without compromising grid stability or imposing excessive financial burdens, provided that policy support is clear and consistent.

Thu Vu, Senior Analyst at TransitionZero and report author, said:

“Phasing out existing plants remains a complex undertaking. Transition strategies must carefully navigate the energy trilemma — ensuring reliability, affordability, and sustainability. While pilots for coal-to-clean replacements, retrofits, and fuel switching are underway in the country, their success will ultimately depend on how cost-effective and scalable they are compared to the pace and scalability of renewable energy options.”

TransitionZero’s TZ-CAT Malaysia is a one-of-a-kind dataset that presents a holistic picture of the current operational, financial, and environmental performance of coal plants at an asset level. It provides unprecedented insights into the country’s coal power sector. This release builds on TransitionZero’s successful deployment of similar datasets for Indonesia and the Philippines.

“The dataset reveals key differences in asset profiles, reliability, and cost, helping to identify the most strategic system-wide and plant-level transition opportunities,” said Vu.

Based on the analysis, Malaysia’s coal fleet has shown operational flexibility, adapting to volatile fuel prices, subdued demand, and frequent unplanned outages that will be critical as the country integrates more solar into its grid. However, despite high utilisation rates averaging 74% between 2020 and 2023, persistent reliability issues and rising costs make the case for close assessment. Many coal plants regularly fail to meet performance benchmarks under their PPAs, incurring penalties, reducing plant profitability, and jeopardising system reliability.

Matt Gray, CEO and Co-founder, TransitionZero, said:

TZ-CAT provides actionable financial and operational data to help estimate the cost of renegotiating PPAs — a critical component of coal transition planning decisions in regulated markets like Malaysia. A full understanding of the cost and operational impacts of a coal-to-clean transition requires detailed grid modelling, which we hope to support the Malaysian government with through Scenario Builder and our system modelling expertise.

George Mowles-Van Der Gaag, Associate Director, Energy Transition at Carbon Trust, said:

Achieving global climate goals requires a rapid and equitable transition away from coal. This challenge is especially pronounced in countries like Malaysia, where coal-fired power remains a dominant energy source. In this context, analysis like this are critically important. TransitionZero has once again delivered a valuable contribution, leveraging their Coal Asset Transition (CAT) dataset to offer a structured and holistic framework for exploring early coal phase-out strategies. Their data-driven insights, grounded in local realities and supported by robust data, are exactly what’s needed to inform effective coal transition strategies.

Download the full report here.

Download TZ-CAT Malaysia dataset here

Notes

About TransitionZero

TransitionZero is a climate analytics nonprofit established in 2021. We provide system modelling data, software and analysis to support energy transition planning decision-making. We are grant-funded by the Quadrature Climate Foundation, Google.org, Sequoia Climate Foundation, Bloomberg Philanthropies, and European Climate Foundation, among others. Our data, software and analysis is used by developers, financiers, planners and think tanks internationally.

About Coal Asset Transition tool (TZ-CAT)

Launched in 2022, TransitionZero’s Coal Asset Transition (TZ-CAT) tool is an open data product designed to assist high-level screening of coal plants for retirement and replacement. TZ-CAT estimates, plant-by-plant, the cost to ‘buy-out’ Power Purchase Agreements (PPAs), the cost of replacing with clean energy alternatives and the potential savings from early retirement, as well as the social costs of air pollution, water use and climate change. TZ-CAT is currently available for Malaysia, the Philippines and Indonesia. Download here.