KUALA LUMPUR, Dec 30 — Rising electricity costs and corporate requirements to report energy-saving initiatives are set to accelerate solar adoption in 2025, driving solar engineering, procurement, construction and commissioning (EPCC) players’ order books to all-time highs.
In a research note today, Kenanga Investment Bank Bhd said key catalysts include RM2.4 billion in EPCC contracts from the 800 megawatt (MW) Corporate Green Power Programme, with earnings recognition beginning in the first quarter of 2025, and RM5 billion in large-scale solar bidding round (LSS5) EPCC contracts set to be awarded in the same period.
It said LSS5 winners have been partially revealed, and it expects Solarvest Holdings Bhd to be among the remaining winners.
While bidders have been shortlisted recently, the Energy Commission has not revealed the winners or the range of the winning bids. This is likely due to timing sensitivities, said the investment bank.
“These initiatives, which are expected to sustain the sector’s growth until 2028, dovetail with declining panel prices due to oversupply, boost margins of solar EPCC contractors, and stimulate investment in solar power systems.
“We maintain an Overweight on the sector, underpinned by the government’s robust execution of renewable energy initiatives and expanding solar quota allocations,” Kenanga Investment added.
The investment bank said solar panel prices, nearing an inflection point in 2025, have dropped to an all-time low of 9 US cents/watt (US$1=RM4.46), falling below production costs, with early signs that the severe oversupply in the solar industry may be easing.
“In this highly competitive environment, Chinese solar manufacturers are struggling to maintain market share, and the sustained low prices are putting significant pressure on them.
“We anticipate that most solar manufacturers will report losses this year, with some unable to withstand the financial strain and ultimately exiting the market,” it said.
While this pressure may set the stage for recovery, a substantial rebound is unlikely in 2025, so renewable energy players can still enjoy a good runway on margins, said Kenanga Investment Bank.
“Moreover, Chinese solar manufacturers are halting production at Southeast Asian plants due to weak export outlook, following a United States (US) tariff increase on solar panels imported from China — rising to 50 per cent from 25 per cent as of August 1, 2024,” it said.
The bank noted that Longi has halted all five production lines at its plant in Vietnam and is winding down its operations in Malaysia, while Trina is shutting down its plants in Thailand and Vietnam.
“Despite the adjustment, global solar panel supply remains excessive, and we expect solar module prices to reach 9 US cents/watt by year-end, continuing their multi-year decline,” it added.
Meanwhile, Kenanga Investment Bank said the growing market for RE certificates (RECs) is driven by corporate commitments to the RE100 initiative and data centres seeking the “green” status.
It said Tenaga Nasional Bhd has received over 70 applications for electricity supply to data centres, with a combined demand of 11 gigawatts, potentially generating RM1.1 billion annually in the REC market.
Solarvest stands out by offering RECs at a competitive US$5 to US$6 per megawatt, compared to Tenaga’s US$10 per megawatt green electricity tariff, it said.
“By 2050, electrifying the economy will require at least three times the current electricity usage, driven by the shift to electric processes and rising power demands from artificial intelligence technologies,” said the investment bank. — Bernama
