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Malaysia’s renewable energy landscape has been expanding rapidly in recent years. Following the introduction of the Corporate Renewable Energy Supply Scheme (“CRESS”), new initiatives such as Community Renewable Energy Aggregation Mechanism (“CREAM”) and the more recent Solar Accelerated Transition Action Programme (“Solar ATAP”) continue to build on the country’s efforts to promote wider participation in clean energy.

Under CRESS, corporations are allowed to purchase renewable energy directly from Renewable Energy Developers (“REDs”) through a regulated bilateral arrangement. At the core of this mechanism lies the Bilateral Energy Supply Contract (“BESC”), the agreement that formalises the commercial relationship between the RED and the Green Consumer.

Although the BESC shares certain features with a traditional Power Purchase Agreement (“PPA”), it operates differently. The contract itself is not strictly regulated by the Energy Commission but is guided by the principles and minimum requirements set out in the Guidelines for CRESS (“Guidelines”). In essence, the Energy Commission prescribes the key elements that should be addressed in the BESC such as roles and responsibilities, billing, details of the energy sales, and force majeure while allowing the RED and Green Consumer the flexibility to negotiate their own commercial terms.

Purpose and Nature of the BESC

The BESC serves as the formal agreement that defines the relationship between RED and the Green Consumer. It outlines the terms governing the supply, consumption, billing, and management of renewable energy, ensuring that the rights and obligations of both parties are clearly articulated and legally enforceable.

While the specific drafting and level of detail may differ between projects, the Guidelines provide a framework on the minimum contractual matters that should be addressed. These include, among others, the governing law, energy sales, billing and metering, operational coordination, and force majeure. The intention is to promote consistency across transactions while allowing sufficient flexibility for parties to adapt to their individual commercial and technical requirements.

Key Provisions to Be Included

According to the Guidelines, a BESC should address, among others the following matters:

• Roles and responsibilities of the RED: The RED must undertake to supply energy in accordance with prudent utility practices.
• Rights of the Green Consumer: The Green Consumer should be accorded clear rights concerning the quality of the energy supplied.
• Project information: The BESC should specify the installed capacity, project location, commencement and commercial operation dates, interconnection points, and metering arrangements.
• Energy sales and payment structure: The contract must outline the tenure of supply, applicable tariff or pricing mechanism, and terms of payment.
• Billing and metering: It should set out the billing cycle, calculation methodology, statement issuance, meter reading procedures, dispute mechanisms for billing inaccuracies, and record-keeping obligations.
• Operational and emergency procedures: The BESC should contain provisions on scheduling, planned maintenance, supply interruptions, and emergency response coordination between the RED and the Green Consumer.
• Force majeure and suspension: The BESC should address events beyond the control of either party and outline the circumstances under which the supply or purchase of energy may be suspended.
• Green attribute arrangements: The BESC should include information on any green attribute arrangement, if applicable. This may cover matters such as the existence, ownership, or transfer of renewable energy certificates (RECs) or equivalent instruments, where relevant to the parties’ commercial arrangement.
• Governing law and applicable regulations: The BESC should clearly specify the governing law, relevant statutes, and regulations that apply to the supply and purchase of renewable energy under the CRESS framework.

Why the BESC Matters?

The BESC is not merely a procedural or regulatory requirement. It serves as the commercial foundation of the CRESS framework, providing both the RED and the Green Consumer with a clear and dependable contractual structure.

A well-crafted BESC brings several key advantages:

• It provides legal certainty by defining the rights, obligations, and liabilities of each party;
• It enhances bankability by offering financiers visibility over the revenue and payment arrangements;
• It ensures operational clarity, particularly on metering, billing, and performance obligations; and
• It supports regulatory compliance by aligning the contractual relationship with Suruhanjaya Tenaga’s requirements.

In the absence of a properly structured BESC, both parties risk uncertainty over pricing adjustments, maintenance obligations, or response procedures during supply interruptions. Such ambiguity often give rise to disputes and operational inefficiencies.

The Road Ahead

As more corporations pursue their sustainability goals through the CRESS framework, the BESC is expected to become an integral component of Malaysia’s renewable energy market. Each BESC should be carefully structured to reflect the commercial realities of the underlying project while remaining consistent with applicable regulatory principles and good industry practice.

Both REDs and Green Consumers are encouraged to undertake proper contract preparation and negotiation. The time and diligence invested at this stage constitute a vital foundation for ensuring the stability, fairness, and long-term success of the renewable energy relationship.

Conclusion

The BESC under CRESS is, at its core, a privately negotiated agreement between the RED and the Green Consumer. Despite guided by the Guidelines, it allows both parties the flexibility to structure commercial and operational terms that best suit their respective objectives and project realities.

For the RED, a well-prepared BESC provides commercial certainty and clarity on delivery, performance, and payment obligations. For the Green Consumer, it establishes confidence in energy quality, reliability, and cost transparency. Ultimately, the effort invested in negotiating and documenting the BESC is not mere formality, it is a practical step toward building a fair, balanced, and sustainable business relationship between the contracting parties.

This Article is written by Yeo Shu Pin (Partner) of Messrs. Shu Pin & Associates.

Disclaimer: Every attempt to ensure the accuracy and reliability of the information provided in this publication has been made. This publication does not constitute legal advice and is not intended to be used as a substitute for specific legal advice or opinions. Please contact the author(s) for a specific technical or legal advice on the information provided and related topics.