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Malaysia’s renewable energy ecosystem continues to expand, supported by regulatory frameworks such as Corporate Renewable Energy Supply Scheme (CRESS), Community Renewable Energy Aggregation Mechanism (CREAM), and Solar Accelerated Transition Action Programme (ATAP). These mechanisms enable consumers and corporations to generate, consume, or procure renewable energy within a structure guided by Suruhanjaya Tenaga (ST).

While most developers and investors understand that regulatory approvals are required, the specific compliance details are often overlooked particularly by foreign investors entering the Malaysian market for the first time. These gaps, although unintentional, can lead to delays in commissioning, complications during financing, and in some cases, challenges in securing the necessary approvals.

1. Licence Holder’s Status

Pursuant to the Criteria and Documents Required for License Application (Below 5MW) issued by ST[1], only a locally incorporated entity may apply for and hold a licence under the SELCO, Net Energy Metering (NEM) (now replaced with ATAP), Supply Agreement with Renewable Energy (SARE) framework. This means that if the Power Purchase Agreement (PPA) or SARE is executed by a foreign entity (eg: a Singaporean or Chinese investor), ST may reject the license application on the basis that the applicant is not a qualified entity for the license.

In our experience, this is one of the most common pitfalls faced by foreign developers or investors seeking to operate directly in Malaysia. The practical solution is to establish a Malaysian-incorporated project company (SPV) that can validly hold the necessary licences.

2. Land Tenure and Site Control

Another frequent issue arises from land tenure, which is often overlooked despite being critical in demonstrating the applicant’s legal right to occupy and use the premises for solar installation. The applicant must be able to show proper site control through ownership documents, a registered lease, or a valid tenancy agreement. In practice, however, it is common to encounter outdated or incomplete records, such as tenancy agreements that have expired or leases that have not been formally renewed. When this happens, ST will typically seek clarification, and this additional step can delay the approval process. This challenge is particularly prevalent in rooftop installations within industrial parks or rented factory lots, where documentation relating to site control is not always maintained or updated in a timely manner.

3. Technical and Professional Certification

All engineering drawings and technical submissions must be certified by a Professional Engineer (PE). This requirement extends beyond design drawings as it applies to as-built plans and electrical single-line diagrams (SLDs) submitted for approval.

4. Capacity Studies and Grid Integration

For systems above 425kW, the submission of a Power System Study (PSS) is compulsory. The PSS assesses the potential impact of the solar installation on the distribution network and determines whether the grid can safely accommodate the proposed capacity. In many cases, TNB will not proceed with connection approval without a satisfactory PSS, making it a critical requirement in the overall project development timeline.

5. Operational and Regulatory Documentation

Before commissioning, the following documents are typically required:

• Form G (Supervision and Completion Certificate) and Form H (Test Certificate); and
• A valid Chargeman’s certificate or appointment letter.

These documents are not mere administrative checkboxes. They form part of the technical and legal record required by ST before a system can be energised and operated lawfully.

6. Foreign Participation and Structuring Considerations

Malaysia continues to draw strong interest from foreign investors, particularly from China and Singapore, who are familiar with regional PPA and investment structures but may not be fully aware of the licensing and regulatory nuances under Malaysian law. These gaps often surface during the project structuring and approval stages. Common issues include the following:

• Foreign investors may engaged local EPC contractor(s) to design, supply and install the solar PV system, but these foreign investors cannot hold the relevant licence or own the rooftop asset unless they are incorporated as a Malaysian entity.
• Even where a local special-purpose vehicle (SPV) has been established, its shareholding structure must comply with Malaysian regulatory expectations. Any inconsistencies may result in additional queries or in more serious cases, an inability to obtain the necessary licence or approval

To avoid such challenges, it is advisable to engage legal counsel with experience in both project structuring and licensing requirements, ensuring that regulatory considerations are addressed early and incorporated appropriately into the project documentation

7. Why Compliance at the Outset Matters

Licensing under PPA or SARE whether under the SELCO or NEM (now replaced with ATAP) scheme may appear procedural, but in practice, it is a critical step that shapes the project’s legal and financial viability. A properly licensed installation provides confidence to financiers, insurers, and counterparties that the project is compliant, secure, and capable of long-term operation. Conversely, overlooking a licensing condition can result in unnecessary rectifications, penalties, or even the inability to connect the system to the grid.

[1] Accessible at chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://oas.st.gov.my/documents/22711/35469a92-c517-477b-930f-36a455a10c56

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.