Key Takeaway
- Malaysia is leveraging biodiesel as an immediate buffer against rising diesel prices and global supply shocks.
- Palm oil gives Malaysia a unique advantage, allowing it to produce fuel locally instead of relying entirely on imports.
- Hydrogen is being developed as a long-term energy play, with projects in Sarawak targeting future regional export markets.
- Solar adoption is growing steadily, especially among businesses, but still faces cost, grid, and scalability challenges.
- The broader goal is clear: reduce dependence on external energy markets and build resilience against future crises.
On April 14, 2026, the Malaysian government announced a major near-term fuel policy shift: raising the national biodiesel blend mandate from B10 to B15, beginning with B12.
Economy Minister Akmal Nasrullah Mohd Nasir said the move would lean on Malaysia’s existing blending infrastructure and available biodiesel capacity to strengthen supply resilience during the current regional energy disruption.
The timing is significant:
- The closure of the Strait of Hormuz
- Iran-US war seem to be dragging on
- Diesel prices that hit RM 5.97 (16th April).
Yet beneath the doom gloom headlines, we believe that Malaysia is well equipped to not only weather the storm, but also resist the shocks.
Biodiesel: Palm Oil and Supply
Let’s start with palm oil.
Malaysia is in a fairly unique position here. While many countries need to import feedstock to produce biofuel, we already have a large domestic palm oil base to work with.
In 2025, Malaysia produced 20.28 million tonnes of crude palm oil (CPO), which gives the country a strong foundation for biodiesel.
That matters for a few reasons.
- Fuel can be sourced locally, instead of relying fully on imported diesel
- Infrastructure already exists, including refineries and blending facilities
- Policy framework is already in motion, with Malaysia moving from B10 towards B15
So this is not a case of starting from scratch.
Another important point is that Malaysia is not yet using its full biodiesel production capacity, and that is actually a strength.
In 2025, biodiesel production was about 975,000 tonnes, while installed capacity stood at 2.36 million tonnes.
That gap tells us a few things:
- Malaysia can still increase output without having to build everything from zero
- Biodiesel production can be ramped up faster during supply shocks
- Existing capacity gives the country some buffer when global oil markets become unstable
In simple terms, we already have more room to move than many people realise.
Why The Blend Increase Matters
When the national blend goes up from B10 to B12, and later to B15, the impact is straightforward.
- More palm-based fuel enters the system
- Less diesel needs to come from imported fossil sources
- Fuel supply becomes a bit more resilient with each step.
It may not sound dramatic on paper, but even a gradual increase helps reduce exposure to global price spikes and supply disruptions.
So Why Not Just Jump Straight to B100?
This is the obvious question.
If biodiesel is useful, why not just go all the way?
Because the issue is not only whether B100 can work. The bigger question is if the whole system can handle it smoothly.
A nationwide overnight move to B100 would create several challenges.
1) Compatibility and maintenance concerns.
A pilot project led by FELDA has been running B100 biodiesel in passenger vehicles, covering over 50,000 kilometres across more than a year of usage.
It sounds impressive but just like solar panels, scaling nationwide is a different story.
Not every engine is designed for long-term B100 use, and fuel behaviour in storage, transport, and day-to-day operation can vary.
2) Logistics implications
Malaysia’s transport, distribution, and industrial supply chains are still built around conventional diesel.
A sudden switch would affect fleets, fuel handling systems, and businesses that depend on stable diesel supply.
“If you ever watch the 1996 movie Chain Reaction, you will have a rough idea of why.”
3) Question of scale
Palm oil is one of Malaysia’s most versatile and economically important commodities.
Today, it is used across three major areas:
- Food: Staple ingredient in both domestic consumption and global food supply chains
- Export: Revenue driver for Malaysia, with strong demand from major markets like India, China, and the EU
- Fuel: An increasingly important component in biodiesel as the country pushes toward higher blend mandates
Every tonne of palm oil can only go into one of these buckets. Increasing biodiesel production means redirecting supply from somewhere else, be it export volume or food-related use.
Hydrogen: New Energy Hope
If biodiesel is what helps Malaysia manage the present, hydrogen is where the country is positioning for the future.
Where Hydrogen Is Actually Taking Shape
Right now, hydrogen development in Malaysia is heavily concentrated in Sarawak. Here are some of the facts:
- Kuching
- Hydrogen production and refuelling facility (since 2019)
- Hydrogen buses already in pilot use
- Smart tram (ART) systems being tested
- Bintulu
- Planned large-scale hydrogen projects
- Focus on future export potential
- Johor (Pengerang area)
- Early-stage studies for hydrogen and ammonia use in industry and power
Note that this is not a nationwide rollout and it is very much still in its infancy stage. As for why Sarawak specifically, it has:
- Strong hydropower base (Bakun, Murum dams)
- More stable renewable supply compared to solar-heavy regions
- Better conditions for producing green hydrogen at scale
Hydrogen is only as clean as the energy used to produce it.
The Scale Malaysia Is Aiming For
Hydrogen is not being treated as a side project, there are very ambitious goals the country had set out to achieve.
- Around RM12 billion in hydrogen-related revenue by 2030
- A potential RM400 billion hydrogen economy by 2050
At the same time, production costs in Sarawak are projected to fall to around USD 2.60 per kg by 2030, with further reductions possible as technology improves.
Those numbers matter because they determine if hydrogen stays as a pilot concept or becomes commercially competitive.
Not Just for Domestic Use
Malaysia is not just thinking about using hydrogen locally, we have partnered with other countries too.
| Country | Partnership | Project | Why It Matters |
|---|---|---|---|
| Japan | PETRONAS + ENEOS Corporation | Hydrogen-to-MCH project, Kerteh (Terengganu) | Enables hydrogen export using existing oil tanker infrastructure. |
| South Korea | SEDC Energy + Samsung Engineering, POSCO, Lotte Chemical | Project H2biscus, Bintulu (Sarawak) | Produces green hydrogen for conversion into export-ready ammonia. |
| Singapore | Gentari + Singapore energy firms | Project VMS (cross-border initiatives) | Supports regional hydrogen supply and cross-border energy integration. |
| China | Various early-stage engagements | Potential hydrogen and ammonia supply chains | Represents future demand market under exploration. |
| Australia | SEDC Energy + H2X Global | Hydrogen mobility and technology collaboration | Focused on technology development and vehicle applications. |
| Brunei | Regional ASEAN energy discussions | Cross-border hydrogen potential | Part of emerging regional energy cooperation conversations. |
Solar: The Middle child of renewable energy
Solar in Malaysia sits in an interesting spot.
It is not as immediate as biodiesel, and not as forward-looking as hydrogen. Perlis, in particular, has become a visible solar hotspot, with Large Scale Solar (LSS) activity tied to locations like Chuping and Kangar
How Much Solar Has Malaysia Adopted?
Solar adoption has grown steadily over the past few years.
By end-2025, Malaysia’s installed solar capacity reached about 5.8 GW (5,777 MW), driven mainly by LSS rollouts and rooftop uptake under schemes that transitioned from NEM to Solar ATAP.
This still forms a relatively small share of total electricity generation, which is still largely powered by gas and coal.
Where Adoption Is Strongest
Solar uptake in Malaysia is not evenly distributed.
Stronger adoption:
- Factories and warehouses
- Commercial buildings (malls, offices)
- Higher-income residential homes
Slower adoption:
- Mass residential housing
- SMEs with limited upfront capital
- Rural areas with infrastructure gaps
This is why solar often grows top-down, starting with businesses, then gradually moving to households.
The Challenges Holding Solar Back
Despite the growth, there are still some constraints.
Cost is the first hurdle: Even though prices have dropped, installation still requires upfront capital, especially for households.
Solar is not always available: It only generates during the day, and output varies with weather. Without storage, it cannot fully replace traditional energy sources.
The grid still matters: Not all areas can handle high levels of solar integration, which can slow down expansion.
Policy helps, but has limits: Earlier programmes like NEM had quotas, and while Solar ATAP is more flexible, adoption still depends on awareness and execution.
And then there is space: Not every rooftop is suitable, which naturally caps how far rooftop solar can go.
Conclusion: Building Energy Independence, One Step at a Time
Malaysia’s shift toward alternative energy is driven by necessity and we have been through multiple shocks before.
- Asian Financial Crisis exposed how vulnerable the economy can be to external forces, with sharp declines in trade and energy demand.
- COVID-19 pandemic disrupted supply chains and forced the government to deploy over RM530 billion in stimulus just to stabilise the economy.
- Iran-related conflict affecting the Strait of Hormuz is once again reminding the region how exposed it is to global fuel disruptions.
Each crisis looks different, but the underlying lesson is the same.
Dependence on external energy markets comes with risk.
At PRESS PR Agency, we are always watching how shifts like these unfold.
Energy, policy, and geopolitics are increasingly connected. What starts as a supply disruption can quickly become a headline, and eventually, a structural change in how industries operate.
We keep a close eye on the stories that shape these transitions, so businesses can respond early, position clearly, and stay relevant.
Disclaimer: This article is for general informational purposes only and reflects publicly available information as of 16 April 2026. It does not constitute financial, investment, legal, engineering, or policy advice. Energy prices, regulations, project timelines, and technical feasibility can change quickly.
Source:
- Bernama — Govt move to raise biodiesel blend mandate (B10 → B15 starting with B12), plus related context (Apr 2026):
- S&P Global Commodity Insights — Malaysia biodiesel: installed capacity (2.36m mt), 2025 output (~975k mt), and blend policy context (Apr 14, 2026):
- MPOB (Malaysian Palm Oil Board) — Overview of the Malaysian Oil Palm Industry in 2025 (CPO production 20.28m tonnes; PDF):
- Reuters — Strait of Hormuz disruption framing (“shut/effectively shut” / severe restrictions) (Apr 9, 2026):
- Free Malaysia Today — Malaysia weekly fuel price update incl. diesel RM5.97/L for 16–22 Apr 2026 (Peninsular):
- Sarawak Energy — Launch of SE Asia’s first integrated hydrogen production plant & refuelling station; hydrogen buses (May 27, 2019):
- MOSTI — Malaysia Hydrogen Economy & Technology Roadmap (HETR) (targets incl. RM12.1b by 2030; >RM400b by 2050) (Oct 2023; PDF):
- Royal Norwegian Embassy / “Hydrogen mapping in Malaysia” report — modelled Sarawak green H₂ cost ~US$2.61/kg around 2030 (May 2023; PDF):
- PETRONAS — PETRONAS + ENEOS commercial-scale hydrogen-to-MCH project (Kerteh) press release (Mar 11, 2022):
- Samsung E&A — Project H2biscus (Sarawak/Bintulu) project listing/details:
- SEDA Malaysia — Solar ATAP programme page; transition from NEM and implementation details
- PV Magazine — Malaysia solar capacity surpasses ~5.7 GW / 5,777 MW by end-2025 (Apr 3, 2026):
- ISEAS — Malaysia COVID-19 support packages total ~RM530b; breakdown context (PDF)
Frequently Asked Questions About Biodiesel, Hydrogen, Solar
What Is Biodiesel and How Is Malaysia Using It?
Biodiesel is a renewable fuel made from palm oil in Malaysia. The government is increasing blending levels from B10 to B12 and B15 to reduce reliance on imported diesel.
Why Doesn’t Malaysia Just Switch to B100 Biodiesel?
A full switch to B100 is not practical yet due to engine compatibility, supply chain adjustments, and the need to balance palm oil usage between food, export, and fuel.
How Much Solar Energy Has Malaysia Adopted?
Malaysia has installed around 2.5 to 3.0 GW of solar capacity, mainly from large-scale solar farms and rooftop systems under programmes like NEM and Solar ATAP.
What Is Solar ATAP and How Does It Work?
Solar ATAP is Malaysia’s newer rooftop solar programme replacing NEM. It allows homes and businesses to generate solar energy and export excess electricity back to the grid.
Is Hydrogen Energy Already Being Used in Malaysia?
Hydrogen is still in early stages, with pilot projects in places like Kuching and Bintulu. It is mainly being developed for future use and export, not widespread domestic adoption yet.
Why Is Malaysia Investing in Alternative Energy Now?
Malaysia is reducing dependence on global oil markets after past shocks like the Asian Financial Crisis, COVID-19, and current geopolitical tensions affecting fuel supply and prices.
