Solar Power Surpasses Palm Oil in Profitability: Maybank Report

A groundbreaking analysis by Maybank Investment Bank has revealed a significant shift in land-use profitability, indicating that large-scale solar (LSS) projects can generate operating profits up to 54 times higher per hectare than traditional oil palm plantations. This finding positions solar farms, which utilize vast arrays of photovoltaic systems, as a far more lucrative venture for landowners in Malaysia.

A Stark Financial Contrast

The financial disparity is striking. According to Maybank’s data, a 1-gigawatt (GW) solar installation spanning 1,500 to 1,700 hectares could produce a recurring annual income between RM134 million and RM266 million. In stark contrast, the average operating profit for Malaysia’s oil palm sector has hovered around RM4,444 per hectare over the last decade. These solar projects operate under Malaysia’s Large-Scale Solar (LSS) program, which provides a framework for power producers to sell electricity to the national grid at guaranteed prices.

A Strategic Opportunity for Plantation Giants

This economic reality presents a pivotal opportunity for major palm oil producers with extensive land holdings. Companies such as Sime Darby Plantation Bhd, Kuala Lumpur Kepong Bhd, and IOI Corp Bhd are ideally situated to leverage their assets for solar energy development. Other industry players, including Genting Plantations Bhd and TH Plantation Bhd, could also tap into this profitable trend. The report notes that some planters are already leasing land to LSS developers for returns that are double or triple what palm oil cultivation provides, offering immediate income without the typical seven-year wait for replanted palms to mature.

However, Maybank proposes a more integrated strategy than simply leasing land. The bank encourages these agricultural giants to become LSS project operators themselves, thereby maximizing the value of their land and directly contributing to Malaysia’s renewable energy goals. This move aligns with the national objective to have renewable sources constitute 40% of the country’s energy mix by 2035.

Pathways to a Sustainable Future

While the financial incentive is clear, the report adds a note of caution, stating that not all agricultural land is suitable for solar development. Prime locations for LSS projects must be relatively flat and situated near grid interconnection points for viability. Ultimately, Maybank’s findings illustrate a powerful synergy between agriculture and energy, where embracing solar power can significantly enhance profitability while advancing Malaysia’s transition away from fossil fuels toward a more sustainable and diversified economy.

Sources

1. June 4 Green Energy News
2. [PDF] Maybank Social Impact Report 2024
3. [PDF] Solarvest x Brookfield
4. Maybank remains optimistic on Malaysia’s renewable energy sector …
5. Malaysia’s Renewable Energy Sector Outlook And The Arrival Of …
6. ESG in Focus: Malaysia’s Power Sector’s Path Towards Net Zero
7. [PDF] Maybank Environmental Report 2024
8. [PDF] Maybank Sustainability Report 2024
9. Solar power could generate 54X more profits than palm oil – MIDA
10. Solarvest Holdings Wins MYR89.5m LSS5+ Solar Project … – Minichart