A recent report from Maybank Investment Bank highlights the significant financial benefits of large-scale solar (LSS) projects over traditional palm oil ventures. According to the report, LSS plants can generate operating profits 54 times higher per hectare than oil palm plantations. These projects, often called solar farms, use large-scale photovoltaic (PV) systems to harness solar energy across wide areas.
Malaysia’s Solar Program Profitability
Capable of generating anywhere from hundreds of kilowatts to tens of thousands of megawatts, solar farms in Malaysia operate under the government’s Large-Scale Solar (LSS) program. This initiative allows farm owners to sell electricity back to the grid at a guaranteed rate.
Maybank estimates a 1-gigawatt (GW) solar project spanning 1,500 to 1,700 hectares could generate an annual income between RM134 million and RM266 million. By contrast, the average operating profit per hectare for Malaysia’s oil palm sector has been approximately RM4,444 over the past decade.
Image: Collected
Major Malaysian palm oil companies with large plantations in prime locations—such as Sime Darby Plantation Bhd, Kuala Lumpur Kepong Bhd, and IOI Corp Bhd—are well-positioned to benefit from exploring solar energy projects. Other firms, including Genting Plantations Bhd, TH Plantation Bhd, and United Plantations Bhd, could also consider similar initiatives.
However, Maybank cautions that not all agricultural land is suitable for LSS projects. A site must be relatively flat and located near the national grid for efficient interconnection.
Solar’s Financial Edge Over Palm Oil
The financial appeal of solar ventures is further highlighted by Maybank’s findings, which note that some plantation companies are already leasing land to LSS farms for double or triple the per-hectare returns of oil palm cultivation. This arrangement allows planters to enjoy immediate rental income without the seven-year waiting period typically required for oil palm replanting.
Rather than simply leasing their land, Maybank encourages plantation companies to become LSS project operators themselves. This approach would maximize land value while supporting Malaysia’s national policy of reducing fossil fuel reliance and transitioning to a renewable energy economy.
The Sustainable Energy Development Authority of Malaysia estimates that renewable energy will contribute 40% of the national energy mix by 2035, with solar energy playing a significant role.
Ultimately, Maybank’s report demonstrates how solar energy can boost both energy diversification and profitability in the palm oil sector. By embracing these renewable solutions, Malaysia can move toward a more balanced and sustainable approach to energy and agriculture.
