Impacts of net energy metering (NEM) and self-consumption schemes on Malaysia's wholesale electricity market

The increasing adoption of Net Energy Metering (NEM) and self-consumption schemes in Malaysia has begun to reshape the dynamics of the country’s wholesale electricity market. This paper investigates the implications of NEM and self-consumption schemes on wholesale market price formation, grid dispatch operations, and utility revenue stability. Using time-series energy export data, grid demand profiles, and tariff structures from the Energy Commission and Tenaga Nasional Berhad (TNB), the study develops a simulation model to quantify the effects of variable prosumer generation on marginal cost-based electricity pricing. The findings reveal that high penetration of NEM systems during mid-day hours leads to a “duck curve” effect, flattening wholesale demand and suppressing system marginal prices, especially in peak solar regions such as Selangor and Johor. Furthermore, the paper evaluates the potential revenue erosion for traditional generators and the implications for long-term investment in centralized capacity. Policy analysis indicates that while NEM enhances grid decentralization and promotes RE participation, it introduces market design challenges related to fairness, grid cost recovery, and demand forecasting. The study concludes with recommendations for regulatory reform, including dynamic feed-in tariffs, capacity-based billing models, and grid service compensation mechanisms to ensure that Malaysia’s electricity market remains sustainable, equitable, and investment-attractive in the face of accelerating distributed generation.