Malaysia’s shift toward renewable energy is gaining pace, supported by national solar initiatives like the Net Energy Metering (NEM) scheme. Designed to reward solar users for exporting excess energy to the grid, NEM has evolved significantly over the years.
NEM 2.0, introduced in 2019, accelerated adoption with its generous structure. Its successor, NEM 3.0, brought a more segmented and scalable approach to meet growing demand.
This article compares NEM 2.0 and NEM 3.0 in terms of design, eligibility, financial benefits, and implementation to help you understand which scheme best aligns with your solar investment goals.
What Changed from NEM 2.0 to NEM 3.0?
NEM 2.0 was designed as a straightforward, unified system where all user categories benefited from a 1:1 offset. This included residential, commercial, industrial, and even agricultural sectors. Every kilowatt-hour (kWh) of exported solar energy was credited at the full retail rate, creating highly attractive financial returns for all participants.
NEM 3.0 brought a more sophisticated and segmented structure. Residential users were assigned to the NEM Rakyat programme, while government entities were grouped under NEM GoMEn. These two programmes maintained the 1:1 mechanism.
Meanwhile, commercial and industrial users were placed under NEM NOVA, which introduced market-based export rates known as the System Marginal Price (SMP).
This new pricing model better reflects real-time electricity market values, but reduces the financial appeal compared to the fixed retail rate offered under NEM 2.0.
Who Is Eligible Under Each Programme?
Eligibility for the NEM scheme has evolved alongside its structure, expanding access while tailoring benefits to different user groups.
Who Is Eligible for NEM 2.0?
During its run from 2019 to 2020, NEM 2.0 was open to four broad sectors: Residential, Commercial, Industrial, and Agriculture. It offered a total quota of 500 MW, with 80% of this capacity taken up by commercial and industrial users, who were quick to take advantage of the favourable 1:1 offset structure.
Who Is Eligible for NEM 3.0?
Introduced in 2021, NEM 3.0 restructured eligibility into more targeted programmes:
- NEM Rakyat: Caters to residential users, expanded from 100 MW to 700 MW due to strong demand, and retains a 1:1 offset for a 10-year contract.
- NEM GoMEn: Designed for government buildings, with a dedicated 100 MW quota and a continued 1:1 offset mechanism.
- NEM NOVA: Targets commercial and industrial users, allocated 1,700 MW, and allows virtual aggregation across up to three premises under the same ownership.
Which NEM Programme Offers Better Financial Returns?
NEM 2.0 offered a universal 1:1 offset for all users. NEM 3.0 introduced segmented programmes with varying rates. Residential users retained the 1:1 rate, while businesses under NOVA received market-based rates.
Residential Users
For homeowners, the financial returns under both NEM 2.0 and NEM 3.0 remain largely consistent. This is because the 1:1 offset was maintained in both versions, continuing to offer reliable savings.
Most residential solar systems achieve:
- Payback periods of 5 to 7 years
- Internal Rate of Return (IRR) of approximately 12% to 15%
While NEM 3.0 did not introduce major changes for this group, slight improvements in returns can be attributed to falling installation costs rather than policy updates.
Commercial and Industrial Users
The impact was more significant for commercial and industrial participants. Under NEM 3.0’s NOVA programme, users shifted from retail-rate offsets to the System Marginal Price (SMP), which typically ranges from RM 0.20 to RM 0.24 per kilowatt-hour.
This transition led to:
- A decrease in IRR by around 3 to 4 percentage points
- Longer payback periods by an additional 1 to 2 years
Even with reduced margins, solar remains a financially viable option for businesses, especially those that optimise self-consumption and make use of virtual aggregation across multiple properties.
How Do the Two Programmes Work Operationally?
Both NEM 2.0 and NEM 3.0 are overseen by the Sustainable Energy Development Authority (SEDA) Malaysia, with regulatory oversight from the Energy Commission and technical support from Tenaga Nasional Berhad (TNB). While the core application process has remained largely the same across both schemes, key improvements were introduced under NEM 3.0.
One major enhancement was the streamlining of administrative procedures through digitalisation. This reduced the average application approval time from around 60 days under NEM 2.0 to approximately 45 days under NEM 3.0.
A notable operational difference lies in the credit rollover period.
- Under NEM 2.0, users could roll over excess energy credits for up to 24 months.
- With NEM 3.0, this period was shortened to 12 months, after which any unused credits are forfeited.
Despite these differences, both versions maintain a 10-year contract period. After this term ends, systems continue to operate under a self-consumption model, without the ability to export excess energy for credits.
What Is the Environmental Impact of NEM in Malaysia?
The 500 MW installed under NEM 2.0 generates about 700 GWh of clean electricity annually, avoiding roughly 483,000 tons of CO₂ emissions. By the end of 2022, NEM 3.0 added another 400 MW, contributing to an additional 386,400 tons of emission reductions.
Despite these gains, challenges remain. High upfront installation costs still limit access for lower-income households and small businesses. The grid is also under growing pressure as solar adoption rises, which may require future infrastructure upgrades.
Lastly, adoption remains uneven. Most solar installations are concentrated on the west coast of Peninsular Malaysia, highlighting the need for more balanced regional development.
What’s Next for Net Energy Metering in Malaysia?
Looking ahead, Malaysia’s NEM programme is expected to evolve by incorporating energy storage systems (ESS). These systems allow users to store excess solar energy and use it later, especially during peak demand periods. This reduces reliance on the national grid and improves overall system flexibility.
As battery prices continue to fall, pairing solar with storage could become a common feature of NEM participation. This marks a shift from a one-size-fits-all model to a more tailored approach. In the future, rates and rules may vary depending on the user’s energy profile and how they contribute to the grid.
Power Your Transition to Solar with a Partner Built for Malaysia
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FAQ
1. What is the difference between NEM 2.0 and NEM 3.0 in Malaysia?
NEM 2.0 offered a universal 1:1 offset for all users, while NEM 3.0 introduced separate programmes. NEM Rakyat retains the 1:1 rate for homeowners, but commercial users under NEM NOVA receive market-based export rates.
2. Is NEM 3.0 still available in Malaysia?
Yes, NEM 3.0 is available until 2025 or until the programme quotas are fully subscribed. Quotas remain under NEM Rakyat for residential users and NEM NOVA for businesses.
3. Which is better: NEM 2.0 or NEM 3.0?
NEM 2.0 was more financially beneficial for commercial users due to its fixed 1:1 export rate. NEM 3.0 offers similar benefits for homeowners but lower returns for commercial users due to market-based export pricing.
4. How long is the NEM contract in Malaysia?
Both NEM 2.0 and NEM 3.0 offer a 10-year contract period. After this term, the system switches to a self-consumption model without export credits.