The Intergovernmental Frame Overlooks the Permitting Layer
When a Malaysian state announces an electricity export programme, the first question is which actor can legally and commercially commit to each part of the transaction. The treaties, ministerial meetings and regional plan sit with national governments. The generation, the land, the state utility’s balance sheet and much of the permitting sit below that level. Treating the ASEAN Power Grid as purely intergovernmental therefore misplaces several of the actors who would actually have to perform.
Sarawak illustrates the gap. Its electricity export ambitions are state-level in origin and national in permission. A Malaysian state government and its utility can build, own and contract in ways a national ministry cannot simply order. Yet the authority to send electricity across a border remains a federal and bilateral matter. Those two facts generate the risk that sits between them.
A structure-taxonomy approach is more useful here than a project inventory. It separates commercial offtake and credit, physical transfer and dispatch, and sovereign permission to export. The axis is the capacity each actor can commit, rather than ownership of the asset. This keeps the analysis from collapsing Sarawak into either a purely national project or a purely state one.
Project finance institutions lend against cash flows. If the offtake contract is with a state utility, the lender is lending to that utility’s balance sheet, not the state government’s. The permit is a condition precedent but does not transfer credit risk. That is why separating the capacities matters before a single megawatt is contracted.
Sarawak’s Export Programme Begins Below the Federal Level
In May 2026, Sarawak’s Utility and Telecommunication Minister Julaihi Narawi said the state plans to export more power to neighbouring countries as part of efforts to realise the Borneo Power Grid and the ASEAN Power Grid, according to a Market Research Malaysia report. That statement is state-level policy, not a federal commitment. It carries no permit status and no contracted capacity. It does, however, put the state’s intention on the public record.
The minister’s framing matters because it places exports inside the state’s own development strategy. The state can pursue commercial offtake and generation, but the border permission remains federal. The state’s ability to build and contract proceeds in parallel with, not in place of, the federal export authorisation.
The state government and the state utility are separate actors. Sarawak Energy Berhad is the utility associated with the state’s generation base, but its project-level proposals are distinct from government policy. The state government supplies the policy intent. The Malaysian federal ministry responsible for energy supplies the cross-border permission, and the instruments that assign those roles cannot be swapped.
Malaysia’s federal guide for cross-border electricity sales is one instrument that assigns part of the permission. According to the ASEAN Centre for Energy’s March 2025 policy insight, the CBES Guide establishes two distinct schemes: one for non-renewable exports and one for renewable cross-border trade. That guide is a federal document, not a Sarawak one. It frames the border even when the generation sits inside the state.
Three Capacities Kept Apart
Sarawak’s position is easier to read when three capacities are kept apart: commercial offtake and credit, physical transfer and dispatch, and sovereign permission to export. A state utility may hold the first, part of the second, and none of the third. The distinction matters because each capacity carries a different risk and a different path to cost recovery.
Commercial offtake is the ability to sign a power purchase agreement and stand behind it financially. Where the licence allows a state entity to contract, a Sarawak utility could be the seller. Price risk then sits with the utility, because the buyer’s obligation runs to the utility’s balance sheet, not the federation’s. If the utility cannot deliver, the credit problem is the utility’s, and the cost recovery question begins at the state level.
Cost recovery follows from that layer. A utility that signs a contract can seek to recover its costs through the tariff it charges the buyer or through regulated revenue. The federal export licence does not by itself create a cost recovery mechanism for a failed contract. The path runs through the commercial instrument first.
Physical transfer is the grid access and dispatch arrangement. The state utility may control generation and part of the network, but the cross-border link is a separate matter. The CBES Scheme distinguishes existing and dedicated interconnections, with different rules depending on destination. Under the non-renewable scheme, exports to Singapore are capped at 100 MW and limited to the existing interconnection, while exports to Thailand require a dedicated line because existing infrastructure cannot be used. That distinction sits at the physical layer before any commercial question arises.
The renewable scheme adds a different ceiling. Up to 300 MW can flow to Singapore over existing interconnections, while Thai exports require new transmission lines that must be approved by relevant authorities and aligned with Thailand’s grid expansion plan. The 300 MW figure describes a transfer capacity rather than a contractual guarantee. It bounds what the physical layer can accept without saying who bears curtailment when the interconnection is constrained.
Sovereign permission is the export licence or bilateral arrangement that makes the transfer lawful across a border. The federal ministry holds this capacity. For renewable cross-border sales, the CBES RE Scheme runs through ENEGEM, a platform that handles auctions and renewable energy certificate issuance. That platform adds an auction and certificate layer to the commercial transaction, even when the offtake obligation sits with a state utility.
The Credit, Dispatch and Curtailment Risk Between State and Federation
Once the capacities are separated, the risks become visible. The commercial layer carries price risk: a fixed-price power purchase agreement fixes the buyer’s cost and leaves the seller exposed to where the market moves over the contract term. Generation risk sits separately, in whether the plant delivers the output the contract assumes, and credit risk in whether the counterparty pays. The physical layer shapes dispatch control and curtailment. A dedicated interconnection may be built on a schedule set by planning authorities, not by the state utility. The sovereign layer sets whether the transaction can proceed at all.
The CBES RE Scheme’s 300 MW ceiling for Singapore over existing interconnections matters because it bounds physical capacity without resolving who bears curtailment when available transfer capacity falls. For Thailand, the requirement that new lines be approved and aligned with Thailand’s grid plan pushes timing risk onto the physical layer. A Sarawak utility could have a signed offtake contract while the dedicated line remains unbuilt. In that gap, the liability is not clearly assigned to either the state or the federation.
ENEGEM adds another layer. Renewable cross-border sales run through a platform that handles auctions and renewable energy certificate issuance, which means part of the price formation sits outside the state utility’s direct bilateral discretion. This shifts some commercial control away from the state utility while leaving the physical asset base with the state. The result is a structure in which credit and curtailment risk sit between the state and the federation, and no single actor clearly holds both.
The federation can block an export by withholding the licence or declining the bilateral arrangement. The harder question is whether the state utility can then recover what it has already spent on generation and network readiness. In a structure where the state builds and the federation permits, the cost of a stalled export tends to fall on the builder, unless a specific agreement transfers it elsewhere.
When the Export Does Not Proceed
If the export does not proceed, the layers point to different losses. A state utility that signed a power purchase agreement without the line would face a take-or-pay exposure or a stranded asset on its own balance sheet. A federal ministry that withheld or delayed an export licence would not automatically absorb that loss, because a licence grants permission rather than guaranteeing the underlying transaction. The practical question is whether the exporting entity, as a state-owned utility, can push the cost recovery onto the state budget or the federal system.
The review of Malaysia’s CBES Guide does not settle that question. It assigns the export schemes, capacity limits and interconnection rules, but it is silent on who bears the liability when an approved scheme stalls. The state holds much of the asset base; the federation holds the border. Credit and curtailment risk sit between them. When the exporting entity is not the sovereign, that gap remains unresolved.
Industry readers can track the sequence of instruments rather than the headline export target. A signed power purchase agreement without a dedicated line indicates commercial exposure ahead of physical delivery. A completed line without an export licence indicates a stranded physical asset. The point where those instruments align is the point where the risk transfers.
References
- ASEAN Centre for Energy, Policy Insight – Malaysia: Guide For Cross-Border Electricity Sales (CBES), 7 March 2025. https://aseanenergy.org/publications/policy-insight-malaysia-guide-for-cross-border-electricity-sales-cbes
- Market Research Malaysia, Sarawak Power Export: Battery of ASEAN Guide Report. https://marketresearchmalaysia.com/insights/articles/sarawak-power-export-momentum-how-the-battery-of-asean-could-light-up-singapore-and-beyond
