Electricity bills in Malaysia can become a significant household and business expense. For consumers served by Tenaga Nasional Berhad (TNB) in Peninsular Malaysia, electricity charges now consist of several components, including energy, capacity, network and retail charges. Depending on the tariff category, Time-of-Use (ToU) rates and maximum-demand charges may also apply.
Installing a solar photovoltaic (PV) system can reduce electricity purchased from the grid by generating electricity on-site, particularly during daylight hours when solar production is highest. The actual savings depend on the property’s electricity consumption profile, tariff category, solar system size and how much solar energy is consumed directly on-site.
1. Understanding the Current TNB Electricity Tariff Structure
From 1 July 2025, Peninsular Malaysia operates under the current electricity tariff structure for Regulatory Period 4 (RP4), which runs until 31 December 2027. The previous residential block-tariff structure of 21.80, 33.40, 51.60, 54.60 and 57.10 sen/kWh is no longer the current general domestic tariff structure.
Residential Electricity Tariff
Under the current general domestic tariff, the published rates are:
- Energy charge: 27.03 sen/kWh for monthly consumption of up to 1,500 kWh
- Energy charge: 37.03 sen/kWh for monthly consumption above 1,500 kWh
- Capacity charge: 4.55 sen/kWh
- Network charge: 12.85 sen/kWh
- Retail charge: RM10 per month
- Domestic consumers using 600 kWh or less per month are exempt from the retail charge.
This means that a customer’s electricity bill is no longer accurately described simply as a series of increasingly expensive residential consumption blocks.
Domestic consumers may also have access to a Domestic ToU tariff, under which the energy charge differs between peak and off-peak periods. The applicable rates are 28.52 sen/kWh during peak periods and 24.43 sen/kWh during off-peak periods for consumption up to 1,500 kWh.
Commercial and Industrial Electricity Tariffs
Non-domestic customers are classified according to factors such as supply voltage and tariff structure.
For example, under the current tariff schedule:
- Low-voltage non-domestic general customers have an energy charge of 27.03 sen/kWh, plus capacity, network and retail charges.
- Medium-voltage general customers have an energy charge of 29.83 sen/kWh, together with capacity and network charges based on maximum demand.
- Medium-voltage ToU customers are charged different energy rates during peak and off-peak periods.
- High-voltage customers similarly have different energy, capacity and network charges depending on their tariff category.
Therefore, businesses should not assume that one universal “peak tariff” or one universal commercial electricity rate applies to all TNB customers.
2. Time-of-Use (ToU) and Maximum Demand
For customers on ToU tariffs, electricity consumed during peak periods carries a higher energy charge than electricity consumed during off-peak periods.
The exact peak and off-peak periods depend on the applicable tariff schedule. Therefore, solar savings should be assessed against the customer’s actual TNB tariff rather than assuming that peak hours are always 8:00 AM to 10:00 PM.
For eligible medium- and high-voltage customers, electricity bills can also contain charges based on Maximum Demand (MD).
TNB defines Maximum Demand as the highest level of electrical demand recorded during the billing period. It is calculated from the largest electricity consumption measured over a consecutive 30-minute period.
Solar PV can potentially reduce MD charges when solar generation is available at the time the customer’s maximum grid demand occurs. However, solar does not automatically reduce MD charges. The actual effect depends on the customer’s load profile and whether solar generation coincides with the recorded maximum-demand period.
3. The Variable Factor: Automatic Fuel Adjustment (AFA)
A major change from the previous tariff structure is the replacement of the Imbalance Cost Pass-Through (ICPT) mechanism with the Automatic Fuel Adjustment (AFA) mechanism from July 2025.
AFA allows monthly adjustments to generation charges based on factors including fuel prices, costs under power purchase and service agreements, renewable-energy displaced costs and other generation costs.
This means that electricity-generation costs can vary over time rather than remaining completely fixed.
When a solar PV system generates electricity that is consumed directly on-site, that electricity does not need to be purchased from the TNB grid. This can reduce the customer’s exposure to the applicable grid energy charges, including the variable generation-related component incorporated through the tariff mechanism.
However, solar does not eliminate every component of the electricity bill. Fixed, capacity, network, retail and other applicable charges may still remain depending on the customer’s tariff and billing arrangement.
4. How Solar PV Reduces Electricity Costs
Solar PV systems generate electricity during daylight hours, with production generally highest around the middle of the day. The exact generation profile varies according to weather, system orientation, shading and location.
The most important financial benefit is therefore self-consumption: using solar electricity directly at the property instead of purchasing the same electricity from the grid.
Residential Solar
For a household, solar electricity can reduce the amount of electricity purchased from TNB during daylight hours.
For example, if a home is consuming electricity while the solar system is producing power, the solar generation can supply part of that household load directly.
The resulting savings depend on:
- Total household electricity consumption
- Daytime electricity consumption
- Solar system size
- Solar generation profile
- Applicable TNB tariff
- Amount of solar electricity consumed directly
- Amount of excess electricity exported to the grid
Solar savings should therefore be calculated using the customer’s actual electricity consumption rather than assuming that every solar kWh automatically offsets the highest historical tariff block.
Commercial and Industrial Solar
For businesses, solar can be particularly valuable where significant electricity consumption occurs during daylight hours.
Potential benefits include:
- Reducing grid electricity purchases during solar-production hours
- Reducing exposure to applicable peak energy charges for customers on ToU tariffs
- Potentially reducing Maximum Demand when solar output coincides with the customer’s demand peak
- Reducing exposure to variable generation-related costs on electricity that is no longer purchased from the grid
The actual savings should be determined from the customer’s hourly or interval electricity consumption and the applicable TNB tariff.
5. Solar ATAP and Exporting Excess Solar
Malaysia’s current consumer solar programme is Solar Accelerated Transition Action Programme (Solar ATAP).
Solar ATAP allows consumers to install solar PV primarily for self-consumption while allowing surplus electricity to be exported to the grid, subject to the programme’s requirements and applicable technical conditions.
Under Solar ATAP:
- Domestic consumers receive bill credits for eligible excess electricity exported to the grid based on the applicable Energy Charge.
- Non-domestic consumers receive bill credits based on the applicable Average System Marginal Price (SMP).
- The programme is designed around self-consumption, with surplus generation eligible for export subject to the programme rules.
This is different from simply saying that all exported electricity receives the same value as the customer’s retail electricity rate.
Because of this, a properly sized solar system should aim to maximise useful on-site consumption while taking the applicable export-credit mechanism into account.
6. What This Means for Solar Savings
Solar PV does not make a customer completely independent from TNB and does not remove every component of the electricity bill.
Instead, its primary financial benefit comes from reducing the amount of electricity that must be purchased from the grid.
For a residential property, the strongest savings generally come from using solar generation directly during the day.
For a commercial or industrial property, savings can be greater when the business has substantial daytime electricity consumption, particularly where the applicable tariff includes higher peak energy charges or Maximum Demand charges.
The actual return on investment depends on the solar system price, system size, electricity consumption, tariff category, solar generation, self-consumption rate, export credits and future electricity costs.
7. Solar ROI: Why Each Property Should Be Calculated Individually
There is no single payback period that applies to every Malaysian solar installation.
A residential system may achieve an attractive payback where the property has relatively high electricity consumption and good daytime solar utilisation. Commercial and industrial systems can also achieve attractive returns, but the result depends heavily on tariff structure, load profile, Maximum Demand, system size and available incentives.
Instead of promising a fixed “4–6 year” or “3–5 year” payback for every customer, the more accurate approach is to calculate the expected savings from the property’s actual electricity bill and consumption profile.
The Bottom Line
Solar PV provides a practical way to reduce dependence on grid electricity by generating power on-site during daylight hours.
The greatest value comes from using solar electricity directly, while excess generation can be handled through the applicable Solar ATAP export mechanism.
For homes and businesses considering solar, the most accurate savings assessment should consider the customer’s actual TNB tariff, consumption pattern, daytime load, solar system size and expected solar generation rather than relying on outdated tariff-block assumptions.
In short, solar does not simply “replace the most expensive TNB tariff block”. It reduces the customer’s overall requirement to purchase electricity from the grid, with the financial benefit determined by the tariff and the way the solar energy is used.