LocationsPowering Rural Entrepreneurship: How Renewable Energy Drives Local Economies
January 26, 2026
According to the Department of Statistics Malaysia (DOSM), Malaysia has achieved 99.4% electrification rate as of 2024.
Yet behind this figure, many villages in remote areas of Pahang, Perak, and Sabah still face unreliable electricity supply and limited connectivity. As a result, the communities are often forced to rely on fuel-powered generators, which are costly, inconsistent, and difficult to maintain.
The lack of stable supply of electricity constrains entrepreneurship, agricultural productivity, and income generation, further widening rural-urban gaps.
Against this backdrop, International Clean Energy Day – observed annually on January 26 – serves as a reminder that clean energy is not only about decarbonisation, but also about people, livelihoods, and equity.
For communities in remote parts of Malaysia, where stable power remains a luxury, access to clean and reliable electricity can be transformative and unlocks opportunity, resilience, and hope for local economies.
Solar PV off-grid system in Ulu Papar, Sabah, designed to complement the existing micro-hydro mini-grid and enhance overall energy capacity
Transforming Communities, One Village at a Time
Implemented by UNDP Malaysia and funded by the Ministry of Finance, the Green and Resilient Recovery (GRR) Local Action Grant demonstrates how clean energy can unlock local potential, reduce poverty gaps, and strengthen rural economies. Across 16 villages in Pahang, Sabah, and Sarawak, GRR has supported the installation of solar photovoltaic (PV) and micro-hydro mini systems that go beyond lighting homes.
Women preparing fruits for the dehydration machine and using ice to store fresh produce, extending shelf life
With reliable energy, farmers can process and store produce, artisans can expand production, and small businesses can operate beyond daylight hours, reaching new markets and sustaining income streams. Renewable energy has become a catalyst for rural entrepreneurship.
A Pathway to Inclusive, Low-Carbon Growth
GRR shows that the transition to a low-carbon future must also be inclusive and equitable. By co-designing solutions with communities and strengthening local capacities, rural livelihoods improve, and socio-economic disparities narrow. These locally tailored approaches contribute to sustainable development while supporting Malaysia’s renewable energy targets 31% by 2025 and 40% by 2035 under the National Energy Transition framework.
A 30 kW solar PV system, providing electricity to 29 households and the local community hub
Electricity is fundamental but not enough
Access to energy lays the foundation for development, but electricity alone cannot drive lasting change. GRR adopts an integrated approach, pairing renewable energy with technical training, entrepreneurial support, and business skills development. Communities are empowered to manage enterprises sustainably and take ownership of their growth.
Corn feed produced by corn mill and sewing machine powered by solar energy
Today, 25 community-driven businesses most of them women-led are emerging as catalysts for inclusive development. Their progress illustrates how energy access, combined with capacity building, can deliver durable socio-economic benefits. This approach exemplifies a Just Transition, ensuring low-carbon development leaves no community behind.
Scaling Solutions: Horizontal and Vertical Impact
Many remote communities across Malaysia still face similar challenges. GRR’s model goes beyond energy provision by ensuring communities have the capacity to operate and maintain systems sustainably over the long term.
- Horizontal scalability involves replicating community-tailored off-grid solutions such as solar mini-grids, micro-hydro systems, and hybrid models in other hard-to-reach villages. In Sabah alone, more than 400 unelectrified communities have been identified as suitable for renewable mini-grid deployment, underscoring both the scale of need and opportunity (SabahRE2RoadMap)
- Vertical scalability focuses on enhancing the capacity of existing systems by addressing site-specific challenges and strengthening local capabilities, including technical, digital, and green skills, to ensure sustainable adoption, operation, and long-term impact.
Looking Ahead
The GRR experience highlights the value of participatory planning, cross-sector partnerships, and sustained investment in skills and enterprise development. A forthcoming policy brief will capture these lessons and offer actionable recommendations for policymakers, practitioners, and communities seeking to scale clean energy solutions advancing Malaysia’s Just Transition toward a future that is both green and socially inclusive.
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