Energy demand in Malaysia has increased steadily over the past years attributed to consistent decline in reserved crude oil and natural gas resources. However, till do date the primary energy supply still comes from coal, natural gas and crude oil while the contribution of renewable fuel in National energy mix is only 10% which is 2080 megawatts. Efforts have been taken by Malaysian government to increase the electricity generation through renewable energy sources; one of it is implementation of feed in tariff mechanism, where it permits independent power producers to generate electricity from renewable sources and sell to national grid. Currently, most of power producers considering palm mill effluent as a promising source to produce biogas for electricity generation via gas engine. The aim of this paper is to address the current progress of biogas industry in Malaysia, issue and challenges and way forward to accelerate the growth of biogas industry. Besides, this paper also highlighted cattle manure as potential feedstock for biogas generation and barriers to build biogas plant in cattle farm for electricity generation. Finally, highlighted the importance of co-digestion technology for Malaysia for sustainable biogas production.