Electric supply is listed as one of the basic amenities of sustainable development in Malaysia. Under this key contributing factor, the sustainable development goal aims to ensure universal access to an affordable, clean, and reliable energy service. To support the generation capacity in years to come, distributed generation is conceptualized through stages upon its implementation in the power system network. However, the rapid establishment growth of distributed generation technology in Malaysia will invoke power quality problems in the current power system network. In order to prevent this, the current government is committed to embark on the development of renewable technologies with the assurance of maintaining the quality of power delivered to consumers. Therefore, this research paper will focus on the review of the energy prospect of both fossil fuel and renewable energy generation in Malaysia and other countries, followed by power quality issues and compensation device under a high renewable penetration distribution network. The issues and challenges of distributed generation are presented, with a comprehensive discussion and insightful recommendation on future work of the distributed generation. In accordance with the addressed highlights in this paper, it would serve as the criterion on upcoming revolution of distributed generation integrated along with the traditional network in Malaysia.