Looking Back On The Growth Of Malaysia’s RE Resources Looking Back On The Growth Of  Malaysia’s RE Resources Previously, we briefly discussed the d...

Looking Back On The Growth Of Malaysia’s RE Resources Looking Back On The Growth Of  Malaysia’s RE Resources Previously, we briefly discussed the development of the Feed-in Tariff (FiT) in Malaysia as well as the successes stemming from its implementation from the standpoint of SEDA Malaysia’s FiT Division.

In this issue, we are taking the opportunity to go into detail while also summarising the Division’s experiences with each renewable energy (RE) resource, namely solar PV, biogas, biomass, and small hydropower.

SOLAR PV                                                                Under the FiT mechanism, homeowners were able to install solar PV systems with an installed capacity of up to 12kW within their residential compounds by applying through the individual quota.

From 2011 to 2013, applications were processed on a first-come-first-served basis through the e-FiT system.

Nonetheless, the high demand for individual quota generated significant amount of traffic to the e-FiT system during each quota opening.

Accordingly, ICT introduced the New Queue System in 2014 to enhance the application process through the online system.

Demand for individual quota far exceeded supply, thus a decision was made whereby applicants who were not successful in obtaining a quota in 2014 would be given the 2015 quota.

In anticipation of the high volume of applicants in subsequent years, SEDA introduced e-balloting for the 2016 and 2017 quota whereby the individual queue number is determined randomly by an automated system.

Commercial and industrial solar PV developers are able to participate in the FiT program through the non-individual quota.

Unsurprisingly, the demand for non-individual quota far exceeds the supply.

Quota in this category was awarded via a first-come-first-served basis when FiT first started.

However, a balloting system was introduced in 2014 onwards to ensure a fair award of projects in light of the high volume of applicants for PV projects up to 425kW.

Solar PV projects above 425kW and up to 1MW had to apply through manual submissions.

Projects in this category were assessed under a merit-point based system in 2014 and 2015, while a pass-fail criteria method was adopted in 2016.

In order to ensure that FiT projects are fairly distributed among small and major players, SEDA imposed a maximum limit for new PV installations at 1MW from 2014 onwards.

Such a move prevents a single major company from seizing a large stake of the FiT quota, which consequently denies smaller players to participate.

Accordingly, imposing a maximum limit in the installed capacity of a PV installation would benefit small local players to develop their expertise in the field, with the hopes of becoming a major player in the future so that such companies can eventually compete internationally.

Gading Kencana, Atlantic Blue, and Ditrolic Solar are among the PV installer companies with humble beginnings but have now been able to secure PV development projects internationally and take part in utility-scale solar projects.

SEDA also introduced a special category for communities under the solar PV quota.

This was to ensure communities eligible for applications – namely places of worship, schools, and care centres – were able to apply without having to compete with commercial applicants.

For the community quota, though it seems that every year the quota is not fully subscribed, it was observed that there were a myriad of communities getting more interested in RE on a yearly basis.

The word would get around the communities of this programme and many would enquire and try to find ways to participate.

Unfortunately, most of the time, lack of funding creates a barrier.

But to those who are able to get sponsors, they are now enjoying extra income while also educating their own community on RE.

Some are also trying their hand at ‘crowdfunding’ to kickstart their community’s installations.

BIOGAS                                                                                                    After a slow uptake in the beginning, biogas picked up with a big demand for its quota due to the revision of the landfill bonus definition to include agriculture waste in 2014; the increase of the bonus FiT rate for the use of locally manufactured or assembled gas engine technology from RM0.01/kWh to RM0.05/kWh; and the Malaysian Palm Oil Board (MPOB) mandating the implementation of biogas capture for all new palm oil mill applications from January 1, 2014 and for existing mills applying for expansions throughout the country.

The demand now far exceeds the annual allocation of biogas quota.

The overwhelming interest in the biogas quota paved the way for the emergence of a number of project development and investment companies specialising in biogas projects, e.g.

Cenergi, GLT, and Green & Smart.

Even local gas engine assemblers are stepping into the biogas game, such as Sime Darby Industrial.

Biogas plant developers tend to opt for gas engines that are locally assembled given that installations that use local engines will be entitled to an additional five cents on top of their basic FiT rate.

As for biogas projects from landfills, we have a number of landfill concessionaires that have applied for the biogas quota, namely KUB-Berjaya, Cypark, and SWM.

Moving forward, biogas projects will be the key driver for FiT as there will no longer be quotas for solar PV past 2017 in the foreseeable future.

BIOMASS                                                                   Biomass has been the most challenging resource in terms of implementation and the farthest from the targeted capacities.

Biomass for power generation is of the lowest value in terms of economic returns for a palm oil mill (POM) owner, hence the emphasis on generating power is low on the priority list.

In addition, empty fruit bunch (EFB) has many competing uses aside from burning for power generation.

EFB applications include mulching, pelletisation, and composting into organic fertiliser.

As such, the various applications of EFB makes the feedstock highly competitive, thus leading to feedstock shortages and price escalations.

Ideally, for power generation from biomass to work, the initiative should be driven by the POM owners themselves (i.e.

owners of the waste) to ensure a constant supply of feedstock.

Technology-wise, Malaysia is still on a learning curve on how to optimize the EFB fuel treatment to yield the best energy output, but the technical know-how to improve the fuel treatment process is improving significantly.

Finally, there are also instances where the grid network is unable to cater to the amount of power intended to be injected, since POMs are often located in remote areas.

SMALL HYDRO                                                                   The challenges of small hydropower plants mostly revolve around the need for developers to obtain numerous permits, ensuring commitment from all stakeholders, and meeting the milestones scheduled within a three-year framework.

It has been observed that small hydro developers are unable to complete their projects within the three-year time frame, hence SEDA is in the process of extending the application period to five years instead.

The time needed to obtain the permits, relevant orders, etc.

takes 1.5 times longer on average than anticipated.

RE FUND                                                                   Like other programmes around the world, the implementation of FiT has had its fair share of challenges.

One major component to determine the lifeline of the FiT mechanism is the RE Fund.

The RE Fund is currently derived through a 1.6% contribution collected from consumers’ electricity bills, except for domestic consumers with an electricity consumption of less than 300kWh/month or consumers currently paying an electricity bill of less than RM77/month.

Under the FiT mechanism, payments to Feed-in Approval Holders (FiAHs) are guaranteed from the RE Fund for a period of 21 years for solar PV, small hydro, and geothermal power plants and 16 years for biomass and biogas.

Therefore, quota caps are essential to ensure that there will be adequate funds to make FiT payments to FiAHs throughout their power purchase agreement (PPA) tenures.

However, the collection at 1.6% is insufficient to cater the demand for RE.

Thus, the limited size of the RE Fund prevents the nation from realising its true RE development potential.

In many countries where the FiT system is implemented, quotas on RE installed capacities are highly discouraged as these caps limit RE growth and constrain its impact.

The avoidance of such caps is possible in countries where the electricity tariff is deregulated.

However, in a regulated electricity market such as Malaysia’s, the funding source for FiT is limited to a fixed percentage imposed on the utility’s electricity revenue.

Once the electricity market in Malaysia is deregulated, or when FiT has been operating for a considerable period of time, then the removal of the caps may be possible.

CHALLENGES OF RE DEVELOPMENT                                  Additionally, when FiT was introduced in 2011, it was envisioned that the participants in the market would have been able to obtain the bank loans needed to finance their projects on account of the high degree of security for investors.

Even so, as the field of RE was still new to the local market during the earlier days, the problem faced by RE developers was not the lack of funds in the capital market, but the lack of skills within the financial institutions to evaluate the applications and provide the funds expeditiously.

As such, SEDA continues to put great effort to overcome this issue by providing capacity building through a series of engagements with leading banks and relevant stakeholders from time to time.

Other major hurdles of RE development include the highly subsidised electricity tariff in our country whereby the low tariff is one of the biggest barriers towards RE implementation; the challenge of setting up a new prevailing displaced cost that can be agreed upon by all relevant parties; the urgency of implementing RE is not well understood and not appreciated by some sectors; the long gestation period for the RE market and industry to reach maturity in order for RE to make significant contributions towards our country’s energy mix; and RE being decentralised and spread out throughout the country.

LESSONS LEARNT                                                                   To the countries who are about to embark on their own FiT programmes, such initiatives can be successful given the implementation of appropriate policies coupled with a comprehensive framework and action plan.

It took Malaysia about three years to get FiT off the ground.

It is important to go back to basics instead of completely copying another country’s implementation – policymakers should work with the local ecosystem for any programme to be successful.

A good policy is one that benefits the citizens, the government, and the industry.

The main goal is to acquire buy-ins from network operators/Distribution Licensees.

Having everyone on board is another important factor, from all levels of government and the public – it is all about engagement, engagement, and more engagement.

Strong leadership is also required to push the RE agenda and to drive the FiT programme.

Most importantly, a dedicated and talented team to serve the country’s agenda and implement the programme is key.

SEDA started with a small team of about 30, with about five people overseeing the FiT applications.

This has now grown to only about 15 folks in the FiT division handling over 10,000 applications located all over Peninsular Malaysia, Sabah, and Labuan.

The strong sense of responsibility, team spirit, and dedication make for the successful FiT implementation in Malaysia.

Using technology wherever possible eases the burden on the government and citizens.

In Malaysia, all FiT applications are carried out predominantly via an online portal, the previously mentioned e-FiT system.

This also discourages any unnecessary interaction or intervention where approvals are concerned and ensures a more transparent processing of applications.

Also, with the use of ICT, SEDA does not need to employ a huge number of personnel to implement FiT, thus reducing overheads.

Nowadays, when everybody is into the Internet of Things, other countries may look into having their own system such as that of our e-FiT.

Lastly, remember to start small and only have grander targets once you have built up the resources i.e.

skilled workers, manufacturers, developers, and financial institutions to name a few.

The main hurdle of any energy project is financing.

It will be essential to have local financial institutions to approve the financing for these kinds of projects.

Some countries may need governmental intervention to mandate/incentivise financial institutions to do so.

On the other hand, it could also be possible for a country to establish state-owned financial institutions that provide Green financing.

– courtesy of SEDA Malaysia The Feed-in Tariff (FiT) Division, led by Director Gladys Mak.

Feedback for this article was provided by Gladys Mak (Director), Ir.

Zamri Laton, Rubita Hani, Ahmad Syafiq, Koh Keng Sen, Frederick Wong, and Nur Haziqah of the FiT Division..

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