Feed in Tariff: Malaysia Case Studies

Khadijah bt Mohamad SyayutiResearch Officer, MEng (Mechanical)Malaysia Japan International Institute of TechnologyUniversiti Teknologi MalaysiaEmail: khadijahsyayuti@gmail.com

Climate Change “is the greatest market failure the world has seen”.

Nicholas Stern – British Climate Economist

This analysis from Nicholas Stern (British Climate Economist) has stimulated decision makers in many countries to consider new approaches to energy policy.

Energy is the most important factor in human development, but our present dependence on fossil fuels is in danger of causing untold harm to future generations.

Renewable energy (RE) is the best overall solution to climate, energy and economic security.

Renewable energy for the future The big challenge for the renewable energy industry

has been to make the cost of clean energy competitive with heavily-subsidized conventional energy.

Householders or energy companies who wanted to install wind turbines or solar panels have been faced with lengthy pay-back times.

They have been forced to make a choice based on ethics rather than economics.

Without increased consumer demand and political measures to facilitate access to the market, manufacturers for wind turbines and solar photovoltaic (PV) panels, cannot produce the unit volumes needed to bring prices down and drive technological innovation

The Feed-In Tariff (FIT) has proven to be the most effective policy instrument in overcoming these barriers

A feed-in tariff is a policy mechanism or government initiative, designed to encourage rapid development of renewable energy (energy that comes from renewable resources such as wind, sun and water)

This simple, low-cost mechanism has turned several European countries into world leaders in the renewables sector.

FiT Mechanism in General

Malaysia National RE target

Assumptions: Feed in Tariff implemented

Source: KeTTHA, SEDA

FiT in Malaysia

3 success factors for FiT Implementation in Malaysia: RE Act 2011

- Enforced 1 December 2011 RE Fund

- 1% surcharge to electricity consumers Implementing agency

- Sustainable Energy Development Authority Development (SEDA) enforced 1 September 2011

FiT implementation in Malaysia

Malaysia's Feed-in Tariff (FiT) system obliges Distribution Licensees (DLs) to buy from Feed-in Approval Holders (FIAHs) the electricity produced from renewable resources (renewable energy) and sets the FiT rate.

The DLs will pay for renewable energy supplied to the electricity grid for a specific duration.

FiT mechanism would ensure that renewable energy becomes a viable and sound long-term investment for companies industries and also for individuals.

Source: Sustainability Energy Authority Development (SEDA)

The following RE resources will be eligible for FiT:• Biomass (including solid waste);• Biogas (including landfill gas & sewage);• Small-hydro; and• Solar PV.

Feed in Tariff rates

Source: Greenpurchasingasia.com, SEDA

Renewable Energy Fund

Established through the enforcement of the Renewable Energy Act 2011.

Important part of the FiT mechanism which has been approved by the Government to spear head the growth of the renewable energy in the country

RE Fund is currently funded through the following resources:

a) An initial funding of RM300million from the Treasury;

b) A 1% surcharge collected from consumers’ electricity bill – except for domestic consumers with electricity consumption of less than 300kWh/month or consumers currently paying electricity bill of less than RM77 per month. The non-domestic consumers will contribute to the 1% regardless of their amount of electricity used in that month

Sample of TNB bills

Installed Capacity of Plants

Source: SEDA

Source: SEDA

Example of project under FiT

Cypark Integrated Renewable Energy Park• Biggest grid-connected solar farm in Malaysia to start

production March28th 2012

• It will supply electricity from its 8 MW capacity solar farm to the national and under a Renewable Energy Power Purchase Agreement (REPPA) signed with Malaysia utilities giant Tenaga Nasional Berhad (TNB) at a tariff of 95 sen (US$0.30) per kWh for the next 21 years

• It is the first utility-scale solar plant in Malaysia to operate since the country’s feed-in tariff (FiT) scheme was launched on December 1st 2011

Location: Pajam, Negeri Sembilan, Malaysia Ownership: Cypark Resources Berhad (CRB)Company founded: 1998 by Tan Sri Razali Ismail, KK Siow and Daud AhmadTotal investment: RM100 million Area: 26 ha Total: 32,000 solar PV panels (phase 1)Output: 8 MW

ConclusionFiT is the key for Malaysia to cut dependency on

fossil fuel.

Supported with policies, projects and programmes designed to cut carbon emission and manage energy efficiently to be effective, particularly in sectors including power generation, transport, urban planning, water and waste management, and agriculture.

Critical to cultivate a culture of making informed decisions to promote efficient energy management to reduce electricity consumption and indirectly it reduces our own carbon footprint.

Reference Feed in Tariff and Renewable Energy Fund in Brief,

Parliament of Malaysia. Oct 2013 www.seda.com.my Feed-In Tariffs – Boosting Energy for our Future: A Guide to

one of the world’s best environmental policies. World Future Council.

Thank you!