STUDY ON PRIVATE-INITIATIVE INFRASTRUCTURE PROJECTS
IN DEVELOPING COUNTRIES IN FY2011
Study on the Solar Photovoltaic Power Generation Projects
in the Federation of Malaysia
FINAL REPORT
February 2012
Prepared for:
The Ministry of Economy, Trade and Industry
Prepared by:
Nippon Koei Co., Ltd
ORIX Corporation
Reproduction Prohibited
Preface
This report is based on the result of our “Study on Private-Initiative Infrastructure Projects in
Developing Countries”. Related tasks were delegated to Nippon Koei Co., Ltd. and ORIX
Corporation in fiscal year 2011, by the Ministry of Economy, Trade and Industry.
The Study on the Solar Photovoltaic Power Generation Projects in the Federation of Malaysia
involves conducting a survey to determine the implementability of the project, which is estimated to
cost JPY 2.3billion. The project is intended to produce power, generated by a 10 MW solar
photovoltaic power system, for the suburb of Ipoh in the State of Perak. Its implementation is
expected to be under the Feed-in Tariff mechanism, which is introduced for the promotion of
renewable energy in Malaysia.
We hope this report will contribute to the realization of the project mentioned above, and serve as
reference for related organizations in Japan.
February 2012
Nippon Koei Co., Ltd.
ORIX Corporation
Proposed Project Site
Proposed Project Site
Map Source: Made by Study Team based on
CIA World Factbook / Department of Surveyand Mapping, Malaysia
Abbreviation
BM Build Margin
BoS Balance of System
CDM Clean Development Mechanism
CEMD Conservation and Environmental Management Divisor
CF Cash Flow
CM Combined Margin
COP Conference of the parties
DL Distribution Licensee
DNA Designated National Authority
DOE Department of Environment
EC Energy Commission
EIA Environmental Impact Assessment
EIRR Economic Internal Rate of Return
EPC Engineering Procurement Construction
EPU Economic Planning Unit
ESCO Energy Service Company
FIRR Financial Internal Rate of Return
FiT Feed-in Tariffs
FOB Free on Board
GDP Gross Domestic Product
GEF Global Environmental Facility
GHG Green House Gas
IPP Independent Power Producer
IRR Internal Rate of Return
ITA Investment Tax Allowance
JBIC Japan Bank for International Cooperation
JICA Japan International Cooperation Agency
JPY Japanese Yen
kW kilowatt
kWh kilowatt hour
MBIPV Malaysia Building Integrated Photovoltaic
Mboe Million Barrel of Oil Equivalent
MEGTW Ministry of Energy, Green Technology and Water
METI Ministry of Economy, Trade and Industry
MJ Megajoule
MNRE Ministry of Natural Resources and Environment
MTOE Million Ton of Oil Equivalent
MW Megawatt
MWh Megawatt hour
NCCDM National Committee on CDM
NEDO New Energy and Industrial Technology Development Organization
NK Nippon Koei Co., Ltd
NOx Nitrogen Oxide
NREPAP The National Renewable Energy Policy and Action Plan
NSCCC National Steering Committee on Climate Change
OECD Organization for Economic Co-operation and Development
OLM ORIX Leasing Malaysia
OM Operating Margin
ORIX ORIX Corporation
PJ Petajoule
PS Pioneer Status
PSS Power System Study
PTM Pusat Tenaga Malaysia
PV Photovoltaic
RE Renewable Energy
REPPA Renewable Energy Power Purchase Agreement
RM Ringitt Malaysia
SEB Sarawak Energy Berhad
SEDA Sustainable Energy Development Authority
SESB Sabah Electricity Sdn. Berhad
SOx Sulfur Oxide
SPC Special Purpose Company
SSE Site Suitability Evaluation
TNB Tenaga National Berhad
TOE Ton of Oil Equivalent
UNDP United Nations Development Programme
UNFCCC United Nations Framework Convention on Climate Change
Contents Executive Summary
Chapter 1 Overview of the Host Country and Sector
(1) Economy and Financial Situation ..................................................................................... 1-1
1) Economic Condition ......................................................................................................... 1-1
2) Financial Condition .......................................................................................................... 1-1
(2) Outline of the Project Sector ............................................................................................. 1-2
1) Energy Basic Policy .......................................................................................................... 1-2
2) Organizations Related to Energy Policy ........................................................................... 1-3
3) Trend of Prime Energy in Malaysia .................................................................................. 1-5
4) Trend of Electricity Supply and Demand in Malaysia ...................................................... 1-6
5) RE Policy .......................................................................................................................... 1-7
6) NREPAP ........................................................................................................................... 1-9
7) Sustainable Energy Development Authority (SEDA) ..................................................... 1-10
8) FiT Mechanism ............................................................................................................... 1-11
(3) Conditions in the Targeted Areas .................................................................................... 1-17
Chapter 2 Study Methodology
(1) Scope of Survey ................................................................................................................ 2-1
(2) Survey Organization ......................................................................................................... 2-2
1) Homework in Japan .......................................................................................................... 2-2
2) Field Survey in Malaysia .................................................................................................. 2-2
3) Selection Method of the Project Site ................................................................................ 2-2
4) Study Organization ........................................................................................................... 2-4
5) Organization Related to the Project .................................................................................. 2-5
(3) Study Schedule .................................................................................................................. 2-5
1) Study Schedule ................................................................................................................. 2-5
2) Terms of Field Survey and Study Contents ...................................................................... 2-5
Chapter 3 Justification, Objectives and Technical Feasibility of the Project
(1) Background and Necessity ................................................................................................ 3-1
1) Scope of the Project .......................................................................................................... 3-1
2) Analysis of Present State and Future Forecast .................................................................. 3-2
3) Impacts of the Project Implementation ............................................................................. 3-3
4) Comparison between the Proposed Project and Other Feasible Projects .......................... 3-3
(2) Study Required for Decision on Contents of the Project .................................................. 3-4
1) Demand Forecasting ......................................................................................................... 3-4
2) Understanding and Analysis on the Problems for Consideration and Decision of the Project
Contents ............................................................................................................................ 3-9
3) Review of Technical Measures ....................................................................................... 3-10
(3) Planned Outline of the Project ........................................................................................ 3-13
1) Basic Policy for Deciding the Scope of the Project ........................................................ 3-13
2) Conceptual Design and Specifications............................................................................ 3-14
3) Contents of the Proposed Project .................................................................................... 3-17
4) Problems and Solutions Related to the Proposed Technology and System .................... 3-23
Chapter 4 Evaluation of Environmental and Social Impacts
(1) Analysis on Environmental and Social Impacts ................................................................ 4-1
1) State Analysis .................................................................................................................... 4-1
2) Future Forecast (If Project is Not Implemented) .............................................................. 4-2
(2) Environmental Improvement Effects by the Project ......................................................... 4-3
(3) Project Influence on Environmental and Social Sectors ................................................... 4-6
1) Environmental and Social Items to be Considered ........................................................... 4-6
2) Comparison between the Proposed Project and Other Feasible Projects ........................ 4-14
3) Discussion with Implementing Agencies ........................................................................ 4-14
(4) Outline of Related Laws and Regulations on Environmental and Social Considerations4-14
1) Outline of the Related Laws and Regulations for the Implementation of the Project ..... 4-14
2) Contents of EIA in the Host Country .............................................................................. 4-15
(5) Measures to be Taken by Host Country Government to Achieve Project Objectives ..... 4-17
Chapter 5 Financial and Economic Evaluation
(1) Project Cost Estimate ........................................................................................................ 5-1
1) Outline of Cost Estimation ............................................................................................... 5-1
2) Contents of the Cost Estimation ....................................................................................... 5-1
3) Verification of Cost Estimation ......................................................................................... 5-4
4) Site Layout and Single Line Diagram of 1 MW System .................................................. 5-5
5) Prospect of Cost Estimation for Future 10 MW System ................................................... 5-8
(2) Results of the Preparatory Financial and Economic Evaluation ..................................... 5-10
1) Conditions Precedent for the Project .............................................................................. 5-10
2) Result of the Evaluation .................................................................................................. 5-12
Chapter 6 Planned Project Schedule
Chapter 7 Implementing Organization
Chapter 8 Technical Advantages of Japanese Company
(1) Forms of Participation by Japanese Company (Investment, Equipment Supply, Operational
Management) .................................................................................................................... 8-1
1) Investment and Finance .................................................................................................... 8-1
2) Equipment Supply ............................................................................................................ 8-1
3) Operational Management .................................................................................................. 8-1
(2) Technical and Economic Advantages of Japanese Company ............................................ 8-2
1) Economic Aspect .............................................................................................................. 8-2
2) Technical Aspect ............................................................................................................... 8-3
(3) Measures to Help Japanese Companies Win Contracts .................................................... 8-4
1) Water Floating PV Module ............................................................................................... 8-4
2) Investment to the Project by PV Module Manufacturers .................................................. 8-5
3) PV Module Production at Site .......................................................................................... 8-5
4) Measure to Avoid the Risk due to Currency Exchange Rate Fluctuations ........................ 8-6
Chapter 9 Financial Outlook
(1) Review of the Fund Source and Fund Raising Plan .......................................................... 9-1
(2) Feasibility of Fund Raising ............................................................................................... 9-1
1) Results of Interview with Banks ....................................................................................... 9-1
2) Green Technology Financing Scheme .............................................................................. 9-3
(3) Cash Flow Analysis ........................................................................................................... 9-3
Chapter 10 Action Plan and Issues
(1) Efforts to Realize the Project .......................................................................................... 10-1
1) Realization below the total investment cost of USD 2,500/kW for 10 MW system ....... 10-1
2) Realization of long project finance with low interest rates ............................................. 10-1
3) Securing a less costly project site which can be used for long periods ........................... 10-1
4) Selection of an excellent local enterprise as a business partner ...................................... 10-1
(2) Efforts to Realize the Project by Implementing Organizations in the Host Country ...... 10-2
1) Action of concerned organization ................................................................................... 10-2
2) Result of consultation with MEGTW ............................................................................. 10-2
(3) Legal and Financial Restrictions ..................................................................................... 10-3
(4) Necessity of Additional Detailed Analysis ...................................................................... 10-3
List of Figures
Figure 1-1 GDP growth rate ................................................................................................... 1-1
Figure 1-2 Organization Chart of EPU (as of January 2012) ................................................. 1-4
Figure 1-3 Organization Chart of MEGTW (as of January 2012) ......................................... 1-5
Figure 1-4 Installed Generation Capacity and Maximum Demands in Peninsular Malaysia in
2009 ..................................................................................................................... 1-7
Figure 1-5 Target of Generated Power and Fulfilled Power by RE in the Malaysian Plan .... 1-8
Figure 1-6 Position of SEDA ............................................................................................... 1-10
Figure 1-7 Progress Flow Chart ........................................................................................... 1-15
Figure 1-8 Login Page of the On-line System on SEDA Website ........................................ 1-16
Figure 1-9 Flow of RE fund ................................................................................................. 1-17
Figure 1-10 Map Showing Amount of Solar Radiation in Malaysia .................................... 1-18
Figure 2-1 List of Candidate Sites ......................................................................................... 2-3
Figure 2-2 Organization Chart of the Study Team ................................................................. 2-4
Figure 2-3 Study Schedule ..................................................................................................... 2-5
Figure 3-1 Solar PV System for the Project ........................................................................... 3-2
Figure 3-2 Power Grid in Peninsular Malaysia ...................................................................... 3-5
Figure 3-3 Monthly Peak Demand of Peninsular Malaysia from 2008 to 2010 .................... 3-6
Figure 3-4 Monthly Energy Demand of Peninsular Malaysia from 2008 to 2010 ................. 3-7
Figure 3-5 Estimated Peak Demand and Reserve Margin of TNB from 2010 to 2030 ......... 3-8
Figure 3-6 System Image of Solar PV System ..................................................................... 3-15
Figure 3-7 Situation of Ipoh Site.......................................................................................... 3-19
Figure 3-8 Situation of Kuantan Site ................................................................................... 3-20
Figure 3-9 Situation of Johor Site ........................................................................................ 3-21
Figure 4-1 Organization Chart Related to CDM in Malaysia ................................................ 4-2
Figure 4-2 Outline of Environmental Impact Assessment Procedure .................................. 4-16
Figure 4-3 Application Procedure for Environmental Requirements in Malaysia ............... 4-17
Figure 5-1 Site Layout Drawing ............................................................................................ 5-6
Figure 5-2 Single Line Diagram ............................................................................................ 5-7
Figure 5-3 Implementation Structure (Financing, Consulting Type of Business) ................ 5-10
Figure 5-4 Implementation Structure (Special Purpose Company) ..................................... 5-10
Figure 6-1 Planned Project Schdule ....................................................................................... 6-1
Figure 7-1 Organization Chart of SEDA (as of January 2012) .............................................. 7-1
List of Tables
Table 1-1 Revenue, Expenditure and Overall Balance of the Malaysian Government .......... 1-2
Table 1-2 Trend of Prime Energy Demand in Malaysia ......................................................... 1-6
Table 1-3 Peak Demand and Installed Capacity of Each DL ................................................. 1-6
Table 1-4 Target of Generated Power of RE ........................................................................ 1-10
Table 1-5 RE Capacity Target Under FiT Mechanism ......................................................... 1-11
Table 1-6 FiT Rates for Biogas ............................................................................................ 1-12
Table 1-7 FiT Rates for Biomass ......................................................................................... 1-12
Table 1-8 FiT Rates for Small Hydro ................................................................................... 1-13
Table 1-9 FiT Rates for Solar PV ......................................................................................... 1-13
Table 1-10 Average of Amount of Solar Radiation per Year in Major Cities....................... 1-18
Table 3-1 Solar Radiation (Monthly Average) ..................................................................... 3-22
Table 3-2 Average, Maximum and Minimum Solar Radiaition and Estimated Power
Generation (1 MW System) ................................................................................. 3-22
Table 4-1 Social and Environmental Considerations for PV Power Generation .................... 4-6
Table 4-2 Related Regulations to Prevent Pollution .......................................................... 4-14
Table 5-1 Details of Project Cost (1 MW System) ................................................................. 5-4
Table 5-2 Cost Estimation for Future 10 MW System ........................................................... 5-9
Table 5-3 Outline of Fiscal Incentives ................................................................................. 5-11
Table 5-4 Financial IRR Sensitivity Analysis 1 (1 MW) ..................................................... 5-12
Table 5-5 Financial IRR Sensitivity Analysis 2 (1 MW) ..................................................... 5-13
Table 5-6 Profit and Loss Statement (1 MW) ...................................................................... 5-14
Table 5-7 Precondition (1 MW) ........................................................................................... 5-15
Table 5-8 Financial IRR Sensitivity Analysis 1 (10 MW) ................................................... 5-16
Table 5-9 Financial IRR Sensitivity Analysis 2 (10 MW) ................................................... 5-16
Table 5-10 Profit and Loss Statement (10 MW) .................................................................. 5-17
Table 5-11 Precondition (10 MW) ....................................................................................... 5-18
Table 9-1 Outline of Green Technology Financing Scheme .................................................. 9-3
Table 9-2 Cash Flow Analysis (1 MW) .................................................................................. 9-4
Table 9-3 Cash Flow Analysis (10 MW) ................................................................................ 9-5
Table 10-1 The situation of the quota for solar PV over 500kW ......................................... 10-2
Executive Summary
S-1
(1) Background of the Project
1) Renewable Energy Policy
The development of electricity supply industry is guided by the National Energy Policy (1979), the
Four Fuel Diversification Policy (1981), and the Fifth Fuel Policy (2001).
In the Eighth Malaysian Plan (2001-2005), renewable energy (RE) was announced as the fifth fuel in
the new Fifth Fuel Policy. It is targeted that RE will contribute 5% (500 MW)of the country's total
electricity generation by 2005, which is the end of the Eighth Malaysia Plan period. However, the
electricity generated by RE to the national grid was only 0.12% (12 MW) at the end of 2005.
Due to the unfulfilled target, the Malaysian government proposed the Fifth Fuel Policy to be
continued to the Ninth Malaysian Plan from 2006 to 2010, and made policies to promote further
development of RE sector in the country. By 2010 in the Ninth Malaysian Plan, RE was expected to
contribute 350 MW to the total energy supply in Malaysia. However, at the end of 2010, the
electricity generated by RE to the national grid was still short at 62.3 MW.
In April 2010, the Malaysian government approved the National Renewable Energy Policy and
Action Plan (NREPAP) that would serve as the cornerstone for a more aggressive RE development
in Malaysia.
The Tenth Malaysian Plan (2011-2015) contains goals for the enhancement of the incentive for RE
investment, and for introducing RE by generating 985 MW power until 2015.
Table S-1 Target Generated Power by RE
Year Total RE
(MW)
Share of
RE Capacity
Annual RE
Generation
(GWh)
Share of RE
Generation
Annual CO2
Avoidance
(t-CO2)
2015 985 6% 5,385 5% 3,715,415
2020 2,080 11% 11,246 9% 7,759,474
2030 4,000 17% 17,232 12% 11,889,887
2050 21,370 73% 44,208 24% 30,503,589
Source : Made by Study Team based on “The National Renewable Energy Policy and Action
Plan”
Additionally, the Renewable Energy Act 2011 which incorporated the feed-in tariff (FiT) mechanism
was adopted by the government in April 2011. The FiT mechanism and governmental RE fund were
then introduced in December 2011.
S-2
2) Scope of the Project
The project involves power production business conducted by private entities under FiT mechanism.
The power producer constructs, operates and maintains the solar photovoltaic (PV) power system
and supplies the generated power by the solar PV power system to the Distribution Licensees (DLs).
A Special Purpose Company (SPC) as power producer is formed for the project. The SPC must do
the following tasks for the project:
Preparation of the project site (issue letter of intent to the site owner)
Preparation of working plan, financing plan and technical design
Conduct of power system study for the relevant DLs
Checking of the local governmental requirements and reporting to the local government
Application to Sustainable Energy Development Authority (SEDA) for approval of FiT
holder
Signing of Renewable Energy Power Purchase Agreement (REPPA) with the relevant DLs
Application to Energy Commission (EC) for the approval of public generation license
Financing arrangements
Procurement, construction and commissioning of the solar PV power system
Operation, maintenance and management of the power station
3) Analysis of the Present State and Future Forecast
Solar PV power system seldom fails compared to other power generating systems, and is almost
maintenance free. The risk of the power producer is also limited than in other power generating
systems, as stable amount of solar radiation can be relatively secured throughout the year in
Malaysia. It is noted that the FiT rate for solar PV power system is not sufficient for business.
However, when the construction of the whole project is ensured to be less costly, the business for the
system is expected to sufficiently sustain the project needs.
On the other hand, in the application process to SEDA for the approval of FiT holder, which
commenced in December 2011, it was realized that the requirements will exceed 90% of the general
amount of project capacity applied to solar PV, which is 140 MW.
The quota for the solar PV until the first half of 2014 was closed for several hours after the process
of accepting applications. The examination of the application has been carried out, and the other
applicants, which were not approved, shall be considered in the future.
The initial target amount of the solar PV generation, which is planned under the FiT mechanism in
Malaysia, is 190 MW in 2020.
SEDA issued a notice on a 5 MW limit for each solar PV application.
S-3
4) Impact of the Project Implementation
The following effects are expected in the implementation of the project:
a. Environmental Improvement Effects (Carbon Emission Reduction)
The power generation amount of 1,300 MWh shall be generated by a solar PV power system of 1
MW at the planned site. An annual carbon emission reduction of 873.6 ton CO2 is expected from the
solar PV power system of 1 MW, since the grid emission factor in Peninsular Malaysia is 0.672
t-CO2/MWh.
b. Japanese Manufacturers‟ Entry Into the FiT Market
The project leads to investment promotion for Japan through direct participation of a Japanese
company. Japanese solar PV power system-related manufacturers who have expressed interest in the
project are also willing to directly participate in the project, aside from supplying equipment.
Especially manufacturers of PV modules are suffering price decreasing of modules in the market,
and they are considering that it will be difficult to continue their business by present business model
to just selling modules in future. In case a PV module manufacturer participates in the project,
method of participation to invest the cost of PV modules is clear and the method has high possibility.
Generally, around 60% of the total project cost is the cost of PV modules. Ratio of investment by
Japanese manufacturer will be high and ratio of Japanese product also will be high if Japanese
manufacturer of PV module participates to the project.
(2) Study Concept
The basic policy for deciding the contents of the project is to start with a small scale project. This
will confirm the business circumstance prior to implementing a large scale project. In this Study, the
capacity of the small scale project is set at 1 MW, and thus, the planning and design were conducted
for a 1 MW PV system. The capacity of the large scale project to be implemented afterward shall be
10 MW.
The main features of the concept design and specification for 1 MW PV system are shown below:
System capacity: 1.0 MW
Mode of grid connection: Distribution line, 11 kV, 1 circuit
Power conditioner: Plural number (in case of Japanese make)
Foundation of support structure: Galvanized steel pipes (scaffold pipes) as
pile with concrete reinforcement
Support structure: Galvanized steel pipes(scaffold pipes)
Step-up transformer: 0.4/11 kV, 3 phase, 2 x 500 kVA
Control house: Single-story, reinforced concrete
construction
Meteorological observation system: Solar insolation, ambient temperature,
S-4
and module temperature
Data collection and communication system: Collect meteorological and power data,
and communicate with cell phone
network
The main features of concept design and specification for 10 MW PV system are shown below:
System capacity: 10.0 MW
Mode of grid connection: Distribution line, 33 kV, 2 circuits
Power conditioner: 10 x 1 MW
Foundation of support structure: Galvanized steel pipes (Scaffold pipes)
as pile with concrete reinforcement, or
water floating type
Support structure: Galvanized steel pipes (Scaffold pipes)
Step-up transformer: 0.4/33 kV, 3 phase, 2 x 5 MVA
Control house: Double-stories, reinforced concrete
construction
Meteorological observation system: Solar insolation, ambient temperature,
and module temperature
Data collection and communication system: Collect meteorological and power data,
and communicate with cell phone
network
(3) Outline of the Project
1) Total Cost
The estimated project cost for the 1 MW PV system is JPY 263 million (RM 10.8 million or USD
3.38 million) , for the 10 MW PV system is JPY 2.31 billion.
S-5
Details of the project cost for the 1 MW system are shown in following table.
Table S-2 Details of the Project Cost (1 MW System)
Quoted/Estimated
Unit Price
For 1 MW System
(Unit: RM)
Unit Price Sub Total %
<< Cost of Equipment and Works >>
A PV Module RM/W 4.84 4,840,000 45.01%
B Power Conditioner RM/kW 1,030 1,030,000 9.58%
C Mounting Structure RM/kW 2,122 2,122,000 19.74%
D Other Equipment RM/kW 866 866,000 8.05%
E Civil/Building/Installation Works RM/kW 586 586,000 5.45%
F *1 944,000 8.78%
G Contingency Cost *2 153,000 1.42%
H Technical Services Cost *3 211,000 1.96%
Total RM 10,752,000
( in JPY 263,323,000 )
( in USD 3,382,000 )
<< Yearly Cost of Operation and Maintenance >>
I 30,000
J *4 70,000
Total RM 100,000 /year
( in JPY 2,449,000 )
( in USD 31,000 )
Note:
Each subtotal is rounded up or down to the nearest RM 1,000.
*1: 10% of total of items A to E above
*2: 10% of total of items E and F above
*3: 2% of total of items A to G above
*4: 0.5% of items A, C, D and 3% of item B
Other Works and Cost for Procedures
"in JPY" and in "USD" are rounded up or down to the nearest JPY 1,000 and USD 1,000
respectively.
Source: Study Team based on collected Price Quotation/Information and Analysis
Check and Inspection Cost
Equipment Repair and Replacement Cost
S-6
Meanwhile, the details of the project cost for the 10 MW system are shown in the following table.
Table S-3 Cost Estimation for Future 10 MW System
Quoted/Estimated
Unit Price
For 10 MW System
(Unit: RM)
Unit Price Sub Total %
<< Cost of Equipment and Works >>
A PV Module RM/W 4.60 46,000,000 48.81%
B Power Conditioner RM/kW 979 9,790,000 10.39%
C Mounting Structure RM/kW 1,910 19,100,000 20.27%
D Other Equipment RM/kW 779 7,790,000 8.27%
E Civil/Building/Installation Works RM/kW 527 5,270,000 5.59%
F *1 4,398,000 4.67%
G Contingency Cost *2 967,000 1.03%
H Technical Services Cost *3 933,000 0.99%
Total RM 94,248,000
( in JPY 2,308,190,000 )
( in USD 29,647,000 )
<< Yearly Cost of Operation and Maintenance >>
I 150,000
J *4 658,000
K 128,852
Total RM 936,852 /year
( in JPY 22,944,000 )
( in USD 295,000 )
Note:
Each subtotal is rounded up or down to the nearest RM 1,000.
*1: 5% of total of items A to E above
*2: 10% of total of items E and F above
*3: 1% of total of items A to G above
*4: 0.5% of items A, C, D and 3% of item B
Other Works and Cost for Procedures
"in JPY" and in "USD" are rounded up or down to the nearest JPY 1,000 and USD 1,000
respectively.
Salary of Maintenance Personnel
Source: Study Team based on collected Price Quotation/Information and Analysis
Check and Inspection Cost
Equipment Repair and Replacement Cost
2) Results of the Preparatory Financial and Economic Evaluation
a. Implementation Structure
Nippon Koei Co., Ltd. and ORIX Corporation determined that 49% investment shall be shared by
SPC. The remaining 51% shall be financed by Malaysian capital companies. Referring to the
analysis of financial and economic feasibility discussed below, a trial calculation has been conducted
based on the implementation structure.
S-7
Figure S-1 Implementation Structure(SPC)
SPC
Land or Building
Owner
Land Lease
or/and
Equity
・Equity
・Project
Management
SEDA
Feed-in tariff
Malaysian Partner
Source : Made by Study Team
b. FiT Rate
Based on the unit rate mentioned under the FiT, a value of RM 1.14/kWh is calculated for an electric
generating capacity of 1 MW, and RM 0.95 /kWh for 10 MW capacity.
c. Interest and Duration
Regarding the terms of financing, considering the result of hearing survey with banks and the
availability of the interest subsidy system by the Malaysian government, a provisional calculated
interest rate is determined as 5% per annum for a term of 15 years.
d. Result of the Evaluation
Table S-4 Financial IRR Sensitivity Analysis-1 (1 MW)
IRR (15 years)
Debt Ratio
0% 50% 70%
FIT Rate
(RM/kWh)
0.9649 3.5% 3.3% 3.1%
1.0488 4.9% 5.9% 7.1%
1.1400 6.3% 8.6% 11.2%
Source : Made by Study Team
i. By increasing the rate of borrowing of SPC, a financial leverage effect was determined,
boosting profitability.
ii. Though the unit price of FiT is RM 1.14/kWh for the first year, the applicable unit price
from the beginning of next year shall gradually decrease by 8%. In terms of profitability, the
project is expected to be executed by the second year.
iii. The case of internal rate of return (IRR) with 0% of borrowing is so called project IRR.
S-8
Table S-5 Financial IRR Sensitivity Analysis-2 (1 MW)
IRR (15 years)
Generated (kWh/year)
1,175,504 1,306,116 1,436,728
System Cost
(RM/W)
9.0 10.7% 16.3% 21.6%
10.0 6.0% 11.2% 16.2%
1.10 2.0% 6.9% 11.6%
Source : Made by Study Team
i. For the installation cost of RM 10/W, IRR with an increase and decrease of 10% is
provisionally calculated.
ii. Under similar conditions, annual energy production is also provisionally calculated. Changes
in energy production have a big influence on the IRR.
In case of 10 MW, profitability is reduced since the applicable FiT rates are lower than 1 MW.
Table S-6 Financial IRR Sensitivity Analysis-1 (10 MW)
IRR (15 years)
Debt Ratio
0% 50% 70%
FIT Rate
(RM/kWh)
0.8041 0.9% -2.4% -6.9%
0.8740 2.0% 0.5% -1.7%
0.9500 3.3% 2.9% 2.4%
Source : Made by Study Team
Table S-7 Financial IRR Sensitivity Analysis-2 (10 MW)
IRR (15 years)
Generated (kWh/year)
11,755,044 13,061,160 14,367,276
System Cost
(RM/W)
9.0 1.9% 6.9% 11.7%
10.0 -3.0% 2.4% 6.9%
11.0 -8.5% -1.8% 2.8%
Source : Made by Study Team
3) Evaluation of Environment and Social Impacts
Generally, solar PV power system is assumed to cause limited environmental effects. With operating
facilities, solar PV power system would not emit effluent or atmospheric pollutant or odour around
the site. Also, solar PV power system would not cause noise or vibration. Environmental effect
S-9
during construction is small because equipment which consists PV power generation is so light that
there is no need for large construction machines and large foundation.
In spite of the small environmental risk to residential areas in implementing the project, there is a
need to confirm legal consistency and to take necessary procedures.
This solar PV power generation project is not included among the projects prescribed under the
Environmental Quality Act. It became clear from documents or hearing with DOE that EIA is not
necessary for this project as long as it does not necessitate land reclamation of over 50 ha.
Consultation with relevant agencies about SSE, and obtaining permission for conducting SSE is
required for the project. The details of SSE are discussed in the following section. The procedure on
SSE is required when constructing a new factory, even if the project does not require EIA. This
application is submitted to the DOE state office.
(4) Implementation Schedule
The project is implemented as a perfect private enterprise. The economic evaluation of the project is
estimated continuously from the result of this Study. Considering that the project will be
implemented by concerned firms and judging from the method of project implementation, an SPC
acting as the responsible business organization will be established. Consequently, the SPC makes an
application as power producer and starts construction work after approval of the application. Power
generation business will start after October 2013 since the construction period of the solar PV power
system of 1 MW is assumed to be about 10 months.
Initial start of business shall be planned for solar PV power system of about 1 MW. However,
increase in capacity and addition of a new project will also be considered while ascertaining the cost
performance and the market situation.
Figure S-2 Planned Project Schedule
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
1 Outline Study
2Business Scheme Consideration and
SPC Establishment
3 Detail Design
4Preparation Study for Application to
SEDA
5 Application for FiT Approved Holder
6 Construction and Installation
7 Commissioning
8 Starting Power Supply
Environmental and Social Consideration related laws and regulations
Site Suitability Evaluation
2012 2013 2014
Source : Made by Study Team
S-10
(5) Feasibility of the Project
1) Economic Potential
In order to achieve the level of profitability for a 10 MW power system, which is normally required
when a private company executes a project, it is necessary to reduce the installation cost to a
minimum of RM 9/W. In comparison with 1 MW, this allows taking advantage of economies of scale,
and hence is considered to be a feasible level, which is achieved by properly selecting the required
equipment.
On the other hand, even if the installation cost of RM 9/W is achieved, 10% reduction in the amount
of solar radiation has a profound effect on profitability. This is because there is a need to carefully
select a site that will secure sufficient amount of solar radiation.
2) Scheme
Many local companies are expressed interested in this business. During the Study stage, where
discussion with two or more companies in the Study has been carried out, and it is considering the
business scheme proposed.
3) Marketability
The advance of the third nation company to power generation business in FiT mechanism including
South Korean companies having already announced the plan of the mega solar power station
becomes active.
(6) Technical Advantage of Japanese Company
The advantages of engaging Japanese companies for the project are examined below, from both
economic and technical aspects, corresponding to the forms of their participation mentioned above.
1) Economic Aspect
a. Investment and Finance
Because Japanese yen is strong, and its procurement interest rate is relatively low compared with
Malaysian Ringgit, there is advantage of engaging Japanese companies in terms of both investing in
and financing the project. On the other hand, the exchange rate fluctuations pose a large risk in case
of investing and financing with Japanese yen.
b. Equipment Supply
Japanese equipment, which has high-performance but was originally expensive, has decreased its
price competitiveness because of strong yen at a level of JPY 70 to USD 1. Judging from the
economic aspect, it may be said that there is limited superiority of Japanese companies in equipment
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supply.
Superiority of Japanese product is high reliability and high efficiency. Such superiority is
understandable after long duration from the commencement of operation. It is necessary to arrange
to compete under the same condition of high reliability and high efficiency for long term if the
product price has less price competitiveness. Suppose a project utilizes cheap PV modules as a
product for high profitability. However the modules might not be able to generate in nominal
efficiency, might break down after a few year, or the efficiency of the modules might be extremely
sagged after around 10 years. Such event can be found only many years after the commencement of
power generation. It is ideal that the implementation body of the project and investors decide to
utilize Japanese product to avoid such future risks even Japanese product is expensive, however it is
actually not easy. The implementation body of the project and investors calculate profitability of the
project to decide whether the project is implemented or not. If profitability is not high as result of
calculation, the project cost is needed to be reduced and utilize cheap product to realize the project.
It has a tendency not to consider un-visible risk at the time e.g. breaking down of the cheap product
and extreme deceasing of efficiency.
As the above, it is a solution to make decision to utilize Japanese product that manufacturers of
equipments participate to the side of decision maker of the project and they decide to utilize
Japanese product to reduce the un-visible risks in future. In solar PV power generation business,
manufacturers compete not in their equipment as product but in generated power as final product of
the manufacturers.
As a method to reduce the product price, it is the most realistic to heighten the local production ratio.
In case of PV modules, assembling cells to module can be done in local.
c. Operational Management
Because of expensive manpower cost and strong yen, it may be said that there is limited superiority
of Japanese companies in terms of operational management similar to equipment supply mentioned
above.
2) Technical Aspect
The examination from a technical aspect was performed for equipment supply and operational
management. The examination of investment and finance was as performed from economic aspect.
a. Equipment Supply
Japanese companies are highly superior in terms of efficiency and reliability of all kinds of
equipment. Equipment supply by Japanese company is possible if the technical superiority of
equipment can overcome their inferiority in the economic aspect, by evaluating their life cycle.
However it is difficult to prove it and to convince the project implementation body and investors.
The current status can be evaluated as shown below.
・ Materials and equipments supplied by Japanese companies are considerably expensive
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than ones supplied by companies of other countries.
・ A multitude of materials and equipments supplied by third countries are utilized for other
project and the efficiency and reliability of the materials/equipments are not low to disturb
the implementation of the project.
There are not enough premises to show technical advantage of product supplied by Japanese
company overcomes economical disadvantage of price difference and to induce the implementation
body and investors to introduce Japanese product for decision making to utilize product supplied by
Japanese companies.
b. Operational Management
For "the operational management at the time of the project setup" and "the operational management
after completion of PV system”, Japanese companies are superior in the technical aspect. On the
other hand, as mentioned above, there is less superiority of Japanese companies in economic aspect
because of the high manpower cost. However, it is assumed that participation of Japanese companies
is essential for operational management because at present, there are no Malaysian companies which
have experience in introducing and operating grid-connected PV system.
(7) Risk on the Execution of the Project
1) Approval and license for implementation of the Project
Approval and license for implementation of the project must be required before implement of power
supply business as follows. And an SPC acting as the responsible business organization will be
established to apply for the approval of a feed-in approval holder (FiA).
To apply for FiA from SADA
To make contract of Renewable Energy Power Purchase Agreement (REPPA) with relevant
Distribution Licensee (DL).
To apply for public generation license from the Energy Commission.
The SPC must prepare permission of the use of the project site, basic design of the system, result of
power system study (PSS) by DL, confirmation to relevant local authority, financing plan and work
plan before application to SEDA for approval.
In order for a foreign company to become a FiT-approved holder, it is necessary to establish a joint
corporation with local companies. The foreign equity shareholder is capped maximum at 49%. Many
local companies expressed interest in this business.
2) Challenges for implementation of the Project
In order for implementation of the project, the biggest challenge is to increase economy of the
project. The efforts and solutions for the challenge are as follows.
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a. Realization below the total investment cost of USD 2,500/kW for 10 MW system
It can be judged that it is sufficiently feasible to execute the project if construction cost does not
exceed USD 2,500/kW, which is approximated from a local system integrator. Since a FiT rate for
solar PV becomes less costly when installed capacity exceeds 1 MW, the project‟s economic
efficiency becomes low. Consequently, the project will not be considered as a profitable business. In
the future, it is preferable to consider less costly construction methods in the design and estimates.
b. Realization of long project financing with low interest rates
If financing will be by a Malaysian bank, long-term finance of 10-15 years is possible. Financing
with interest rates of as low as around 5% is possible if green technology financing scheme of the
Malaysian government can be applied.
c. Securing less costly project site, which can be used for long periods
The landowner of the proposed site in Ipoh is a local government, while the local private company
has the right to use the land, being the land holder. Compared with unused land of other private
companies, such land can be used at a low cost and for a long term. This is based on the rights of the
land holder depending on the method adopted in the site for the project implementation.
3) Risk of reviewing FiT mechanism in future
Because the project is carried out based on FiT mechanism, it may be affected by the review of the
mechanism. The quotas for solar PV after from late in 2014 have yet to be decided. Because many
applicants and projects were applied for the quota of solar PV until first in 2014, SEDA issued a
notice on a 5 MW limit for each application. The schedule and design of the project may be affected
by such reviewing FiT mechanism.
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(8) Map Showing Implementation Area
Project Site Project Site
Map Source: Made by Study Team based on
CIA World Factbook / Department of Surveyand Mapping, Malaysia
Chapter 1 Overview of the Host Country and Sector
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(1) Economy and Financial Situation
1) Economic Condition
In 2009, the gross domestic product (GDP) of Malaysia is about USD 191.6 billion and the GDP per
capita is USD 6,975. Malaysia is classified as among the higher middle-income countries.
Malaysia‟s GDP growth rate was kept high at 9% from the late 1980s to 1997, during the Asian
currency crisis. Its economy fell at -7.4% growth in 1997, but recovered from the recession through
economic stimulus policy and large financial assistance from Japan. Since then, Malaysian economy
sustained a stable growth with GDP growth rate maintained at 6%. However, when the economy
went into recession due to the world economic crisis in 2008, the GDP per capita remained at 4.6%
while its growth rate was at -1.9%. After that, the growth rate rebounded at 7.2% in 2010 due to the
economic improvement, and monetary and financial policy. Figure 1-1 shows the trend of real GDP
growth rate and GDP per capita from 1990 to 2010.
Figure 1-1 GDP growth rate
-10
-5
0
5
10
15
0
2,000
4,000
6,000
8,000
10,000
Rea
l G
DP
gro
wth
rat
e(an
nual
%)
GD
P p
er c
apit
a(U
SD
)
GDP per capita(USD) Real GDP growth rate(annual%)
Source : Made by Study Team based on Annual Report issued by Central Bank of Malaysia
2) Financial Condition
As shown in Table 1-1, the revenue of the Malaysian government in fiscal year 2009 is about RM
158.1 billion, which is about 30% of the GDP. On the other hand, the expenditure during the same
year was about RM 206.1 billion while the Malaysian government‟s deficit was RM 47.5 billion.
1-2
Table 1-1 Revenue, Expenditure and Overall Balance of the Malaysian Government
Revenue Expenditure Overall Balance
year RM billon As % of GDP RM billon RM billon As % of GDP
2000 61.9 17.4 81.5 -19.6 -5.5
2001 79.6 22.2 97.9 -18.3 -5.1
2002 83.0 22.0 103.8 -20.8 -5.5
2003 91.3 22.9 103.5 -12.2 -3.1
2004 91.3 21.4 118.8 -27.5 -6.5
2005 97.7 21.8 125.0 -27.3 -6.1
2006 123.5 26.0 142.7 -19.2 -4.0
2007 139.9 27.6 160.6 -20.7 -4.1
2008 159.8 30.2 195.4 -35.6 -6.7
2009 158.6 30.4 206.1 -47.5 -9.1
Source : Made by Study Team based on Annual Report issued by Central Bank of Malaysia
(2) Outline of the Project Sector
1) Energy Basic Policy
In Malaysia, the energy policy turned to diversification and stabilization of the source of energy
supply after the looming oil crisis. The energy policy of the country is formulated by the energy
section of the Economic Planning Unit (EPU) under the Prime Minister‟s department, and aims at
supporting the national economic development considering the following three principal energy
objectives, based on National Energy Policy (1979):
Supply objective: To ensure the provision of adequate, secure, and cost-effective energy
supplies through developing indigenous energy resources, both non-renewable and
renewable;
Utilization objective: To promote efficient utilization of energy and to discourage wasteful
and non-productive patterns of energy consumption; and
Environmental objective: To minimize negative impacts of energy production,
transportation, conversion, utilization and consumption to the environment.
The government‟s strategies in achieving the above objectives include the following:
Secure supply: Diversification of fuel type and sources, technology, maximized use of
indigenous energy resources, and adequate reserve capacity to cater for contingencies;
Sufficient supply: Forecast demand, right energy pricing, and formulate plans to meet the
demand;
Efficient supply: Promote competition in the electricity supply industry;
Cost-effective supply: Provide indicative supply plan to meet demand based on least cost
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approach, using power system software;
Sustainable supply: Promote the development of renewable and co-generation as much as
possible;
Quality supply: Match quality with customer demand through variable tariffs;
Efficient utilization of energy: Promote energy efficiency and conservation by bench
marking, energy auditing, financial and fiscal incentives, technology development,
promotion of energy service company (ESCO), labeling system, correct pricing, energy
management; and
Minimizing negative environmental impacts: Monitor the impacts, improve efficiency of
utilization, and conversion and promotion of renewable energy.
Also, the energy policies in Malaysia, such as stabilization of the source of energy supply, promotion
of the development of renewable energy, and promotion of energy efficiency and conservation are
set in the Malaysian Plan, which defines more specific national development plan for the country
every five years.
2) Organizations Related to Energy Policy
a. Economic Planning Unit (EPU)
EPU was established in 1961 under the Prime Minister Department. It is the principal government
agency responsible for the preparation of development plans for the nation.
Energy section of EPU has the following key functions:
Formulate policies and strategies for the sustainable development of the energy sector;
Promote the development of oil and gas industries;
Ensure adequate, stable, quality and cost-effective supply of energy;
Promote increased utilization of renewable energy and energy efficiency in the energy
sector; and
Provide allocation for energy-related development programs and evaluate their
achievements.
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The organization chart of EPU is shown in Figure 1-2.
Figure 1-2 Organization Chart of EPU (as of January 2012)
Source : EPU Internet Website
b. Ministry of Energy, Green Technology and Water (MEGTW)
MEGTW, which was established during a cabinet reshuffling to replace the Ministry of Energy,
Water and Communications in April 2009, is responsible in formulating policies and strategies, as
well as undertaking planning for electricity supply in Malaysia.
Its main functions are as follows:
Development of policy, legal framework, regulation, etc., for energy and water, concerning
environmental technology;
Set up of the target in accordance with the national development goal; and
Development of an efficient management system and a monitoring system.
1-5
The organization chart of MEGTW is shown in Figure 1-3.
Figure 1-3 Organization Chart of MEGTW (as of January 2012)
Source : MEGTW Internet Website
3) Trend of Prime Energy in Malaysia
The trend of prime energy demand from 2008 in Malaysia is shown in Table 1-2. It is noted that
Malaysia's crude oil production has been stable in recent years.
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Table 1-2 Trend of Prime Energy Demand in Malaysia
(PJ) (PJ) (PJ) (PJ)
Petroleum Products 1,023.0 54.4% 1,010.0 59.1% 1,041.0 58.6% 1,072.0 58.2%
Electricity 334.0 17.8% 347.0 20.3% 359.0 20.2% 371.0 20.1%
Natural Gas 450.0 23.9% 285.0 16.7% 304.0 17.1% 324.0 17.6%
Coal & Coke 72.0 3.8% 67.0 3.9% 71.0 4.0% 75.0 4.1%
Total 1,879.0 100.0% 1,709.0 100.0% 1,775.0 100.0% 1,842.0 100.0%
Notes: *1 Preliminary data
*2 Forecast data
2008 2009 2010(*1)
2011(*2)
Source: Made by Study Team based on “The Malaysian Economy in Figures 2011” by EPU
After a pause during the Asian financial crisis, Malaysia's domestic petroleum product consumption
is growing again, and the country is expected to become a net oil importer before the end of the
current decade.
4) Trend of Electricity Supply and Demand in Malaysia
The country‟s main power utility companies are Tenaga National Berhad (TNB), Sabah Electricity
Sdn. Berhad (SESB) and Sarawak Energy Berhad (SEB), which cover the regions of Peninsular
Malaysia, Saba and Sarawak, respectively. All the three main power utility companies in Malaysia
are government-linked companies and are very much influenced by government policy.
The trend of peak demand and installed capacity from 2008 in Malaysia is shown in Table 1-3.
Electricity generating capacity has increased by 20% between 2000 and 2009. Total installed
capacity was estimated at 25,000 MW in 2010, and peak demand was anticipated at 17,000 MW.
Per capita electricity demand is on the rise, and is expected to reach or even exceed the OECD
average by 2030.
Table 1-3 Peak Demand and Installed Capacity of Each DL
Power Utilities TNB
(2010)
SESB
(2010)
SEB
(2009)
Maximum Demand (MW) 15,072 760 1,036
Installed Capacity (MW) 21,817 866 1,230
Generating Mix
Natural Gas 54.0% - 53.0%
Coal 40.0% 31.0% 34.0%
Oil - 57.0% -
Hydro 5.2% 9.0% 8.0%
Diesel - - 5.0%
RE 0.8% 3.0% -
Source : Made by Study Team based on “The Malaysian Economy in Figures 2011” by EPU
1-7
In the project area in Peninsular Malaysia, the total installed generation capacity increased by 2,094
MW, or 10.6% from 19,723 MW in 2008 to 21,817 MW on December 31, 2009.
Figure 1-4 Installed Generation Capacity and Maximum Demands in Peninsular Malaysia in 2009
Source : “Electricity Supply Industry in Malaysia” by TNB
5) RE Policy
The development of electricity supply industry is guided by the National Energy Policy (1979), Four
Fuel Diversification Policy (1981), and Fifth Fuel Policy (2001).
In the Eighth Malaysian Plan (2001-2005), RE was announced as the fifth fuel in the new Fifth Fuel
Policy. It is targeted that RE will contribute 5% (500 MW) of the country's total electricity
generation by 2005, which is the end of the Eighth Malaysia Plan period. However, the capacity
generated by RE to the national grid was only 0.12% (12 MW) at the end of 2005.
Due to the unfulfilled target, the Malaysian government has proposed the Fifth Fuel Policy to be
continued to the Ninth Malaysia Plan from 2006 to 2010, and made policies to promote further
development of RE sector in the country. By 2010, in the Ninth Malaysia Plan, RE was expected to
contribute 350 MW to the total energy supply in Malaysia. However, at the end of 2010, the capacity
generated by RE to the national grid was still short at 62.3 MW.
1-8
Figure 1-5 Target of Generated Power and Fulfilled Power by RE in the Malaysian Plan
Eighth Malaysian Plan (2001-2005)
Target of generated power by RE: 500MW
Only 12MW
Ninth Malaysian Plan (2006-2010)
Target of generated power by RE: 350MW
(300MW in Peninsular Malaysia, 50MW in Sabah)
62.3 MW
(Connected to the grid)
Source : Made by Study Team
In April 2010, the Malaysian government approved the the NREPAP that would be the cornerstone
for a more aggressive RE development in Malaysia.
The Tenth Malaysian Plan (2011-2015) contains goals for the enhancement of the incentive for RE
investment, and for introducing RE by generating 985 MW power until 2015.
Additionally, the Renewable Energy Act 2011, which is incorporated the FiT mechanism and the
Sustainable Energy Development Authority Act 2011 which is intended to establish the
implementation organization of FiT were adopted by the government in April 2011.
<Renewable Energy Act 2011>
Part I: PRELIMINARY
Part II: FEED-IN TARIF SYSTEM
Part III: CONNECTION, PURCHASE AND DISTRIBUTION OF RENEWABLE
ENERGY
Part IV: FEED-IN TARIFF
Part V: RENEWABLE ENERGY FUND
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Part VI: INFORMATION GATHERING POWER
Part VII: ENFORCEMENT
Part VIII: GENERAL
Part IX: SAVINGS AND TRANSITIONAL
<Sustainable Energy Development Authority Act 2011>
Part I: PRELIMINARY
Part II: THE AUTHORITY
Part III: FUNCTIONS AND POWERS OF THE AUTHORITY
Part IV: EMPLOYEES OF THE AUTHORITY
Part V: FINANCE
Part VI: GENERAL
Based on the Act mentioned above, Sustainable Energy Development Authority (SEDA) and RE
fund was established in September 2011, and the FiT mechanism was started in December 2011.
The power supply produce by RE in Malaysia is carried out in the Act mentioned above and under
the supervision of SEDA.
6) NREPAP
a. Renewable Energy Policy
The policy in NREPAP approved in April 2010 has five objectives as follows:
To increase RE contribution in the national power generation mix;
To facilitate the growth of the RE industry;
To ensure reasonable RE generation costs;
To conserve the environment for future generation; and
To enhance awareness on the role and importance of RE.
b. Strategic Mission
The Malaysian government has five strategic action plans to achieve the abovementioned objectives.
Strategic mission 1: Introduce appropriate regulatory framework
Strategic mission 2: Provide conducive environments for RE business
Strategic mission 3: Intensify human capital development
Strategic mission 4: Enhance RE research and development
Strategic mission 5: Design and implement an RE advocacy programme
c. Targets and Success Indicators
The targets for the introduction of RE are set as 5% of the total electric generation in 2015, 9% in
2020, and 12% in 2030, under NREPAP.
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Table 1-4 Target of Generated Power of RE
Year
Total RE
(MW)
Share of RE
Capacity
Annual RE
Generation
(GWh)
Share of RE
Generation
Annual CO2
Avoidance
(t-CO2)
2015 985 6% 5,385 5% 3,715,415
2020 2,080 11% 11,246 9% 7,759,474
2030 4,000 17% 17,232 12% 11,889,887
2050 21,370 73% 44,208 24% 30,503,589
Source : Made by Study Team based on NREPAP
7) Sustainable Energy Development Authority (SEDA)
SEDA is a statutory body formed as a lower organization of MEGTW under the SEDA Act 2011
[Act 726]. The key role of SEDA is to administer and manage the implementation of the FiT
mechanism, which is mandated under the Renewable Energy Act 2011 [Act 725].
Figure 1-6 Position of SEDA
Electricity SectorRenewable
Energy Sector
Energy CommissionSEDA
A new organization was formed under the Sustainable Energy Development Authority Act 2011 [Act726]
Energy
RegulatorImplementing
Authority
Green Technology Water
Ministry of Energy , Green Technology & Water
(MEGTW)
Source : Made by Study Team
SEDA has all the functions conferred on it under the Renewable Energy Act 2011, and any other
renewable energy laws. Its functions also include the following:
To advise the Minister and relevant government entities on all matters relating to
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sustainable energy, including providing recommendations on policies, laws and actions to
be applied for promoting RE;
To implement the national policy objectives for RE;
To promote and develop RE;
To implement, monitor and review the FiT mechnism;
To implement RE laws and to recommend reforms to such laws to the government;
To recommend to relevant government entities fiscal incentives applicable to investment in
the RE sector;
To promote private sector investment in the RE sector; and
To conduct training for the development of human resources and capacity building in the
sustainable energy sector.
8) FiT Mechanism
RE under the FiT mechanism adopted in April 2011 is classified into four categories, namely: biogas
(inclusive of landfill/sewage), biomass (inclusive of municipal solid waste), small hydro and solar
PV. The outline of the FiT mechanism is as follows:
a. RE Capacity Target
Table 1-5 RE Capacity Target Under FiT Mechanism
Source : FiT Handbook issued by MEGTW
b. FiT Rates
FiT rates for every energy source are shown in Table 1-6 to Table 1-9. If the system satisfies the
requirements as per the criteria, a bonus rate is added to the original FiT rate. However, annual
degression rate is established under FiT rates. The effective periods of the applied rate are 16 years
for biogas and biomass, and 21 years for small hydro and solar PV. The FiT rate is fixed from the
commencement date.
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Table 1-6 FiT Rates for Biogas
Source : FiT Handbook issued by MEGTW
Table 1-7 FiT Rates for Biomass
Source : FiT Handbook issued by MEGTW
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Table 1-8 FiT Rates for Small Hydro
Source : FiT Handbook issued by MEGTW
Table 1-9 FiT Rates for Solar PV
Source : FiT Handbook issued by MEGTW
c. Progress Flow Chart
The procedure to ensure progress of the power producer in FiT mechanism is shown in Figure 1-7.
Approval and license for implementation of the project must be required before implement of power
supply business as follows.
To apply for approval of FiT holder from SEDA
To make contract of Renewable Energy Power Purchase Agreement (REPPA) with
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relevant Distribution Licensee (DL).
To apply for public generation license from the Energy Commission.
The applicants must prepare the legal rights for the site, basic design of the system, power system
study (PSS) by DL, confirmation from relevant local authority, financing plan and detailed work
plan before submitting application to SEDA as mentioned in Step 2 of the following flow chart.
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Figure 1-7 Progress Flow Chart
Source : Website of SEDA
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The website of SEDA contains information on FiT mechanism. On-line application for being a FiT
approved holder is possible through the website of SEDA.
Immediately after receiving application, which started on December 1, 2011, the on-line system
could not be accessed temporarily. At present, there is no problem in accessing the on-line system.
Figure 1-8 Login Page of the On-line System on SEDA Website
Source : SEDA Website
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d. RE Fund
The FiT mechanism in Malaysia is not financed from tax revenue. Instead, it is financed by an RE
fund which is derived by passing the FiT cost to final electricity consumers. However, the passing of
this cost is limited to only 1% of the total electricity revenue generated by the utilities.
Management of the RE fund will be under the supervision of SEDA. The RE fund can only be used
for the purpose of disbursing the FiT payment claims made by the DLs, and to cover any
administrative expenses relating to the FiT implementation
Figure 1-9 Flow of RE fund
(1% of Electricity Bill for RE Fund)
Electricity Consumer
Distribution Licensee99% of Electricity Bill
RE Fund (SEDA)
1% of Electricity Bill for RE Fund
1% of Electricity Bill for RE Fund
FiTHs
Distribution Licensee
RE Fund (SEDA)
100% of Electric Bill(After tariff review)
FiT Payment for distributed electricity from FiTH
Payment for clam of differential between FiT payments and market cost
Source : Made by Study Team based on FiT handbook
(3) Conditions in the Targeted Areas
Malaysia has abundant amount of solar radiation as shown in Figure 1-10 and Table 1-10, and thus,
it is a place suitable for using solar PV system. In Peninsular Malaysia, the amount of solar
radiation in its northern part is more than that in the southern part.
Average amount of solar radiation per year (kWh/m2) in Malaysia‟s major cities is shown in Table
1-10.
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Table 1-10 Average of Amount of Solar Radiation per Year in Major Cities
Source : National Renewable Energy Policy and Action Plan
Figure 1-10 Map Showing Amount of Solar Radiation in Malaysia
Source : National Renewable Energy Policy and Action Plan
Chapter 2 Study Methodology
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(1) Scope of Survey
Scope of survey is intended to evaluate Japanese companies‟ participation by collecting information
about FiT mechanism enforced on December 1, 2011. It also aims to evaluate the economic viability
of the PV power business
Also, the Study Team collected information from finance institutions to determine financial
conditions on special loan related to the project‟s aim of conserving the environment. The
information will also be useful in determining a suitable finance model and business scheme for the
power production business by solar PV.
a. FiT Mechanism
It is necessary to conduct survey on business environment about the general conditions of FiT
mechanism, FiT rate, terms, and approval for FiT holder.
b. Technological Item for Grid Connection
It is required to confirm the technological item for grid connection through discussion with the DLs.
c. Analysis of Environmental and Social Impacts
Environment and social impacts shall be evaluated based on the requirements stipulated in the JICA
Guidelines for Environmental and Social Considerations and JBIC Guidelines on Environmental and
Social Considerations.
d. Project Cost Estimate and Outline Design
It is required to perform field survey for the candidate sites to determine connecting points to the
grid, and identify basis for outline design. The estimated project cost shall be based on the outline
design.
e. Financing
Financing will be planned by collecting information on financial environment in Malaysia.
f. Economical Evaluation of the Business
Business scheme by Japanese company shall be considered based on the result of above survey.
g. Conserve Environment (Reduce CO2 emission)
Effects of conservation of environment through the implementation of the project shall be estimated.
h. Identify the Problems
Problems for the implementation of the business shall be identified.
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(2) Survey Organization
1) Homework in Japan
・ Preparation of field survey and collecting data related to existing documents
・ Collecting information and performing analysis
・ Consideration of business environment, e.g., financing and regulation
・ Economical evaluation and business scheme consideration
2) Field Survey in Malaysia
・ Confirmation of the state‟s situation and conducting joint meetings with local consultant
・ Field survey on the candidate site and interview with financial institution and government
affiliated organization
・ Financial consideration; estimation of project cost; technical meeting about grid connection
・ Meeting regarding the implementation of the project
3) Selection Method of the Project Site
Four field survey sites are selected from among the 19 candidate sites in Figure 2-1, through the
following primary selection criteria:
Criteria 1: It is available to construct more than 1 MW solar PV power
Criteria 2: It is available to use the site for long term of more than 21 years
Criteria 3: There is a connecting point to the grid near the site
Criteria 4: Site is flat
Criteria 5: Landowner allows the Study Team to perform field survey in the candidate site
2-3
Figure 2-1 List of Candidate Sites
Kedah Penang12, 13
Perak Ipoh15
Selangor Shah Alam14
Kuala Lumpur
Pahang Kuantan7, 8, 9, 10, 11, 16, 17, 18
Melaka1, 2, 3, 4, 5, 6
Johor Pasir Gudang19
No Area Land Owner Capacity (Acres) (m2) (kW)※1 1 2 3 4 5
1 Melaka Malaysian Company 5 20,000 1,300 A C C C C
2 Melaka Malaysian Company 2.5 10,000 660 B C C C C
3 Melaka Malaysian Company 0.44 1,800 120 B C C C C
4 Melaka Malaysian Company 0.22 900 60 B C C C C
5 Melaka Malaysian Company 1.5 6,000 400 B C C C C
6 Melaka Malaysian Company N/A N/A N/A - C C C C
7 Kuantan Malaysian Company 3 12,000 800 B C C C C
8 Kuantan Malaysian Company >5 >20,000 1,300 A C C C C
9 Kuantan Malaysian Company 7 28,000 1,800 A C C C C
10 Kuantan Malaysian Company 10 40,000 2,600 A C C C C
11 Kuantan Malaysian Company >3 >12,000 800 B C C C C
12 Penang Japanese Company 2 8,000 500 B C C C C
13 Penang Malaysian Company 5 20,000 1,300 A C C C C
14 Shar AlamJapanese Company >3 >12,000 800 B C C C C
15 Ipoh Malaysian Company 10 40,000 2,600 A A A A A
16 Kuantan Malaysian Company >3 >12,000 800 B C C C A
17 Kuantan Malaysian Company >3 >12,000 800 B C C C A
18 Kuantan Malaysian Company >10 >40,000 2,600 A A A A A
19 Johor BaruMalaysian Company >2.5 >10,000 660 B A A A A
※1 Estimated by Land Space A: eligible, B: ineligible, C: No reply
Land Area Criteria
Source : Made by Study Team
2-4
Study Team surveyed the following four sites selected from among the 19 candidate sites.
・ No.15 : A vacant lot in Ipoh where tin mining is being conducted
・ No.18 : Two lots at an industrial area in Kuantan
・ No.19 : On the roof of factory/warehouse at an industrial area in Johor
4) Study Organization
This study was carried out by the joint venture between Nippon Koei Co., Ltd. and ORIX
Corporation. The organization of the Study Team is shown in Figure 2-2.
Figure 2-2 Organization Chart of the Study Team
Power Engineering AdministrationEngineering Division
Energy Solution business Dept.
Team LeaderBusiness planning
Tsutomu MORI
Technical engineer 1Photovoltaic system and
synchronaizationTomoyasu FUKUCHI
Technical engineer 2Design, Construction Plan and
Estimation
Ryousuke OGAWA
Economic financial evaluation1
Nobuomi IOKAMORI
Evaluation of environment and social impacts
Shinji TANAKA
Head company:Nippon Koei Co., Ltd.
Cooperating Company:ORIX
Corporation
Local consultant :MIRASTECH Sdn. Bhd.
・Preliminary survey in Malaysia
・Interview with organization
・Assistance for Study Team
Local assistantORIX Leasing Malaysia Berhad
Takashi KITAMURA
SupportMalaysia
Technical engineer 3Design, Construction Plan and
EstimationNaoya MATSUMOTO
Economic financialevaluation2
Kiyoharu TSUKADA
Source : Made by Study Team
2-5
5) Organization Related to the Project
Regulatory agency: Sustainable Energy Division of MEGTW (Organization chart refer to Figure1-3)
Implementing organization: Feed-in Tariff Division of SEDA (Organization chart refer to Figure7-1)
(3) Study Schedule
1) Study Schedule
Study schedule is shown in Figure 2-3
Figure 2-3 Study Schedule
2011 2012
Field Survey in Malaysia
First Field Survey
Confirmation of surrret state
Negotiation and discussion with local consultant
Second Field Survey
Site survey at a few candidate site
Market survey in financing
Interview survey to th organization cocerned
Third Field Survey
Estimation of the project cost
Negotiation to TNB on synchonizing with the grid system
Forth Field Survey
Developing the implementation plan of projects
Home work in Japan
Preparation for the Study
Preparation works
Gathering theinformation
First Home work
Gathering theinformation by local consultant
Analyzing of the information
Second Home work
Study of the business environment
Basic design of the system
Third Home work
Economical evaluation and study of the Implementation scheme
Forth Home work
Summarizing the study
Jul Aug Sep Oct Nov Dec Jan Feb
Source : Made by Study Team
2) Terms of Field Survey and Study Contents
a. 1st field survey
Term: September 8, 2011 to September 15, 2011
Study contents: Meeting with interested party and site survey for two candidate sites (No.15 and
No.19)
2-6
b. 2nd
field survey
Term: October 17, 2011 to November 10, 2011
Study contents: Meeting with MEGTW and SEDA, site survey for two candidate sites of No. 18,
interview with DOE, meeting with candidate business partner, visit financial
institution, and request for quotation from local system integrator
c. 3rd
field survey
Term: December 4, 2011 to December 17, 2011
Study contents: Meeting with MEGTW, site survey for the project site, interview with local DOE,
visit local financing institution, market price survey on equipment for PV power
d. 4th
field survey
Term: January 31 2012 to February 4, 2012
Study contents: Meeting with MEGTW for explaining the result of the survey, and meeting with
interested party
Chapter 3 Justification, Objectives and Technical
Feasibility of the Project
3-1
(1) Background and Necessity
1) Scope of the Project
The Project is related to power production business conducted by private entities under FiT
mechanism. The power producer constructs, operates and maintain the solar PV power system, and
supplies DLs with the power generated by the solar PV power system.
An SPC of the power producer is formed for the project. The SPC must do the following tasks for
the project:
Preparation of the project site (submit letter of intent to the site owner)
Preparation of the working plan, financing plan and technical design
Conduct of power system study with the relevant DL
Checking of local governmental requirements and reporting to the local government
Application to SEDA for approval of FiT holder
Signing of REPPA with relevant DL
Application to EC for approval of public generation license
Financing arrangements
Procurement, construction and commissioning of the solar PV power system
Operation, maintenance and management of the power station
3-2
The solar PV power system constructed by the project is shown in Figure 3-1.
Figure 3-1 Solar PV System for the Project
-~
InverterIsolating
Transformer
Protection Devise
Power Conditioner
AC
Distribution
Panel
Internal Power Source
400V
Cubicle
Step up
Transformer
Data Collecting
System
PV Module
PV Array
Structure for PV Array
DL
Cubicle
Project Site
M
Connection
Box Junction
Box
Power Conditioner
Connection
Box
Source : Made by Study Team
2) Analysis of Present State and Future Forecast
Solar PV power system seldom fails as compared to other power generating systems, and is almost
maintenance free. The risk of the power producer is also limited than that in other power generating
systems, as stable amount of solar radiation can be relatively secured throughout the year in
Malaysia. It is noted that the FiT tariff for solar PV power system is not sufficient for business.
However, when the construction for the whole project is ensured to be less costly, the business for
the system is expected to sufficiently sustain the project needs.
At the implementation of the project, the project should apply Japanese equipment as much as
possible. Superiority of Japanese product is high reliability and high efficiency. Such superiority is
understandable after long duration from the commencement of operation. The project leads to
develop the new market for a Japanese maker and it can be with a place to appeal for a good point of
the high reliability and high efficiency of Japanese product through the long duration of the solar PV
power business.
If the project is not implemented, the place to appeal for the high reliability and high efficiency of
Japanese product would be lost. Moreover, Japanese companies would be lagged behind other Asian
countries such as China, Korea, and Taiwan.
3-3
3) Impacts of the Project Implementation
The following effects are expected in the implementation of the project:
a. Environmental Improvement Effect (Carbon Emission Reduction)
The power generation amount of 1,300 MWh shall be generated by a solar PV power system of 1
MW at the planned site. An annual carbon emission reduction of 873.6 t-CO2 is expected from the
solar PV power system of 1 MW, since the grid emission factor in Peninsular Malaysia is 0.672
t-CO2/MWh. Details are described in Section 4 (2).
b. Japanese Manufacturers‟ Entry into the FiT Market
The project leads to investment promotion from Japan through direct participation of a Japanese
company. Japanese solar PV power system-related manufacturers who have expressed interest in the
project are also willing to directly participate in the project, aside from just supplying equipment.
Especially, when a manufacturer of module, which accounts for 60% of the total cost, participates in
the project directly, it is possible to raise price competitiveness.
4) Comparison between the Proposed Project and Other Feasible Projects
NREPAP, (National Renewable Energy Policy & Action Plan) formulated by MEGTW (The
Ministry of Energy, Green Technology and Water), includes biomass, biogas, solid waste and
small-hydro RE other than solar PV.
However, under FiT mechanism based on the Renewable Energy Act 2011, solar PV will be
considered only the unlimited source of energy and the expected important role of national energy.
Furthermore, solar PV is superior to other forms of RE (biomass, biogas, solid waste) in terms of
effects to ambient air or noise.
And also, the power generated by RE other than solar PV were limited to get the source of RE, and
more high risk than solar PV. So the operation and maintenance cost became high, the project risk
is high as the power production business of emerging start-up by Japanese company.
The project is related to power production business conducted by private entities under FiT
mechanism. The power producer constructs, operates and maintains the solar PV power system. He
is free to choose the system he prefers but for the planned project, there are items that need to be
considered. However, it includes the following subjects for project implementation, and it is
necessary to compare and examine the following measures and raise the cost performance of the
project.
Realization below the total investment cost of USD 2,500/kW for 10 MW system
Realization of long project financing with low interest rates
Securing a less costly project site, which can be used for long periods
3-4
(2) Study Required for Decision on Contents of the Project
1) Demand Forecasting
a. Target Demand
The planned project site in Malacca, Kuantan, Penang, Shah Alam, Ipoh and Johor are located in
Peninsular Malaysia. The power supply for Peninsular Malaysia is conducted by TNB, which is an
electricity utility company. The planned project is a grid-connected solar generation project, which
involves connection of the generated electricity to the national grid of TNB. Therefore, the
electricity demand to be considered for planning this project is that of Peninsular Malaysia, which is
the demand of electricity supplied by TNB.
3-5
Figure 3-2 below shows that the power grid consists of 500 kV and 275 kV facilities in Peninsular
Malaysia.
Figure 3-2 Power Grid in Peninsular Malaysia
Source : TNB‟s presentation material “Planning for Smart Grid in TNB System”, 2010
IEEE Conference
3-6
b. Present Situation of Electricity Demand
Figure 3-3 below shows the peak demand of Peninsular Malaysia in each month from 2008 to 2010.
Figure 3-3 Monthly Peak Demand of Peninsular Malaysia from 2008 to 2010
Source : Grid System Operation and Performance Report, Peninsular Malaysia: Year 2010,
(Energy Commission :EC), Malaysia
The peak demand in 2010 was recorded in May, and its value was beyond 15,000 MW.
3-7
Figure 3-4 below shows the energy demand of Peninsular Malaysia in each month from 2008 to
2010.
Figure 3-4 Monthly Energy Demand of Peninsular Malaysia from 2008 to 2010
Source : Grid System Operation and Performance Report, Peninsular Malaysia: Year 2010,
(Energy Commission :EC), Malaysia
The maximum energy demand in 2010 was recorded in May, and its value was around 9,000 GWh.
3-8
c. Demand Forecast
Figure 3-5 below shows the estimated peak demand and reserve margin of TNB from 2010 to 2030.
Figure 3-5 Estimated Peak Demand and Reserve Margin of TNB from 2010 to 2030
Source : TNB Website, “Why Nuclear Despite High Reserve Margin?”
In the figure, the peak demand in 2010 is recorded as 15,072 MW. This is expected to grow annually
at a rate of 3.2% from 2010 until 2020, reaching a value of 20,669 MW. Afterward, the peak demand
is forecasted to exceed 25,000 MW in 2030.
d. Demand Forecast and Contents of the Project
The target capacities of solar PV generation that the Malaysian government is planning to introduce
under a FiT mechanism are 190 MW by 2020 and 1,370 MW by 20301. The percentages of said
target capacities against the peak demands are 0.9% and 5.5% in 2020 and 2030, respectively. Solar
PV power system cannot control the output of generation. Thus, the connection of a large amount of
solar PV generation capacity to the grid leads to disturbance of the grid operation. Accordingly, the
solar PV generation capacity is generally considered compared with the forecasted demand of the
grid to which the solar PV power system is connected for the planning of grid-connected solar PV
power system. In this point of view, the above percentages are not at a level that will cause
disturbance to the grid operation. The capacity of this solar PV project is decided under the target
1 Handbook on the Malaysian Feed-in Tariff for the Promotion of Renewable Energy, KeTTHA,
March 2011
3-9
capacity. Therefore, the forecasted demand is not the factor to constrain the contents of the project.
2) Understanding and Analysis on the Problems for Consideration and Decision of the Project
Contents
Following issues are considerable problems for consideration and decision of the project contents.
a. Climate condition
b. Condition of land for the project
c. Matters related to grid connection
d. Matters related to maintenance
e. Realization of price reduction of the project
a. Climate Condition
Temperature, rainfall, wind speed, frequency/scale of earthquake and frequency in thunder are
considerable issues related to decision of project contents as climate condition. The relationships
between climate condition and considerable issues of project contents are shown in below:
Temperature: Type of PV Module
Rainfall : Tilt Angle of PV Module
Wind Speed: Design Strength of Mounting Structure of PV Module
Frequency/Scale of Earthquake: Design Strength of Mounting Structure of PV Module
Frequency in Thunder: Countermeasures against Surge on Electrical Circuits
b. Site Condition at Project Site
Following issues are considered as condition at project site.
a mountain area or not
near the sea or not
in low latitudes
The relationships between site condition and considerable issues of the project contents are shown in
below:
In a Mountain Area: Selection of Installation Place of PV Modules
Near the Sea: Countermeasure against Salt Damage
In Low Latitude: Tilt Angle of PV Module
c. Issues related to Grid Connection
For the grid connection, it is not clear whether the extension of distribution line to the project site
from its existing end point or substation shall be carried out by TNB or by the project owner. As
technical specification of power distribution line and its poles for extension of the existing grid, there
is no problem to aerial cables and concrete poles, those are specified in the standard items of TNB.
3-10
Regarding the assessment of impact to the grid operation by connecting the project to the grid, this is
to be done by TNB under a power system study.
d. Issues of Maintenance
As for the maintenance plan, it can be said that solar PV power system is almost maintenance-free.
Among the system components, the equipment with the highest failure probability is the power
conditioner. Hence, the selection criteria for power conditioners include high reliability and
availability of maintenance support in Malaysia. In deciding the capacity of power conditioner,
reserved quantities (stock) of such equipment is considered to ensure continuous system operation in
cases of failure of one power conditioner. Regarding maintenance plan, the most suitable will be
decided based on the specific type of power conditioners to be provided.
As issues at the project site, countermeasures to theft are required in case that the site is away from
town/village and there is less traffic on the road to the site.
e. Realization of Total Project Cost Reduction
The price setting for purchasing electricity under the FiT mechanism is not much attractive for a
private business in terms of gaining enough benefits. Therefore, the key factor for the success of the
project is to realize the total project cost reduction to a level that makes it financially feasible. It is
necessary to carry out detailed cost estimation and examination on the maximum cost reduction for
all the components of the project such as PV module, foundation, support structure, erection work,
power conditioner, facilities for grid connection, and others.
3) Review of Technical Measures
The following technical measures are reviewed to solve the problems in the implementation of the
project mentioned above.
The way of review on the technical measures are same for the four candidate sites mentioned in
Chapter 2. Thus, the technical measures are reviewed at the most promising candidate site Ipho as
shown below:
a. Climate Condition
(Temperature)
Monthly average highest temperature and monthly average temperature in Ipoh are 32 to 33 and 22
to 24 degrees Celsius respectively2, according to data for 30 years from 1971 to 2000. It is high
temperature throughout the year.
2 The World Meteorological Organization (WMO) specialized agency of the United Nations,
http://www.worldweather.org/020/c00077f.htm#climate
3-11
The efficiency of crystalline PV module goes down in case of higher temperature on the PV module,
and the one of amorphous PV module also goes down but a little. In the point of the efficiency,
amorphous type shall be selected, however the aging degradation of the efficiency of amorphous PV
module is lager then the one of crystalline PV module.
In the project, crystalline PV module is selected since smaller aging degradation is more important
for the project.
(Rainfall)
According to data for data 30 years, which is same as the temperature data, average yearly rainfall is
2,428 mm. The highest month with 297 mm is October and the lowest month with 132 mm is
January. There is high rainfall throughout the year.
It is recommended to install PV module with same tilt angle as latitude in case of grid-connected
system. The latitude in Ipoh is 4.42 degrees, therefore 4 to 5 degrees is recommended as tilt angle at
the site. However dusts and leaves cannot be washed away in the tilt angle by rain and the efficiency
of the PV module becomes low because of the dusts and leaves.
In the project, it is expected that the high rainfall washes away the dusts and leaves. To make the tilt
angle 10 degrees, which is greater than 4 to 5 degrees, the rain water can easily wash away on the
surface of the PV modules.
(Wind Speed)
There is light wind in the whole Malay Peninsula. There is a report3 estimates the strongest wind
speed for 10, 30, 50 and 100 years based on the wind data of 1975 to 2008 in Ipoh. According to the
report, 14.37 m/sec, 19.18 m/sec, 21.41 m/sec and 24.44 m/sec are estimated the strongest wind for
10, 30, 50 and 100 years respectively.
Expected strong wind will be considered for strength design of mounting structure of PV module.
Based on the estimated the maximum wind speed, 25 m/sec is applied as wind speed for design.
(Frequency/Scale of Earthquake)
There is a very little occasion of earthquake in the whole Malay Peninsula. There are 13 earthquakes
with magnitude 5 or more and occur within around 300 km from the project site from January 1973
to January 20124. The largest one is occurred in 2006 and its magnitude was 6.3. The focus of
earthquake is located more than 200 km away from the site.
Therefore the horizontal seismic coefficient for design is expected to be smaller than the one in
3 Mapping of annual extreme wind speed analysis from 12 stations in peninsular Malaysia, 2010,
ICOSSSE'10 Proceedings of the 9th WSEAS international conference on System science and
simulation in engineering 4 U.S. Geological Survey,
http://earthquake.usgs.gov/earthquakes/eqarchives/epic/epic_global.php
3-12
Japan. For safety side, 0.7, which is minimum value of the horizontal seismic coefficient for design
in JIS C8955, is applied.
(Frequency in Thunder)
There is much frequency in thunders in Malay Peninsula. Isokeraunic level (IKL) in Malaysia is
around 180 days5. It is around 35 days even in the northern part of Kanto, where the frequency in
thunder is quite high in Japan. By the comparison, it is understandable that the frequency in thunder
in Malaysia is so high.
The project site is located in mountain area, therefore direct lightning strokes strike to the mountain
peaks and there is less possibility to strike PV modules or related equipment of the project. However
it is certain that a lot of inducement lightning occurs at the site. It is necessary to protect electrical
circuits from the surge of thunder. As the protection countermeasures, common grounding of
equipment is surely installed, and surge protection device (SPD) is installed at input/output sides of
connection box and junction box.
b. Site Condition at Project Site
(In a Mountain Area)
Since the project site is located in a mountain area, shadow by the mountain shall be considered. PV
module will be installed at a limited plain area in a mountain area, however alignment of PV module
is designed not to be covered by the shadow of mountain for day time.
(Near the Sea)
Since the project site is located around 500 meter away from the sea. Countermeasure against salt
damage is necessary. Mounting structure made of galvanized steel, stainless or aluminum is utilized.
(In Low Latitude)
As mentioned in the section of rainfall in climate condition, the latitude of the site is 4.42 degree.
The latitude and rainfall, 10 degree is selected as the tilt angle of PV module.
c. Matters Related to Grid Connection
The capacity of solar PV power system is designed at 1 MW in the initial stage at the project site in
Ipoh. It is possible to connect this scale of capacity to the grid through 11 kV distribution line.
Existing 11 kV distribution line reaches a concrete factory, which is 2 km away from the project site.
This is the nearest existing power distribution line from the project site.
The grid connection at the point above is under the jurisdiction of the regional site office of TNB.
The study team could not have a meeting with the official for grid-connection in the office since the
official was absence when the study team visited the site. The local consultant had a meeting with
5 Auto-reclose performance on 275 kV and 132 kV transmission line in Malaysia, 2002, Asia Pacific.
IEEE/PES
3-13
the office later. At the meeting it was confirmed that it is possible to connect to the existing line at
the connection point by installing disconnection switches by the project at the project side and by
TNB at existing line side.
The construction cost of the distribution line to be provided is accounted for in the project.
d. Maintenance Plan
In case of applying Japan-made power conditioners, multiple power conditioners are installed (e.g. 4
units of 250 kW power conditioner) to ensure continuous operation during failure of one unit. In
case power conditioners from other countries are opted, the primary criteria for selection shall be
availability of well-organized support service in Malaysia and low price.
To prevent thefts, fence, security cameras and exterior lights are installed and the video picture is
monitored at the control house. Data for monitoring the system e.g. amount of generated electricity
and voltage, and metrological data are sent to the Internet via mobile network, and the status of
operation can be monitored even at Japan through the Internet.
e. Realization of Total Project Cost Reduction
According to the purpose of the support scheme for this Study, which involves promotion of project
formation by Japanese companies and export from Japan, the project formulated under the scheme
should apply Japanese equipment as much as possible. However, the cost competitiveness of
Japanese equipment is low. In order to make the project financially feasible, applying Japanese
equipment for all components of the project should not be considered. Thus, the possibility of
applying Japanese equipment is examined only for (i) PV module, which accounts for a high
proportion of the project cost, and (ii) power conditioner, which needs to be highly reliable.
Regarding cost reduction of PV module, the possibility of manufacturing on site from cells using PV
module manufacturing machine has been studied. In such case, PV module manufacturing machine
shall be Japan-made.
Regarding cost reduction of foundation and support structure for PV module, it was examined to
design them considering galvanized steel pipes which are widely used as ready-made products. The
cost reduction for constructing them by simplifying their design is also examined.
(3) Planned Outline of the Project
1) Basic Policy for Deciding the Scope of the Project
The budget under FiT for purchasing electricity generated by renewable energy at higher tariff
compared with that generated by conventional energy, is the 1% additional to the electricity tariff for
consumers of three power utilities in Malaysia. The price setting of FiT was made as low as possible,
within the range that is attractive for private entities to venture into the renewable energy market, in
3-14
order to maximize the benefits of electricity generated by renewable energy. With the limitation of
budget for FiT, the government is discreet in specifying the target amount of renewable energy to be
introduced. It is not certain whether introduction of renewable energy proceeds in line with the
government plan by FiT or not.
In other words, implementation under FiT mechanism is presently at a trial stage even for the
Government of Malaysia. If the introduction of renewable energy does not proceed well, the set
prices and/or annual degression rate of FiT may be adjusted. Otherwise, the budget of FiT may be
increased.
Under such circumstance, the basic policy for deciding the contents of the project is to start with a
small scale project in order to confirm business circumstance prior to implementation of a large scale
project. In this Study, the capacity of the small scale project is set at 1 MW, and the planning and
design were conducted for the 1 MW PV system. The capacity of the large scale project to be
implemented afterward is 10 MW. Regarding planning and design for the 10 MW PV system,
conceptual design and preliminary cost estimation were conducted utilizing the result of planning
and design for the 1 MW PV system.
2) Conceptual Design and Specifications
The main features of the conceptual design and specifications for 1 MW PV system are shown
below.
(a) System capacity: 1.0 MW
(b) Mode of grid connection: Distribution line, 11 kV, 1 circuit
(c) Power conditioner: Plural number (in case of Japanese make)
(d) Foundation of support structure: Galvanized steel pipes (scaffold pipes) as
pile with concrete reinforcement
(e) Support structure: Galvanized steel pipes (scaffold pipes)
(f) Step-up transformer: 0.4/11 kV, 3 phase, 2 x 500 kVA
(g) Control house: Single-story, reinforced concrete
construction
(h) Meteorological observation system: Solar insolation, ambient temperature, and
module temperature
(i) Data collection and communication system: Collect meteorological and power data, and
communicate with cell phone network
3-15
Meanwhile, the main conceptual design features and specifications for 10 MW PV system are shown
below.
(a) System capacity: 10.0 MW
(b) Mode of grid connection: Distribution line, 33 kV, 2 circuits
(c) Power conditioner: 10 x 1 MW
(d) Foundation of support structure: Galvanized steel pipes (Scaffold pipes) as
pile with concrete reinforcement, or water
floating type
(e) Support structure: Galvanized steel pipes (Scaffold pipes)
(f) Step-up transformer: 0.4/33 kV, 3 phase, 2 x 5 MVA
(g) Control house: Double-stories, reinforced concrete
construction
(h) Meteorological observation system: Solar insolation, ambient temperature, and
module temperature
(i) Data collection and communication system: Collect meteorological and power data, and
communicate with cell phone network
System image is shown in Figure 3-6. Site layout of 1 MW system is shown in Figure 5-1 and single
line diagram is shown in Figure 5-2.
Figure 3-6 System Image of Solar PV System
-~
Inverter
Isolating
Transformer
Protection Devise
Power Conditioner
AC
Distribution Panel
Internal Power Source
400V
Cubicle
Step up
Transformer
Data Collecting
System
PV Module
PV Array
Structure for PV Array
DL
CubicleM
Connection
Box
Connection
Box
Junction
Box
Power Conditioner
11kV or 33kV
Meteorological
Observation
System
Project Site
Control House
Scope Out of Scope
Source : Made by Study Team
a. System Output
System output is 1 MW or 10 MW in rated total output of installed PV modules. Supplied power to
existing power grid of TNB is less than the output because of loss at power conditioner and
distribution line even at the peak of power generation by solar PV power system.
3-16
The rated output of PV module is specified based on STC (at 25oC at surface of PV module and
some other conditions). Generally, power generation efficiency goes down at a higher temperature6.
At the project site, the temperature at surface of module is estimated from 50oC to 70
oC since
ambient temperatures are 21oC to 24
oC (minimum of monthly average temperature) and 28
oC to
34oC (maximum of monthly average temperature). Therefore, economic evaluation shall be based on
the power generation estimated not by rated output but by output estimated at such temperature.
Considering this, suitable PV module shall be selected.
b. Method of Grid Connection
Power distribution line of 11 kV in case of 1 MW system and 33 kV in case of 10 MW system is
utilized. Aerial cable is utilize for the distribution line. The type of cable and voltage of distribution
comply with the standard of TNB.
In case of candidate site Ipoh, the method of grid connection is considered as follows.
Connection point to existing power grid is existing 11 kV distribution line which is located 2 km
away from the site in case of 1 MW system and existing 33 kV sub-station of TNB which is located
10 km away from the site in case of 10 MW system. 1 MW of power can be transmitted by 11 kV
line. 33 kV line is utilized for 10 MW system since 10 MW of power is difficult to be transmitted by
11 kV line because of its capacity. 33 kV line can transmit around 15 MW of power if its
cross-section size is around 100 mm2. One 33 kV line is enough to transmit 10 MW of power,
however two lines are designed to be installed for future scale expansion and countermeasure of
failure on one line.
c. Power Conditioner
1 MW of power conditioner is now available at the market. It is ideal to purchase power conditioners
with larger capacity to consider economic efficiency. However power conditioner has higher
possibility of failure than other system components, several power conditioners with smaller
capacity, those made in Japan with high reliability, is to be installed for the project. Ten 1 MW of
power conditioners are to be installed for 10 MW system.
d. Foundation of Mounting Structure
Galvanized steel pipe (scaffold pipe), which is utilized as mounting structure, is utilized as
foundation of mounting structure. Number of kinds of material can be reduced and it is helpful to
reduce the cost to utilize galvanized steel pipe as the foundation. The pipe is stroked into the ground
and stabilized by concrete near the surface level. The method to stroke the pipe vertically is
considered including development of working tools for this.
For installation of 10 MW system on the water of pond, mounting structure made of galvanized steel
6 Generally, the drop down of output (watt) is 0.4 to 0.5% /
oC in case of monopoly of crystalline
module.
3-17
pipes is assembled on a raft made of floating for fishery and galvanized steel pipes.
e. Mounting Structure
Mounting structure is made by galvanized steel pipes. The pipe is commonly utilized among
building and construction site. The benefits to utilize the pipe are 1) easy to purchase locally, 2)
enough strength and 3) availability of connection/joint parts for the pipe. By using the parts, it is
much easier to make proper level of pipes, which needs much process in case of utilization of other
materials.
f. Step-up Transformer
400 V, which is standard line voltage in Malaysia, is adopted as voltage at low voltage side of
step-up transformer for both 1 MW system and 10 MW system. 11 kV or 33 kV is adopted as voltage
at high voltage side of the transformer for 1 MW system and 10 MW system respectively. Oil-
insulation transformer for outdoor use is utilized. Two transformers are installed for continuous
operation if failure occurs.
g. Control House
Control house with reinforced concrete is built for the project. It is single-story because of less
number of power conditioner in case of 1 MW system. It is double-stories, power conditioners are
installed at ground floor, and electrical panels, data collection and communication equipment and
other equipments are installed at control room in upper floor in case of 10 MW system.
h. Metrological Monitoring System
Solar radiation, ambient temperature and temperature at surface of PV module are measured by a
metrological monitoring system. The system will not collect wind direction and wind speed data
because wind is not strong at the site.
i. Data Collection and Communication Equipment
Data collection system collects metrological data and power generation data, and record the data
automatically. 1) voltage and current at input side of power conditioner, 2) voltage, current and
power factor at output side of power conditioner, 3) voltage, current, power factor and frequency at
high voltage side of transformer and 4) voltage, current and power factor at the connection point to
the grid are collected as power generation data of the system.
Communication equipment has a function to transmit data of collected data and images on security
cameras to the Internet via mobile network, Addition to this, the communication equipment has a
function to collect power data at connection point via optical fiber cable installed on the power
distribution line to the connection point.
3) Contents of the Proposed Project
A proposed project site was selected from the results of site survey of the following candidate sites:
a. A vacant lot in Ipoh where tin mining is conducted
3-18
b. Two lots at an industrial area in Kuantan
c. On the roof of factory/warehouse at an industrial area in Johor
3-19
a. A vacant lot in Ipoh where tin mining is conducted
Site at Ipoh is a vacant lot where tin mining is being carried out. Available land for the proposed site
is more than 10 ha. Around 10 MW system can be installed at the site based on the land size.
Countermeasure against salt damage is necessary since the site is not so far from the sea. Moreover,
extension of existing grid is necessary since existing 11 kV distribution line is located 2 km away
from the proposed site. Land clearance cost should also be considered since the land is not cleared.
Situation of Ipoh site is shown below. Site layout drawing is shown in Figure 5-1 in Chapter 5.
Figure 3-7 Situation of Ipoh Site
Site Map
Site Photo
Remarks ・60 km away from the center of Ipoh (2 hours by car)
・4.5 hours drive from Kuala Lumpur
・Vacant lot where tin mining is being conducted
・Available land at present: 10 ha or more
・Expansion of site is possible (on pond)
・A private company (a candidate partner for the project) has license to use the land.
Source of Map : CIA World Factbook/Department of Survey and Mapping Malaysia
Source of Photograph : Study Team
Candidate Project Site
Candidate Project Site
3-20
b. Two lots at an industrial area in Kuantan
Kuantan two sites are located in an industrial area, which is now for sale. It is necessary to consider
the cost of purchasing or leasing the land for purposes of cost estimation. It seems that its cost is JPY
54 million for 2 ha land (for 1 MW system). Considering such cost and whole project cost, (JPY 263
million), said site is not feasible because the land cost is too high ratio (around 20%) in the whole
project cost. Situation of Kuantan sites are shown below.
Figure 3-8 Situation of Kuantan Site
Site Map
Site Photo
Remarks ・20 km away from the center of Kuantan (30 minutes by car)
・4 hours drive from Kuala Lumpur
・Ownership of land: An industrial area developer (Purchase or Lease)
Site 1: Gebeng Industrial Land, 25.3 ha, Land cost: 32,670,000 RM
Site 2: Gambang Industrial Land, 20.5 ha, Land cost: 22,055,500 RM
・Available land: Up to 100 ha
・Other lot at other industrial areas can be proposed, if necessary
Source of Map : CIA World Factbook/Department of Survey and Mapping Malaysia
Source of Photograph : Study Team
Candidate Project Site
3-21
c. On the roof of factory/warehouse at industrial area in Johor
Johor site includes several buildings (factory and warehouse). The sizes of buildings vary; however,
some of them have sufficient size for the installation of 1 MW solar PV power system. Bonus rate of
FiT mechanism is applicable since PV module is installed at an existing building; however,
installation of solar PV power system on the building is more costly due to high installation,
maintenance and management costs compared to installation on ground7. It is also necessary to
consider estimating the cost of a foundation/mounting structure to be installed on the roof, as well as
verifying the capacity of the existing reinforced building structure, if necessary. Situation of Johor
site is shown below.
Figure 3-9 Situation of Johor Site
Site Map
Site Photo
Remarks ・15 km away from the center of Johor Baru (half hour by car)
・2.0 hours drive from Kuala Lumpur to Johor Baru
・Building in industrial estate
・Available space at present: 1 ha
・A private company of developing industrial estate.
7 According to “Achieving Low-Cost Solar PV: Industry Workshop Recommendations for Near-Term
Balance of System Cost Reductions”, (September 2010, Rocky Mountain Institute), total project cost is
USD 3.5/W for installation on the ground, and USD 3.75/W for installation on the roof.
Source of Map : CIA World Factbook/Department of Survey and Mapping Malaysia
Source of Photograph : Study Team
Candidate Project Site
Candidate Project Site
3-22
Average monthly solar radiation is shown in the following table.
Table 3-1 Solar Radiation (Monthly Average)
Unit: kWh/sq.m/day
Average Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.
Ipoh (Site) 5.11 5.23 5.66 5.70 5.55 5.16 5.19 5.10 4.92 4.90 4.64 4.56 4.67
Ipoh (Central) 4.74 4.59 5.20 5.29 5.27 4.93 4.85 4.81 4.68 4.67 4.47 4.11 4.05
Johor 4.56 4.48 5.22 5.06 4.87 4.57 4.41 4.30 4.33 4.53 4.57 4.34 4.07
Kuantan 4.79 4.24 5.09 5.24 5.42 5.15 5.02 4.96 5.05 5.12 4.71 3.89 3.55
Kuala Lunpur 4.91 4.79 5.37 5.42 5.27 5.11 4.98 4.92 4.87 4.88 4.77 4.36 4.17
Malacca 4.68 4.48 5.12 5.10 5.09 4.77 4.61 4.58 4.61 4.71 4.76 4.34 4.00
Source: Website of NASA
Average, maximum and minimum solar radiation and estimated power generation (in case of 1 MW
system) are shown in the following table.
Table 3-2 Average, Maximum and Minimum Solar Radiation and Estimated Power Generation
(1 MW System)
Average, Maximum and Minimum Daily Solar Radiation
(Horizontal)
Estimated
Power Generation
Ipoh (Site) 5.11 kWh/sq.m/day ( 5.70 in Mar. and 4.56 in Nov.) 1.31 GWh/year
Ipoh (Central) 4.74 kWh/sq.m/day ( 5.29 in Mar. and 4.05 in Dec.) 1.21 GWh/year
Johor 4.56 kWh/sq.m/day ( 5.22 in Feb. and 4.07 in Dec.) 1.17 GWh/year
Kuantan 4.79 kWh/sq.m/day ( 5.42 in Apr. and 3.55 in Dec.) 1.22 GWh/year
Kuala Lunpur 4.91 kWh/sq.m/day ( 5.42 in Mar. and 4.17 in Dec.) 1.25 GWh/year
Malacca 4.68 kWh/sq.m/day ( 5.12 in Feb. and 4.00 in Dec.) 1.20 GWh/year
Source: Website of NASA and Calculation by the Study Team
Estimated Power Generaton
= Average Daily Solar Radiation * Capacity of PV system * 365 (day/year) * 70% (efficiency)
From the result of comparison and consideration of the above, Ipoh site is selected because of the
available land size for installing large PV system in one place, and the greater availability of solar
radiation. The initial capacity is 1 MW and planned increase is 10 MW.
Addition to 10 ha or more land is available at the site, which includes a 20 ha pond filled with rain
water, after tin mining is carried out. One of the ideas is to install the PV module on a floating device
on the pond in the future.
As result of cost estimation base on a price quotation by a local system integrator in Malaysia,
interview survey from a system integrator of Japanese company in Malaysia, interview survey from
a system integrator in Japan and price trend at the word market, the estimated cost will be from JPY
263 million for 1 MW system to JPY 2.31 billion for 10 MW. The basis and process for cost
3-23
estimation refer to Chapter5.
4) Problems and Solutions Related to the Proposed Technology and System
The profit from power production business is greatly affected if the power cannot be generated due
to defective and troublesome system. Therefore, it is necessary to improve the reliability and
stability of the system. The following should be noted in designing the system composition:
a. Composition of Multi-system
PV module and power conditioner are the main components of a solar PV power system. Thus,
power cannot be generated if any of these components fail. In order to avoid such, it is necessary to
design the system by constituting two or more systems. In case of 1 MW system, it shall be designed
by constituting four parallel 250 kW systems. Hence, if one 250 kW system fails, operation can
continue with the remaining 750 kW system.
b. Maintenance
Solar PV power system does not need much maintenance persons since it is related to
maintenance-free facility. Two persons for maintenance are employed and one of them is resident
once every other day and the other person is resident the other days in day time. The person goes on
patrol at the site twice a day in morning and in evening to find damaged equipment, theft of
equipment and other abnormalities, and records voltage, amount of generated power, solar radiation
and other related data at the control house. Cleanness of surface of some amount of PV module is
also done every day by the person and PV module will be cleaned once a month. Security guards are
also employed for night. To prevent thefts, fence, security cameras and exterior lights are installed
and the video picture is monitored at the control house.
Data for monitoring the system e.g. amount of generated electricity and voltage, and metrological
data are sent to the Internet via mobile network, and the status of operation can be monitored even at
Japan through the Internet.
It is the power conditioner which is subjected to high risk of failure among the components of solar
PV power system. It is important that the selected manufacturer of such equipment has local
maintenance organization in Malaysia. Moreover, a failure risk is reduced by keeping supplies of
replacement parts and conducting periodic maintenance of the equipment.
c. Grid Connection
In Malaysia, there is a technical standard about grid connection of the power system by RE.
However, as for the technical specifications for connecting to the local grid, it is necessary to
conduct discussions with the local DL. It is important that the protection system of the solar PV
power system is designed against grid failures.
Principle of grid-protection system is that the PV power generation system is to be isolated certainly
in case of electricity failure at the power grid. Disconnection switch is opened by signal from
protection relay if the protection relay finds electricity failure on the power grid. Addition to this, the
3-24
connection to the grid is released if over current or over voltage is found as general protection
method.
Chapter 4 Evaluation of Environmental and Social
Impacts
4-1
Generally, solar PV power system is assumed to cause limited environmental effects. With operating
facilities, solar PV power system would not emit effluent, atmospheric pollutant, and odour around
the site. Also, solar PV power system would not cause noise and vibration. Environmental effect
during construction is small because equipment which consists PV power generation is so light that
there is no need for large construction machines and large foundation.
In spite of the small environmental risk to residential areas in implementing the project, there is a
need to confirm legal consistency. Social and environmental effects of PV power generation project
as well as the result of study on legal system in Malaysia are shown in this chapter. In addition,
result of study on preventing global warming effect is shown.
(1) Analysis on Environmental and Social Impacts
1) State Analysis
Water pollution in Malaysia is caused by tin mining which is a traditional industry in the country.
Additional pollution is also accumulated from natural rubber factory and palm kernel oil plant. As a
result of industrialization of Malaysia, which advanced rapidly with the introduction of foreign
capital during the second half of 1960s, pollution problems appeared (e.g., water pollution and
wastes from factories.) To deal with these problems, Environmental Quality Act was enacted in 1974.
This law introduced limits of effluent and atmospheric emission. Furthermore, DOE was established
in the same year.
On the other hand, Malaysian government ratified the United Nations Framework Convention on
Climate Change (UNFCCC) in July 1994, and the Kyoto Protocol in September 2002. The
designated national authority (DNA) is Conservation and Environmental Management Division
(CEMD) under the Marrakesh Accords, which is the detailed regulation of Kyoto Protocol. The
National Steering Committee on Climate Change (NSCCC) has role to examine climate change
problems under the CEMD, and the National Committee of Clean Development Mechanism
(NCCDM) argues about clean development mechanism (CDM) under the NSCCC. NCCDM has
scope between the energy and forest sectors. Green Tech Malaysia is assigned as the executive office
of the energy technological committee.
4-2
Figure 4-1 Organization Chart Related to CDM in Malaysia
Source : Made by Study Team
Number of registered CDM projects as of January 2011 in Malaysia, the world's fifth, is 87. The
expected reductions from registered projects are in the world's seventh annual average of 5,242,897
tons.8
2) Future Forecast (If Project is Not Implemented)
In December 2009, Prime Minister Najib Razak announced at the 15th
Conference of the Parties
(COP15) to the United Nations Framework Convention on Climate Change in Copenhagen that by
2020, Malaysia would voluntarily reduce its green house gas (GHG) emissions intensity, per unit of
GDP, by up to 40%, based on 2005 levels. This is considering conditions on technology transfer and
financial assistance from developed countries.
The 10th Malaysia Plan (2010~2015) specified that promoting these policies ensure sustainable
8 Reference 1 "In Overseas Environmental Measures of Japanese Companies" Website of
Ministry of Environment
Reference 2 “The compass of CDM/JI National Policy (Malaysia)” Website of The Institute of
Energy Economics, Japan
Conservation and Environmental Management Division,
Ministry of Natural Resources and Environment : CEMD
National Steering Committee on Climate Change: NSCCC
National Committee on CDM: NCCDM
Technical Committee on CDM
for Energy Sector
Technical Committee on CDM
for Forest Sector
Malaysian Green Technology
Corporation
(Green Tech Malaysia)
Forest Research Institute
Malaysia: FRIM
4-3
development and conservation of environment.
As discussed in Chapter 1, NREPAP formulated by MEGTW specifies the planned proportion of RE
in the total electricity generation in the country as 5% in 2015, 9% in 2020, and 12% in 2030. It also
states the plan to gradually increase the proportion to 24% in 2050.
If the project would not be implemented, other solar PV projects or RE projects would need to be
executed in Malaysia to meet the national goal. Therefore, now is the time for venturing into the RE
market in Malaysia.
(2) Environmental Improvement Effects by the Project
In the project, environmental improvement is through carbon dioxide emission reduction. Therefore,
the quantity of emission reduction would be suitable for the evaluation of this project.
a. Methodology
The generated energy of the project would be less than 15 MW. Consequently, small scale
methodology of CDM (“ASMI-D Grid connected electricity generation”) is used for calculating the
quantity of reduction.
b. Annual Generated Energy
For the Solar PV power system of 1 MW in Perak (Ipoh), the assumed annual electricity generation
of the construction would be 1,300 MWh.
c. Baseline
Baseline emissions are calculated by multiplying the emission factor of power generated from RE
generation facilities. Emission factors, i.e., operating margin (OM) and build margin (BM) that
composes the combined margin (CM), are used.
d. Grid Emission Factor
・ OM
OM is the emission factor calculated, considering that the power plant under this project would
substitute for other active power plants. This emission factor would be calculated based on weighted
average of emission factors for all power plants, except the zero-fuel cost and must-run facilities.
OM of Peninsular Malaysia was already stated as 0.603(t-CO2/MWh) in the “Study on Grid
Connected Electricity Baseline in Malaysia” published by Malaysia Energy Center (PTM). It is
calculated using following formula:
4-4
Where,
Operating margin in year y.(t-CO2/MWh)
Net electricity supplied to the grid by plant m in year y. (MWh)
Emission factor of power plant m in year y.(t-CO2/MWh)
Power plants included in the OM except zero-fuel cost and must-run
facilities.
y Most recent year for which power generation data is available.
・ BM
BM is the emission factor calculated considering that the power plant under this project would not
immediately substitute for new power plants soon, signifying delay in construction of such plants.
For lack of information about new power plants, the following method for calculating BM from
emission factor of active power plants would be adopted:
○ Set of five power units that have been built most recently; or
○ Set of power capacity additions in the electricity system that comprise 20% of the system
generation, and that have been built most recently.
BM of Peninsular Malaysia was already mentioned as 0.741(t-CO2/MWh) in the “Study on Grid
Connected Electricity Baseline in Malaysia”, based on the following formula:
Where
Build margin in year y.(t-CO2/MWh)
Net electricity supplied to the grid by plant m in year y. (MWh)
Emission factor of power plant m in year y.(t-CO2/MWh)
Power plants constructed recently.
y Most recent year for which power generation data is available.
4-5
・ CM
The emission factor used to determine baseline emission is CM, which is calculated as the weighted
average of the emissions factor of the OM and the BM. The formula for calculating this weighted
average emission factor is as follows:
EFy = wOM × EFOM,y + wBM × EFBM,y
Where
EFy Combined margin
EFOM,y Operating margin emission factor
EFBM,y Build margin emission factor
wOM,wBM Weighting of build margin and operating margin emissions factor (%).
These values are 50%, as a general rule. (wom=wBM=0.5)
EFy = 0.5 × 0.603 + 0.5 × 0.741y = 0.672 (t-CO2/MWh)
e. Calculation of Baseline Emission
BEy = EFy × EGy = 0.672(t-CO2/MWh) ×1,300(MWh) =873.6 (t-CO2)
f. Calculation of Emissions Reduction
ERy = BEy - PEy - Ly
Where,
ERy Emission reductions in year y (t-CO2)
BEy Baseline emissions in year y (t-CO2)
PEy Project emissions in year y (t-CO2)
Ly Leakage emissions in year y (t-CO2)
In the solar PV power system project, PEy =0 and Ly=0; therefore, annual emissions reduction is
as follows:
ERy = BEy =873.6(t-CO2)
g. Possibility of the Clean Development Mechanism project or the Bilateral Offset Mechanism
project
This section shows the study on possibility of the Clean Development Mechanism project or the
4-6
Bilateral Offset Mechanism project for this PV power generation project. According to the Web site
of SEDA and interview to the Green Tech Malaysia (Malaysian Green Technology Corporation)
which assigned as executive organization of CEMD (Conservation and Environmental Management
Divisor), it is possible to make an application of FiT in RE project which applied Clean
Development Mechanism provided by Kyoto Protocol.
Annual capital gain of carbon credit in this project is ¥648,770, using calculated reduction of
emission in above, and recent price of carbon-credit. ( 874 ton/year ×¥742.3/ton = ¥648,770 /year)
And the price of carbon-credit is refer from “Nikkei Ecology January 2012” showed ¥742.6/ton.
Recently the price of carbon-credit is fall down, therefore these mechanisms cannot make feasibility
of PV project better, and rather it makes profitability worse for application to CDM and monitoring
(3) Project Influence on Environmental and Social Sectors
1) Environmental and Social Items to be Considered
The result of confirmation of social and environmental considerations about this project is shown in
the following table. It adopted the checklist of JICA for the category of “other power generation”.
Table 4-1 Social and Environmental Considerations for PV Power Generation
Category Environmental
Items Main Checklist Items
Yes: Y
No: N
Confirmation of Environmental
Considerations
1 P
erm
its
and
Exp
lan
atio
n
(1) EIA and
Environmental
Permits
(a) Have EIA reports been officially
completed?
(b) Have EIA reports been approved by
authorities of the host country‟s
government?
(c) Have EIA reports been
unconditionally approved? If
conditions are imposed on the
approval of EIA reports, are the
conditions satisfied?
(d) In addition to the above approvals,
have other required environmental
permits been obtained from the
appropriate regulatory authorities of
the host country‟s government?
(a)N
(b)N
(c)N
(d)N
(a)~(c)
Solar PV power system project is not
subject to EIA
(d)It will be submitted to DOE State
office before implementation
4-7
Category Environmental
Items Main Checklist Items
Yes: Y
No: N
Confirmation of Environmental
Considerations
(2) Explanation
to the Public
(a) Are contents of the project and the
potential impacts adequately
explained to the public based on
appropriate procedures, including
information disclosure? Is
understanding obtained from the
public?
(b) Are proper responses made to
comments from the public and
regulatory authorities?
(a)N
(b)N
(a)EIA does not apply to PV power
generation projects. However, it is
necessary to obtain the permission
for SSE, the information on this
project would be provided to
relevant authorities.
(b)Candidate sites for this project are
in industrial estate or the land
utilized for mining. There is almost
no need to incorporate comments
from the public.
2 M
itig
atio
n M
easu
res
(1) Air Quality
(a) In the case that electric power is
generated by combustion, such as
biomass energy projects, do air
pollutants, such as sulfur oxides
(SOx), nitrogen oxides (NOx), and
soot and dust emitted by power plant
operations comply with the country‟s
emission standards and ambient air
quality standards?
(b) Do air pollutants, such as hydrogen
sulfide emitted from geothermal
power plants comply with the
country‟s standards? Is there a
possibility that emitted hydrogen
sulfide will cause impacts on the
surrounding areas, including
vegetation?
(a)N
(b)N
(a)~(b)
The electric power generated by solar
PV power system does not need
burning of any fuel or materials.
There is no emission of atmospheric
pollutant.
(2)Water Quality
(a) Do effluents (including thermal
effluent) from various facilities, such
as power generation facilities comply
with the country‟s effluent standards?
Is there a possibility that the effluents
from the project will cause areas that
do not comply with the country‟s
ambient water quality standards?
(a)N
(b)N
(a)~(b)
There are no effluents in solar PV
power system.
4-8
Category Environmental
Items Main Checklist Items
Yes: Y
No: N
Confirmation of Environmental
Considerations
(b) Do leachates from the waste disposal
sites comply with the country‟s
effluent standards and ambient water
quality standards? Are adequate
measures taken to prevent
contamination of soil, groundwater,
and seawater by leachates?
(3) Waste
(a)Are wastes generated by the plant
operations properly treated and
disposed of in accordance with the
country‟s standards (especially
biomass energy projects)?
(a)N (a) Solar PV power system does not
involve permanent disposal of
wastes.
(4)Soil
Contamination
(a) Has the soil in the project site been
contaminated in the past, and are
adequate measures taken to prevent
soil contamination?
(a)N (a) Some sites are potentially
contaminated in the past; however,
there is no possibility that soil
contamination would spread due to
this project.
(5)Noise and
Vibration
(a)Do noise and vibrations comply with
the country‟s standards?
(b) Do low frequency sound comply
with the country‟s standards,
especially in wind power generation?
(a)Y
(b)Y
(a) Solar PV power system does not
generate noise or vibration.
(b) Solar PV power generation does
not generate low frequency sound.
(6)Subsidence
(a) In the case of extraction of a large
volume of groundwater or extraction
of steam by geothermal power
generation, is there a possibility that
the extraction of groundwater or
steam will cause subsidence?
(a)N (a) Solar PV power system does not
cause subsidence, because it does
not require groundwater use.
(7) Odour
(a) Are there any odor sources? Are
adequate odor control measures
taken?
(a)N (a) Solar PV power system does not
cause odor.
3 N
atu
ral
Env
iro
nm
ent
(1) Protected
Areas
(a) Is the project site located in protected
areas designated by the country‟s
laws or international treaties and
conventions? Is there a possibility
that the project will affect the
protected areas?
(a)N (a) Candidate sites are not in protected
areas. They are located in an
industrial estate or land utilized for
mining.
4-9
Category Environmental
Items Main Checklist Items
Yes: Y
No: N
Confirmation of Environmental
Considerations
(2)Ecosystem
(a) Does the project site encompass
primeval forests, tropical rain forests,
ecologically valuable habitats (e.g.,
coral reefs, mangroves, or tidal
flats)?
(b) Does the project site encompass the
protected habitats of endangered
species designated by the country‟s
laws or international treaties and
conventions?
(c) If significant ecological impacts are
anticipated, are adequate protection
measures taken to reduce the impacts
on the ecosystem?
(d) Is there a possibility that localized
micro-meteorological changes due to
wind power generation will affect
valuable vegetation in the
surrounding areas? (Is there valuable
vegetation in the vicinity of the wind
power generation facilities?) If
impacts on vegetation are
anticipated, are adequate measures
considered?
(e)Are the wind power generation
facilities (wind turbines) sited by
considering the habitats and
migration routes of sensitive or
potentially affected bird species?
(a)N
(b)N
(c)N
(d)N
(e)N
(a)There are no primeval forests or,
tropical rainforests in the candidate
sites, located in industrial estate or
land used for mining.
(b)There are no protected habitats in
the candidate sites located in an
industrial estate or land used for
mining.
(c)In the industrial estate, solar PV
power system project would not
affect the ecosystem.
In the land used mining, flora is
different from primeval forest around
the candidate site. There would be no
impact to primeval forest.
(d)It is not expected that solar PV
power system would cause
micro-meteorological changes.
(e)It is not expected that solar PV
power system would affect the
habitat and migration routes of
birds.
(3)Hydrology
(a) Is there a possibility that hydrologic
changes due to installation of
structures, such as weirs will
adversely affect the surface and
groundwater flows (especially in
"run of the river generation"
projects)?
(a)N (a) Solar PV power system project
would not cause changes of
drainage system. Planning and
management would be based on
urban stormwater management
manual.
(4)Topography (a) Is there a possibility that the project (a)N (a)In the project, there are no large
4-10
Category Environmental
Items Main Checklist Items
Yes: Y
No: N
Confirmation of Environmental
Considerations
and Geology will cause a large-scale alteration of
the topographic features and geologic
structures in the surrounding areas
(especially in run of the river
generation projects and geothermal
power generation projects)?
scale geologic alterations. Only site
preparation needs to be performed.
4 S
oci
al E
nv
iro
nm
ent
(1)Resettlement
(a) Is involuntary resettlement caused by
project implementation? If
involuntary resettlement is caused,
are efforts made to minimize the
impacts caused by the resettlement?
(b) Is adequate explanation on relocation
and compensation given to affected
persons prior to resettlement?
(c) Is the resettlement plan, including
proper compensation, restoration of
livelihoods and living standards,
developed based on socioeconomic
studies on resettlement?
(d) Are the compensations going to be
paid prior to the resettlement?
(e) Are the compensation policies
prepared in document?
(f) Does the resettlement plan pay
particular attention to vulnerable
groups or people, including women,
children, the elderly, people below
the poverty line, ethnic minorities,
and indigenous peoples?
(g) Are agreements with the affected
people obtained prior to
resettlement?
(h) Is the organizational framework
established to properly implement
resettlement? Are the capacity and
budget secured to implement the
plan?
(a)N
(b)N
(c)N
(d)N
(e)N
(f)N
(g)N
(h)N
(i)N
(j)N
(a)~(j)
Resettlement need not be
implemented, because candidate sites
are located in an industrial estate or
land used for mining.
4-11
Category Environmental
Items Main Checklist Items
Yes: Y
No: N
Confirmation of Environmental
Considerations
(i) Are any plans developed to monitor
the impacts of resettlement?
(j) Is the grievance redress mechanism
established?
(2)Living and
Livelihood
(a)Is there a possibility that the project
will adversely affect the living
conditions of inhabitants? Are
adequate measures considered to
reduce the impacts, if necessary?
(b) Is there a possibility that the amount
of water (e.g., surface water,
groundwater) used and discharge of
effluents by the project will
adversely affect the existing water
uses and water area uses?
(a)N
(b)N
(a)It is not expected that solar PV
power system would affect the
living conditions of inhabitants.
(b)Solar PV power system does not
require use of surface water or
ground water.
(3)Heritage
(a) Is there a possibility that the project
will damage the local archeological,
historical, cultural, and religious
heritage? Are adequate measures
considered to protect these sites in
accordance with the country‟s laws?
(a)N (a)Candidate sites for this project are
in an industrial estate or land for
mining. It is not expected that solar
PV power system would damage
heritages.
(4 Landscape
(a) Is there a possibility that the project
will adversely affect the local
landscape? Are necessary measures
taken?
(a)N (a) Solar PV power system will have
small impact to local landscape,
because candidate sites are located
in an industrial estate or land used
for mining.
(5) Ethnic
Minorities and
Indigenous
Peoples
((a) Are considerations given to reduce
impacts on the culture and lifestyle
of ethnic minorities and indigenous
peoples?
(b) Are all of the rights of ethnic
minorities and indigenous peoples in
relation to land and resources
respected?
(a)N
(b)N
(a)~(b)
Solar PV power system will not have
an impact to culture and lifestyle of
minorities or indigenous people,
because candidate sites are located in
an industrial estate or land used for
mining.
4-12
Category Environmental
Items Main Checklist Items
Yes: Y
No: N
Confirmation of Environmental
Considerations
(6) Working
Conditions
(a) Is the project proponent not violating
any laws and ordinances associated
with the working conditions of the
country which the project proponent
should observe in the project?
(b) Are tangible safety considerations in
place for individuals involved in the
project, such as the installation of
safety equipment which prevents
industrial accidents, and management
of hazardous materials?
(c) Are intangible measures being
planned and implemented for
individuals involved in the project,
such as the establishment of a safety
and health program, and safety
training (including traffic safety and
public health) for workers, etc.?
(d) Are appropriate measures taken to
ensure that security guards involved
in the project do not to violate safety
of other individuals involved, or
local residents?
(a)Y
(b)Y
(c)Y
(d)Y
(a)~(d)
Occupational Safety and Health Act
1994 will be complied with in this
project.
5 O
ther
s
(1) Impacts
during
Construction
(a) Are adequate measures considered to
reduce impacts during construction
(e.g., noise, vibrations, turbid water,
dust, exhaust gases, and wastes)?
(b) If construction activities adversely
affect the natural environment
(ecosystem), are adequate measures
considered to reduce impacts?
(c) If construction activities adversely
affect the social environment, are
adequate measures considered to
reduce impacts?
(a)N
(b)N
(c)N
(a)~(c)
Scale of construction will be limited
and small. Therefore, environmental
impact during construction is
minimal.
4-13
Category Environmental
Items Main Checklist Items
Yes: Y
No: N
Confirmation of Environmental
Considerations
(2) Monitoring
(a) Does the proponent develop and
implement monitoring program for
the environmental items that are
considered to have potential impacts?
(b) Are the items, methods and
frequencies included in the
monitoring program judged to be
appropriate?
(c) Does the proponent establish an
adequate monitoring framework
(organization, personnel, equipment,
and adequate budget to sustain the
monitoring framework)?
(d) Are any regulatory requirements
pertaining to the monitoring report
system identified, such as the format
and frequency of reports from the
proponent to the regulatory
authorities?
(a)N
(b)N
(c)N
(d)N
(a)~(d)
Solar PV power system with less
environmental and social impact
require for limited monitoring.
6 N
ote
Reference to
Checklist of
Other Sectors
(a) Where necessary, pertinent items
described in the Power Transmission
and Distribution Lines checklist
should also be checked (e.g., projects
including installation of electric
transmission lines and/or electric
distribution facilities).
(a)N (a)The project will use transmission
lines, which already exist. If none
exist around the candidate site, new
transmission line will be needed.
However, scale of construction will
be limited and small.
Note on Using
Environmental
Checklist
(a) If necessary, the impacts to
trans-boundary or global issues
should be confirmed (e.g., the project
includes factors that may cause
problems, such as trans-boundary
waste treatment, acid rain,
destruction of the ozone layer, or
global warming).
(a)Y (a)In the project, reduction of GHG
emission will be calculated.
Source : JICA‟s New Guidelines for Environmental and Social Considerations Checklist for “Other Electric
Generation”
4-14
2) Comparison between the Proposed Project and Other Feasible Projects
NREPAP, formulated by MEGTW, includes biomass, biogas, solid waste and small-hydro RE other
than solar PV.
However, under FiT mechanism based on the Renewable Energy Act 2011, solar PV will consider
only the unlimited source of energy and the expected important role of national energy. Furthermore,
solar PV is superior to other forms of RE (biomass, biogas, solid waste) in terms of effects to
ambient air or noise.
3) Discussion with Implementing Agencies
Consultation with relevant agencies about SSE, and obtaining permission for conducting SSE is
required for the project. The details of SSE are discussed in the following section. The procedure on
SSE is required when constructing a new factory, even if the project does not require EIA. This
application is submitted to the DOE state office.
(4) Outline of Related Laws and Regulations on
Environmental and Social Considerations
1) Outline of the Related Laws and Regulations for the Implementation of the Project
a. Environmental Quality Act
Environmental Quality Act was introduced when water pollution became serious due to traditional
tin mining, and establishment of industries such as natural rubber and palm oil. Industrial pollution
was caused by aggressive industrialization policies since the late 1960s. This law regulates the
effluent and atmospheric pollutant, procedure on waste treatment and EIA. This law also regulates
procedure on SSE.
Table 4-2 Related Regulations to Prevent Pollution
Environmental Quality (Sewage and Industrial Effluents) Regulations 1979
Environmental Quality (Clean Air) Regulations 1978
Environmental Quality (Scheduled Wastes) Regulation 1989
Source : Made by Study Team
b. Occupational Safety and Health Act
Occupational Safety and Health Act, which basically adopts self control, apply to all laborers except
troops and crew of commercial vessels as basic rules on industrial safety. For securing health and
safety in the workplace, businesses and workers, industrial hygiene, ergonomics, the law is seeking
active involvement of safety volunteers and professionals.
4-15
c. Other Plans or Guidelines
・ For the siting and zoning of industries
These guidelines are used for determining suitable site and adequate buffer zones when locating new
industries/industrial areas or residential areas. These also aim to ensure systematic planning to
reduce the maximum possible impact of residual pollutant to nearby residents. These guidelines
classify the following industries according to environmental effects:
Light Industries
Medium Industries
Heavy Industries
Special Industries
・ Specify an example case and minimum buffer zone for each case
・ Planning guidelines for environmental noise limits and control
・ Guidelines for noise labeling and emission limits of outdoor sources
・ Planning guidelines for vibration limits and control
In Malaysia, there are no laws or regulations on the limitation of noise or vibration. Since the
Environmental Quality Act specifies noise criteria, these were enacted by DOE. These guidelines
specify the limitation of general noise, outdoor sources (construction machines, outdoor equipment),
and vibration.
・ Urban Stormwater Management Manual for Malaysia
This manual serves as guide to regulators, planners and designers who are involved in stormwater
management. It identifies a new direction for stormwater management in urban areas of Malaysia.
2) Contents of EIA in the Host Country
In Malaysia, Environmental Quality Act was reformed in 1985 before the Rio Declaration on
Environment and Development (United Nations Conference on Environment and Development, Rio
de Janeiro, 1992). In this modified version, the procedure for conducting EIA in Malaysia was
determined. It also specifies types of projects that require EIA, and which should implement
preliminary EIA.
4-16
Figure 4-2 Outline of Environmental Impact Assessment Procedure
Source: Research Report on Trends in Environmental Considerations related to Overseas Activities
of Japanese Companies, FY 1999
On the other hand, SSE is necessary for new factories that do not require EIA. In SSE, planning of
factory, which is based on “Guidelines for the Siting and Zoning of Industries” should be referred to
the state office of DOE. DOE carries out the evaluation by checking the development plan against
environmental laws and guidelines.
As a result of evaluation, DOE sometimes recommends changing of the site location. After the SSE,
projects that cause effluent or fuel burning should obtain written permission and approval from
DOE.
This solar PV power generation project is not included among the projects prescribed under the
Environmental Quality Act. It became clear from documents or hearing with DOE that EIA is not
necessary for this project as long as it does not necessitate land reclamation of over 50 ha. If
implementation of solar PV power generation project requires permanent equipment with capacity of
over 100 t per day, preparation of related EIA would be required.
From the above study, EIA is not necessary for the project while SSE needs to be carried out.
4-17
Figure 4-3 Application Procedure for Environmental Requirements in Malaysia
Source : A Guide for Investors by DOE
(5) Measures to be Taken by Host Country Government to
Achieve Project Objectives
Renewable Energy Act which is one of the measure to taken by host country government to achieve
this project was already enacted and FiT mechanism was introduced on December 2011. Other new
action plans which host country government should implement about environmental and social part
was not expected. Consequently, measure should be done by host country is examining and
permitting any applications which submitted by proponent on the basis of predetermined criteria.
Under the procedure of SSE, which is needed for this project, the applicant should submit the
4-18
following to the state office of DOE:
a. Application checklist of the site preliminary assessment
b. Copy of the land grant for the site premises
c. Site plan of the factory and plan of surrounding sites within 1 km radius
d. Factory layout plan
The applicant should refer to the „Guidelines for the Siting and Zoning of Industries‟ mentioned
above when planning the layout. This project has basically no pollutant emissions, and cause lower
noise generation. It does not also involve discharging of toxic wastes, and is determined to belong to
„light type‟ under the guideline, as it has the least effects. According to the guideline, the buffer zone
width should be 30 m, which is determined from effect to car traffic, fire, emergency and aesthetics.
Therefore, if the candidate site is adjacent to residential areas, it is necessary to secure more than 30
m as the distance between residential and PV power facilities. In addition, the procedure on SSE is
needed not only for PV power project on ground, but also for those to be installed on roofs of factory.
PV power generation project does not need combustion and effluent facilities. Hence, it will be
possible to implement the project when carried out based on the procedure of SSE. Method of
application to DOE is mentioned above. For the implementation of the project, noise, vibration,
stormwater drainage, etc., should be considered in the planning and design, based on the mentioned
guidelines.
Chapter 5 Financial and Economic Evaluation
5-1
(1) Project Cost Estimate
1) Outline of Cost Estimation
The project cost has been estimated by the following methods:
Cost estimation by a local system integrator in Malaysia
Interview survey of a Japanese company working as system integrator in Malaysia
Interview survey of a system integrator in Japan
According to cost estimation by a local system integrator in Malaysia, cost for design, procurement
and building/installation of 1,017 kW of grid-connected PV system is RM 9.76 million (JPY 239
million).
According to an overseas subsidiary of a Japanese company, which has a license to work as system
integrator in Malaysia, it is possible to install 1 MW PV system at a cost of RM 10,000/kW (RM 10
million or JPY 245 million in total for 1 MW system) under an engineering procurement
construction (EPC) contract. A Japanese system integrator also stated that it is possible to provide all
necessary equipment for 1 MW PV System at a cost of JPY 200,000/kW (JPY 200 million in total
for 1 MW system) under free on board (FOB) price. Hence, the estimated total cost of JPY 263
million is considered reasonable and proper.
2) Contents of the Cost Estimation
Contents of the cost estimation are described below based on the price quotation from a local system
integrator and price trend in the world market. The cost is estimated considering the following
components of the project:
a. PV Module
b. Power Conditioner
c. Mounting Structure
d. Other Equipment
e. Civil/Building/Installation Works
f. Other Works and Cost for Procedures
g. Other Cost (Technical Services)
h. Contingency Cost
i. Technical Services Cost
In this chapter, the following exchange rates announced by the Central Bank of Malaysia on
December 13, 2011 are applied:
RM 1 = USD 3.1790
JPY 100 = RM 4.0832
5-2
<< PV Module >>
Price quotes for products, which are available in Malaysia, were collected from a local system
integrator. Price information from Japan and other countries were also collected. The costs were RM
1,210 in case of 250 W mono-crystalline type PV module, which is available in Malaysia. This is
equivalent to RM 4.84/W (JPY 119/W or USD 1.52/W). Wholesalers in the U.S. and other countries
are selling PV modules at USD 1 to 2/W (JPY 78 to 156)/W). Malaysian made modules are also
evaluated.
A cost of JPY 230 to 320/W is determined in case of products from Japan at an ex-warehouse price,
which has less advantage in terms of pricing.
<<Power Conditioner>>
Same as PV module, price quotations of products, which are available in Malaysia, were collected
from a local system integrator. Price information from Japan and other countries were also collected.
A cost of RM 257,500 in case of 250 kW power conditioner is determined. This is equivalent to RM
1,030/kW (JPY 25,225/kW or USD 324/kW).
Japanese products could not be found in Malaysian Market. China-made or Germany-made products
are commonly distributed.
Wholesalers in the U.S. and other countries are selling power conditioners with 250 kW to 1 MW
capacity at USD 300 to 500/kW.
<<Mounting Structure>>
Price quotes of products for conservatively designed mounting structure made of galvanized steel
angles are collected from a local system integrator. The cost is RM 2,158,000 for 4,068 pcs. of PV
module (total 1,017 kW), which is equivalent to RM 2,122/kW (JPY 51,967/kW or USD 667/kW).
<< Other Equipment >>
Other equipment includes electrical boards/panels, connection box, junction box, transformer,
display panel to show the amount of power generation and others. According to price quotation from
a local system integrator, the cost is RM 880,300, which is equivalent to RM 866/kW (JPY
21,199/kW or USD 272/kW).
<< Civil/Building/Installation Works >>
Civil/building/installation works include foundation structures for PV array, assembly of mounting
structure, installation of PV module, power conditioner electrical boards/panels, and others.
According to price quotation from a local system integrator, the cost is RM 595,500, which is
equivalent to RM 586/kW (JPY 14,340/kW or USD 184/kW).
<< Other Works and Cost for Procedures >>
Other works and procedures will cost RM 159,300, which is equivalent to RM 156/kW (JPY
3,836/kW or USD 49/kW), for design works by a local system integrator, including transportation of
equipment, cost of tests and commissioning.
5-3
It is necessary to consider the cost of a power system study (analysis of power grid if the new power
plant is connected), site survey, geological survey, and installation of power distribution line up to
the existing line, which depends on site conditions.
Such cost mentioned above is considered under the item of “Other Works and Cost for Procedures”,
which is estimated to be 10% of the total cost of equipment, and civil/building/installation works.
<< Contingency Cost >>
A value of 10% of total cost of “Civil/Building/Installation Works” and “Other Works and Cost for
Procedures” is estimated as “Contingency Cost”.
<< Technical Services Cost >>
A value of 2% of total cost of “PV Module”, “Power Conditioner”, “Mounting Structure”, “Other
Equipment”, “Civil/Building/Installation Works”, “Other Works and Cost for Procedures” and
“Contingency Cost” is estimated as the cost for technical services, e.g., project supervision.
<< Yearly Cost of Operation and Maintenance >>
Unattended operation of solar power generation station is possible, however inspection is necessity.
Monthly and yearly inspection is assumed. According to price quotation by a local system integrator,
it costs RM 30,000 (JPY 735,000 or USD 9,000) for 12 times (monthly) inspection for the first year
after taking-over. The price is estimated as inspection for a year.
It is also necessary to accumulate sufficient funds for future repair/replacement of equipment.
Especially power conditioner will be required to be repaired/replaced 10 years after commencement
of operation. A value of 0.5% of total cost of “PV Module”, “Mounting Structure” and “Other
Equipment”, and a value of 3% of cost of “Power Conditioner” are estimated as the yearly cost for
the fund for future repair/replacement.
5-4
Details of project cost (1MW system) are shown in the following table.
Table 5-1 Details of Project Cost (1 MW System)
Quoted/Estimated
Unit Price
For 1 MW System
(Unit: RM)
Unit Price Sub Total %
<< Cost of Equipment and Works >>
A PV Module RM/W 4.84 4,840,000 45.01%
B Power Conditioner RM/kW 1,030 1,030,000 9.58%
C Mounting Structure RM/kW 2,122 2,122,000 19.74%
D Other Equipment RM/kW 866 866,000 8.05%
E Civil/Building/Installation Works RM/kW 586 586,000 5.45%
F *1 944,000 8.78%
G Contingency Cost *2 153,000 1.42%
H Technical Services Cost *3 211,000 1.96%
Total RM 10,752,000
( in JPY 263,323,000 )
( in USD 3,382,000 )
<< Yearly Cost of Operation and Maintenance >>
I 30,000
J *4 70,000
Total RM 100,000 /year
( in JPY 2,449,000 )
( in USD 31,000 )
Note:
Each subtotal is rounded up or down to the nearest RM 1,000.
*1: 10% of total of items A to E above
*2: 10% of total of items E and F above
*3: 2% of total of items A to G above
*4: 0.5% of items A, C, D and 3% of item B
Other Works and Cost for Procedures
"in JPY" and in "USD" are rounded up or down to the nearest JPY 1,000 and USD 1,000
respectively.
Source: Study Team based on collected Price Quotation/Information and Analysis
Check and Inspection Cost
Equipment Repair and Replacement Cost
3) Verification of Cost Estimation
According to the cost data for projects involving 20 kW or more capacity, which were procured in
2008 or 20099, e.g., Malaysia Building Integrated Photovoltaic (MBIPV) project implemented by the
Government of Malaysia, United Nations Development Programme (UNDP) and Global
Environmental Facility (GEF), the total cost of such projects, taking MBIPV as reference, is about
RM 24,855/kW. Of this, RM 15,311/kW (61.60%) was for the PV module, RM 2,433/kW (9.79%)
9 Since the cost of each component is rapidly going down recently, the costs shown in the text shall be
considered to be higher than current cost level.
5-5
was for power conditioner, and RM 7,111/kW (28.61%)10
was for balance of system (BoS).
Although simplified comparison of MBIPV project cost and cost of proposed project is difficult
(since building integrated PV is costlier than installation on the ground and considering there is rapid
price decline in recent year), the ratio of each component to total project cost is reasonable. This is
realized because the costs of PV module and power conditioner have declined rapidly, as well as the
BoS cost.
According to a recent survey11
regarding projects greater than 10 MW, USD 1.90/W (54%) of total
project cost (USD 3.50/W) was for PV module, USD 0.26/W (7%) was for power conditioner, USD
0.44/W (13%) was for mounting structure of PV module, USD 0.48/W (14%) was for other
equipment and works, and USD 0.42/W (12%) was for other costs.
The cost estimation of proposed project is reasonable based on the result of the survey.
4) Site Layout and Single Line Diagram of 1 MW System
Site layout drawing and single line diagram based on the following components and design are
shown in the following figures.
<< PV Module >>
Mono-crystalline type, 250 W, 4,000 pcs (total 1 MW), Size: 1,700 mm x 1,000 mm
<< PV Array >>
20 Series (system voltage: approx. 600 V), 200 Parallel
<< Mounting Structure of PV Array >>
2 rows x 5 columns, 3.5 m width x (5.5 m depth + 3.0 m interval)
400 Units
<< Power Conditioner >>
250 kW/unit x 4 units
10 Project cost data of each project is available at the website of MBIPV project. The ratio and unit price
per kW is the weighted average of capacity of projects 11
“Achieving Low-Cost Solar PV: Industry Workshop Recommendations for Near-Term Balance of
System Cost Reductions”, September 2010, Rocky Mountain Institute
5-6
Figure 5-1 Site Layout Drawing
Source: Made by Study Team
5-7
Figure 5-2 Single Line Diagram
Source: Made by Study Team
5-8
5) Prospect of Cost Estimation for Future 10 MW System
The project cost for 10 MW system in the future is considered to be certainly lower than 10 times the
cost of 1 MW system. In addition to scale merit and price decline of PV module and power
conditioner, research and utilization of cost reduction method for BoS are expected.
Cost estimation for future 10 MW system is shown in the following table. For the estimation, price
decline of 5% for PV module and power conditioner; and 10% for mounting structure, other
equipment and civil/building/installation works are expected. Percentage of other works and cost for
procedure and technical services cost decreased from 10% to 5%, and from 2% to 1%, respectively.
The estimated project cost is JPY 2.31 billion (RM 94.2 million or USD 29.6 million).
“ Check and Inspection Cost” for 10 MW system is assumed to be 5 times of the one for 1 MW
system. “Equipment Repair and Replacement Cost” for 10 MW system is based on the same
calculation as 1 MW system. For 10 MW system, salary for maintenance personnel (two engineers
and two security guards) are also considered as a part of the cost of operation and maintenance.
5-9
Table 5-2 Cost Estimation for Future 10 MW System
Quoted/Estimated
Unit Price
For 10 MW System
(Unit: RM)
Unit Price Sub Total %
<< Cost of Equipment and Works >>
A PV Module RM/W 4.60 46,000,000 48.81%
B Power Conditioner RM/kW 979 9,790,000 10.39%
C Mounting Structure RM/kW 1,910 19,100,000 20.27%
D Other Equipment RM/kW 779 7,790,000 8.27%
E Civil/Building/Installation Works RM/kW 527 5,270,000 5.59%
F *1 4,398,000 4.67%
G Contingency Cost *2 967,000 1.03%
H Technical Services Cost *3 933,000 0.99%
Total RM 94,248,000
( in JPY 2,308,190,000 )
( in USD 29,647,000 )
<< Yearly Cost of Operation and Maintenance >>
I 150,000
J *4 658,000
K 128,852
Total RM 936,852 /year
( in JPY 22,944,000 )
( in USD 295,000 )
Note:
Each subtotal is rounded up or down to the nearest RM 1,000.
*1: 5% of total of items A to E above
*2: 10% of total of items E and F above
*3: 1% of total of items A to G above
*4: 0.5% of items A, C, D and 3% of item B
Other Works and Cost for Procedures
"in JPY" and in "USD" are rounded up or down to the nearest JPY 1,000 and USD 1,000
respectively.
Salary of Maintenance Personnel
Source: Study Team based on collected Price Quotation/Information and Analysis
Check and Inspection Cost
Equipment Repair and Replacement Cost
At the site, addition to 10 ha land is available. which is a 20 ha pond filled by rainwater at a hole
created for tin mining. One of the ideas is to install the PV module on a floating device on the pond.
Such idea is utilized at several sites in Japan and is considered during operational stage, not during
research stage. This is considered as a solution to reduce the cost for foundation as such works will
not be necessary.
FiT rates will decline after 2013. Declined rate shall be considered in case of economic/financial
evaluation of future 10 MW system.
5-10
(2) Results of the Preparatory Financial and Economic
Evaluation
1) Conditions Precedent for the Project
a. Implementation Structure
The implementation structure of the project has two patterns as shown below.
Figure 5-3 Implementation Structure (Financing, Consulting Type of Business)
Land or Building
Owner
Finance
SEDA
Feed-in tariff
Consulting
Source : Made by Study Team
Based on the structure above, the Malaysian capital company who possesses the land and buildings
necessary for the installation of PV facilities is responsible for the project. Nippon Koei Co., Ltd.
selects the facilities and supports the application for FiT, while ORIX Corporation mainly provides
financing to introduce the leased equipment, etc.
Figure 5-4 Implementation Structure (Special Purpose Company)
SPC
Land or Building
Owner
Land Lease
or/and
Equity
・Equity
・Project
Management
SEDA
Feed-in tariff
Malaysian Partner
Source : Made by Study Team
Based on the structure above, Nippon Koei Co., Ltd. and ORIX Corporation provide a maximum of
49% investment for SPC shares. The remaining 51% is financed by Malaysian capital companies.
Referring to the analysis of financial and economic feasibility discussed below, a trial calculation is
made based on the latter implementation structure.
5-11
b. Fiscal Incentives for RE
Business entities, which undertake generation of energy using RE, are eligible to apply for the fiscal
incentives indicated below.
Table 5-3 Outline of Fiscal Incentives
Source : Made by Study Team
Regarding pioneer status (PS) and investment tax allowance (ITA), either of the two can be selected.
For this project, ITA is adopted as it allows deduction by qualifying capital expenditure as a deficit,
covering more than a decade.
c. Project Size
Calculations are made for 1 MW and 10 MW capacities.
Pioneer Status
(Income Tax Exemption)
Investment Tax
Allowance (ITA)
Import Duty and Sales Tax
Exemption
Selling all the energy
generated
Exemption from income
tax on 100% of income for
10 years
Accumulated losses and
capital allowances can be
carried forward.
100% of expenditure
within 5 years can be
utilized against 100% of
income for each year of
assessment.
On imported machinery,
equipment, materials, etc.
given for a period of one
year.
Selling the partial
energy generated
Exemption from income
tax on 100% of income for
10 years
Accumulated losses and
capital allowances can be
carried forward.
100% of expenditure
within 5 years can be
utilized against 100% of
income for each year of
assessment.
Own
enegy consumption
100% of expenditure
within 5 years can be
utilized against 100% of
income for each year of
assessment.
5-12
d. FiT Rate
Applying the monetary unit for FiT, RM 1.14/kWh is calculated for electric generating capacity of 1
MW, while RM 0.95/kWh for 10 MW.
e. Interest and Duration
Regarding the terms of financing, considering the result of hearings with banks and the availability
of interest subsidy system by the Malaysian government, provisional calculation of interest rates is
made at 5% per annum for a term of 15 years.
f. Facility Cost
Facility cost is provisionally calculated as JPY 300 million per 1 MW.
g. Electricity Generated Per Annum
A trial calculation of expected annual energy production is made, based on the amount of solar
radiation from one of the candidate sites, i.e., Ipoh site.
2) Result of the Evaluation
a. Economic Internal Rate of Return
The cost of solar PV power system is much higher than other conventional power plants such as gas
fired, hydro power. Also, due to instability of solar PV, there is no advantage in terms of national
economy at this point in time. However, in case of escalating fuel price or/and climate change along
with global warming in the future, which is difficult to predict but devastating impact on national
society, Malaysian government introduce FiT to cope with these potential problems.
Therefore, it is difficult and not necessarily important to put forward specific EIRR in this case.
b. Financial Internal Rate of Return
Table 5-4 Financial IRR Sensitivity Analysis 1 (1 MW)
IRR (15 years)
Debt Ratio
0% 50% 70%
FIT Rate
(RM/kWh)
0.9649 3.5% 3.3% 3.1%
1.0488 4.9% 5.9% 7.1%
1.1400 6.3% 8.6% 11.2%
Source: Made by Study Team
i. By increasing the rate of borrowing of SPC, a financial leverage effect is determined,
boosting the profitability.
ii. Though the unit price of FiT is RM 1.14/kWh for the first year, the applicable unit price
from the beginning of next year is gradually decreased by 8%. In terms of profitability,
project is expected to be executed by the second year.
5-13
iii. The case of IRR with 10% of borrowing is so-called Project IRR.
Table 5-5 Financial IRR Sensitivity Analysis 2 (1 MW)
IRR (15 years)
Generated (kWh/year)
1,175,504 1,306,116 1,436,728
System Cost
(RM/W)
9.0 10.7% 16.3% 21.6%
10.0 6.0% 11.2% 16.2%
11.0 2.0% 6.9% 11.6%
Source: Made by Study Team
i. For the cost of installation, which is RM 10/W, IRR with an increase and decrease of 10% is
provisionally calculated.
ii. Under the same conditions, annual energy production is provisionally calculated. Changes in
energy production have a big influence on IRR.
5-14
Table 5-6 Profit and Loss Statement (1 MW)
Prof i t & Loss
- Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12 Year13 Year14 Year15
'000RM 2013/03 2014/03 2015/03 2016/03 2017/03 2018/03 2019/03 2020/03 2021/03 2022/03 2023/03 2024/03 2025/03 2026/03 2027/03
Revenue 1,415 1,407 1,400 1,393 1,386 1,380 1,373 1,366 1,359 1,352 1,345 1,339 1,332 1,325 1,319
Insurance 20 20 20 20 20 20 20 20 20 20 20 20 20 20
Rent 114 114 114 114 114 114 114 114 114 114 114 114 114 114 114
Depreciation 667 667 667 667 667 667 667 667 667 667 667 667 667 667 667
Maintenance 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
Interest 329 307 285 263 241 219 197 175 153 131 110 88 66 44 22
Removal - - - - - - - - - - - - - - -
Amortization 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3
Operating Cost 1,213 1,211 1,189 1,167 1,145 1,123 1,102 1,080 1,058 1,036 1,014 992 970 948 926
Profit before Tax 202 196 211 226 241 256 271 286 301 316 331 347 362 377 392
margin 14.2% 13.9% 15.1% 16.2% 17.4% 18.6% 19.7% 20.9% 22.2% 23.4% 24.6% 25.9% 27.2% 28.5% 29.8%
-2,285 216 220 223 227 231 235 238 242 246 250 253 257 261 265
2,336 -167 -167 -167 -167 -167 -167 -167 -167 -167 -167 -167 -167 -167 -167
Profit after Tax 151 147 158 170 181 192 203 215 226 237 249 260 271 283 294
EBITDA 872 867 882 897 912 927 942 957 972 987 1,002 1,017 1,032 1,048 1,063
margin 61.7% 61.6% 63.0% 64.4% 65.8% 67.2% 68.6% 70.1% 71.5% 73.0% 74.5% 76.0% 77.5% 79.1% 80.6%
Tax(Accounting)
Source : Made by Study Team
5-15
Table 5-7 Precondition (1 MW)
RM in million
Generation
Tariff Year1~15 1.14 RM/kWh Capacity 1,000 kW Panels 6,667
Year16~ 1.14 RM/kWh Hour 24 h Panel size 1.228
VAT Tax excluded Day 365 days Buffer 1.3
Trans Loss 5.0% 8,760,000 kWh/year Area 2.6 acre
Gradual 0.5% /year Availability 14.9%
Decrease Generated 1,306,116 kWh/year Commenciment 2012/01
Expiration Year21
Cost
Property facility 0.0% System Cost 10.00 RM/W
real estate 0.0% ITA 100.0% Removal 6.00 RM/W
Corporte tax 25.0% Duration 15 year account Maintenance 1.0%
Duration 6 year tax Insurance 0.2%
ITA Depreciation ratio 14.0% Land 3,600.00 RM/acre/month
Initial ratio 20.0% Land 114 acre/month
償却保証率 14.0%
改定償却率 14.0%
Finance and Structure
Use Source Capita ratio 70.0% Duration 15 year
Tax - Debt 7,042 D/E ratio 2.33 (Max 3.0x) Interest 5.0%
Solar PV 10,000 GAAP 1 US-GAAP
Other equipment 10 Equity 3,018 Tax incentive 2 ITA Arrangement fee 0.5%
Arrangement Fee 50 Initial year 12 month
Total 10,060 Total 10,060 1
Source : Made by Study Team
5-16
Table 5-8 Financial IRR Sensitivity Analysis 1 (10 MW)
IRR (15 years)
Debt Ratio
0% 50% 70%
FIT Rate
(RM/kWh)
0.8041 0.9% -2.4% -6.9%
0.8740 2.0% 0.5% -1.7%
0.9500 3.3% 2.9% 2.4%
Source : Made by Study Team
In case of 10 MW, as the applicable FiT rates are lower than for 1 MW, profitability is reduced.
Table 5-9 Financial IRR Sensitivity Analysis 2 (10 MW)
IRR (15 years)
Generated (kWh/year)
11,755,044 13,061,160 14,367,276
System Cost
(RM/W)
9.0 1.9% 6.9% 11.7%
10.0 -3.0% 2.4% 6.9%
11.0 -8.5% -1.8% 2.8%
Source : Made by Study Team
i. In order to achieve the level of profitability with 10 MW, which is normally required when a
private company executes a project, it is necessary to reduce the cost of installation to a
minimum of RM 9/W. In comparison with 1 MW, this allows taking advantage of economies
of scale, and hence is considered as the level, which is achieved through selection methods
for equipment.
ii. On the other hand, even if the cost of installation at RM 9/W is achieved, 10% reduction in
the amount of solar radiation has a profound effect on profitability. This is because there is a
need to carefully select a site that secures enough amount of solar radiation.
5-17
Table 5-10 Profit and Loss Statement (10 MW)
Prof i t & Loss
- Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12 Year13 Year14 Year15
'000RM 2013/03 2014/03 2015/03 2016/03 2017/03 2018/03 2019/03 2020/03 2021/03 2022/03 2023/03 2024/03 2025/03 2026/03 2027/03
Revenue 11,788 11,729 11,670 11,612 11,554 11,496 11,438 11,381 11,324 11,268 11,211 11,155 11,100 11,044 10,989
Insurance 200 200 200 200 200 200 200 200 200 200 200 200 200 200
Rent 1,136 1,136 1,136 1,136 1,136 1,136 1,136 1,136 1,136 1,136 1,136 1,136 1,136 1,136 1,136
Depreciation 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673
Maintenance 1,001 1,001 1,001 1,001 1,001 1,001 1,001 1,001 1,001 1,001 1,001 1,001 1,001 1,001 1,001
Interest 3,286 3,067 2,848 2,629 2,410 2,191 1,972 1,753 1,534 1,315 1,095 876 657 438 219
Removal - - - - - - - - - - - - - - -
Amortization 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33
Operating Cost 12,130 12,111 11,892 11,673 11,454 11,235 11,016 10,797 10,578 10,358 10,139 9,920 9,701 9,482 9,263
Profit before Tax -342 -382 -222 -61 100 261 423 585 747 909 1,072 1,235 1,398 1,562 1,726
margin n/a n/a n/a n/a 0.9% 2.3% 3.7% 5.1% 6.6% 8.1% 9.6% 11.1% 12.6% 14.1% 15.7%
-23,442 1,573 1,613 1,653 1,693 1,734 1,774 1,814 1,855 1,896 1,936 1,977 2,018 2,059 2,100
23,357 -1,668 -1,668 -1,668 -1,668 -1,668 -1,668 -1,668 -1,668 -1,668 -1,668 -1,668 -1,668 -1,668 -1,668
Profit after Tax -257 -287 -166 -46 75 196 317 438 560 682 804 926 1,049 1,171 1,294
EBITDA 6,364 6,324 6,485 6,645 6,807 6,968 7,129 7,291 7,454 7,616 7,779 7,942 8,105 8,269 8,433
margin 54.0% 53.9% 55.6% 57.2% 58.9% 60.6% 62.3% 64.1% 65.8% 67.6% 69.4% 71.2% 73.0% 74.9% 76.7%
Tax(Acconting)
Source : Made by Study Team
5-18
Table 5-11 Precondition (10 MW)
RM in million
Generation
Tariff Year1~15 0.95 RM/kWh Capacity 10,000 kW Panels 66,667
Year16~ 0.95 RM/kWh Hour 24 h Panel size 1.228
VAT Tax excluded Day 365 days Buffer 1.3
Trans Loss 5.0% 87,600,000 kWh/year Area 26.3 acre
Gradual 0.5% year Availability 14.9%
Decrease Generated 13,061,160 kWh/year Commenciment 2012/01
Expiration Year21
Cost
Property facility 0.0% System Cost 10.00 RM/W
real estate 0.0% ITA 100.0% Removal 6.00 RM/W
Corporte tax 25.0% Duration 15 year account Maintenance 1.0%
Duration 6 year tax Insurance 0.2%
ITA Depreciation ratio 14.0% Land 3,600.00 RM/acre/month
Initial ratio 20.0% Land 1,136 acre/month
償却保証率 14.0%
改定償却率 14.0%
Finance and Structure
Use Source Capita ratio 70.0% Duration 15 year
Tax - Debt 70,420 D/E ratio 2.33 (Max 3.0x) Interest 5.0%
Solar PV 100,000 GAAP 1 US-GAAP
Other equipment 100 Equity 30,180 Tax incentive 2 ITA Arrangement fee 0.5%
Arrangement Fee 501 Initial year 12 month
Total 100,601 Total 100,601 1
Source : Made by Study Team
Chapter 6 Planned Project Schedule
6-1
The project is implemented as a perfect private enterprise. The economic evaluation of the project is
estimated continuously from the result of this Study. When considering that the project will be
implemented by the firms concerned, an SPC, which becomes the responsible business organization,
will be established. SPC then makes a power producer application and starts construction work after
approval. Power production business will start after October 2013, as construction period of the solar
PV power system of 1 MW is assumed to be about 10months.
At first, planned business will start for solar PV power system of about 1 MW. However, increase of
the capacity and addition of a new project will also be considered while ascertaining the cost
performance and market situation.
Figure 6-1 Planned Project Schedule
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
1 Outline Study
2Business Scheme Consideration and
SPC Establishment
3 Detail Design
4Preparation Study for Application to
SEDA
5 Application for FiT Approved Holder
6 Construction and Installation
7 Commissioning
8 Starting Power Supply
Environmental and Social Consideration related laws and regulations
Site Suitability Evaluation
2012 2013 2014
Source : Made by Study Team
Chapter 7 Implementing Organization
7-1
The implementing organization of FiT mechanism is SEDA. Since the FiT mechanism, which was
supposed to commence in September 2011, was postponed until December 2011, there appears a
lack in lead time for commencement. SEDA already operated from September 2011, and has 30
staffs as of December 2011. The organization is new; however, many staffs from MEGTW have
already been replaced. Nevertheless, it can be said that there is no particular problem with regard to
the implementing ability of the organization.
The organization chart of SEDA is shown in Figure 7-1
Figure 7-1 Organization Chart of SEDA (as of January 2012)
Source : SEDA Internet Website
Chapter 8 Technical Advantages of Japanese
Company
8-1
(1) Forms of Participation by Japanese Company (Investment,
Equipment Supply, Operational Management)
At first, the forms of participation by Japanese company in terms of investment and finance,
equipment supply, and operational management are evaluated to determine the technical and
economical advantages of such participation.
1) Investment and Finance
To carry out this project, an SPC is established through co-funding between a Malaysian company
and a Japanese company. The capital share of SPC by the Malaysian side must be more than 51% so
that SPC could apply for FiT. Therefore, the investment upper limit becomes 49% of the SPC capital
when Japanese company participates in the project in the form of an investment.
The fund necessary for the project implementation is collected as financing and investment. Because
there is no limitation on the financing share not like in the case of investment, 100% financing is
possible for the project implementation.
2) Equipment Supply
All equipment to be used for the project can be supplied from Japan. Hence, it is highly possible
from a technical aspect that Japanese companies can participate in the project as equipment suppliers.
However, since Japan-made equipment have low price competitiveness as mentioned in the next
section, such equipment to be procured actually for the project will be limited.
3) Operational Management
Operational management is examined under two categories. The first one is operational management
at the time of project setup, which involves design, procurement, construction/installation, and
commissioning. The second one is operational management after completion of PV system
installation, which consists of daily operation and maintenance works for the system, and which is
usually routine task.
The first category is not a routine task, and needs high technical and management capacity, and
occasionally, critical decisions for the project have to be made during this stage. Therefore, it is
essential that Japanese companies who are investors of SPC participate in the project by directly
conducting operational management. Besides acting as investors of SPC, it is assumed that the
suppliers of equipment participate in the project by providing training to the staff of SPC for the
operation and maintenance of the equipment.
8-2
For the latter category, participation of Japanese companies, which entails high labor costs, is
minimized since high technical and management capacity is not much required during this stage.
(2) Technical and Economic Advantages of Japanese Company
The advantages of Japanese companies are examined below from the economic and technical aspects,
corresponding to their forms of participation mentioned above.
1) Economic Aspect
a. Investment and Finance
Because Japanese yen is strong and its procurement interest rate is relatively low compared with
Malaysian ringgit, Japanese companies could gain advantage in terms of providing investment and
financing to the project. On the other hand, the exchange rate fluctuations pose large risk in case of
investing and financing with Japanese yen.
b. Equipment Supply
Japanese equipment, which have high-performance but originally expensive, have decreased price
competitiveness due to strong yen at a level of JPY 70 to USD 1. Judging from an economic aspect,
it may be said that there is limited superiority of Japanese companies in equipment supply.
Superiority of Japanese product is high reliability and high efficiency. Such superiority is
understandable after long duration from the commencement of operation. It is necessary to arrange
to compete under the same condition of high reliability and high efficiency for long term if the
product price has less price competitiveness. Suppose a project utilizes cheap PV modules as a
product for high profitability. However the modules might not be able to generate in nominal
efficiency, might break down after a few year, or the efficiency of the modules might be extremely
sagged after around 10 years. Such event can be found only many years after the commencement of
power generation. It is ideal that the implementation body of the project and investors decide to
utilize Japanese product to avoid such future risks even Japanese product is expensive, however it is
actually not easy. The implementation body of the project and investors calculate profitability of the
project to decide whether the project is implemented or not. If profitability is not high as result of
calculation, the project cost is needed to be reduced and utilize cheap product to realize the project.
It has a tendency not to consider un-visible risk at the time e.g. breaking down of the cheap product
and extreme deceasing of efficiency.
As the above, it is a solution to make decision to utilize Japanese product that manufacturers of
equipments participate to the side of decision maker of the project and they decide to utilize
Japanese product to reduce the un-visible risks in future. In solar PV power generation business,
8-3
manufacturers compete not in their equipment as product but in generated power as final product of
the manufacturers.
As a method to reduce the product price, it is the most realistic to heighten the local production ratio.
In case of PV modules, assembling cells to module can be done in local.
c. Operational Management
Because of expensive manpower cost and strong yen, it may be said that there is limited superiority
of Japanese companies in terms of operational management, similar to the case of equipment supply
mentioned above.
2) Technical Aspect
The examination from a technical aspect was performed for equipment supply and operational
management only, as investment and finance are not technical matters.
a. Equipment Supply
The superiority of Japanese companies is high considering efficiency and reliability of
Japanese-made equipment. Equipment supply by a Japanese company is possible if the technical
superiority of equipment can overcome their inferior level in the economic aspect, through
evaluation of the equipment‟s life cycle. However it is difficult to prove it and to convince the
project implementation body and investors. The current status can be evaluated as shown below.
・ Materials and equipments supplied by Japanese companies are considerably expensive
than ones supplied by companies of other countries.
・ A multitude of materials and equipments supplied by third countries are utilized for other
project and the efficiency and reliability of the materials/equipments are not low to disturb
the implementation of the project.
There are not enough premises to show technical advantage of product supplied by Japanese
company overcomes economical disadvantage of price difference and to induce the implementation
body and investors to introduce Japanese product for decision making to utilize product supplied by
Japanese companies.
b. Operational Management
Based on the above discussions, Japanese companies are superior in terms of technical aspect. On
the other hand, they are less superior in economic aspect because of their high manpower cost.
However, it is assumed that participation of Japanese companies is essential for operational
management as no Malaysian companies are experienced in initiating and operating grid-connected
PV system at present.
8-4
(3) Measures to Help Japanese Companies Win Contracts
As mentioned above, Japanese companies are superior in the technical aspect, but are inferior in the
economic aspect, compared with foreign companies. In order for Japanese companies to participate
in the project, it is necessary to define measures to avoid failing from simple price competition and
eliminate other problems that could prevent their participation.
Hence, the following measures will be examined:
・ Introduction of water floating PV module
・ Investment to the project by PV module manufacturers
・ PV module production at site
・ Measure to avoid risk due to currency exchange rate fluctuations
1) Water Floating PV Module
Water floating PV module is a technology that Japanese companies have developed in advance. The
following demonstration tests have already been carried out:
(i) New technology field test for water floating PV module on a regulation pond
in Kameyama City
Completion Year: 2007
Location: Regulation pond of Kameyama City, Mie Province
Capacity of PV: 200 kW
Implemented by: Sharp Corporation, Cenergy Co. Inc.
Funding source: New Energy and Industrial Technology Development
Organization(NEDO)
(Source: Report on Collaborative Research of Fiscal 2006, NEDO, 2007)
(ii) Technical development for large scale PV system on water surface
Completion Year: 2007 and 2008
Location: Aichi Pond, Nisshin City, Aichi Province
Capacity of PV: 20 kW and 60 kW
Implemented by: Japan Water Agency (Incorporated Administrative Agency),
Kureha Engineering Co., Ltd.
Funding source: Ministry of the Environment, Government of Japan
(Source: Mizu-to-tomoni, Japan Water Agency, June 2008)
Abovementioned demonstration tests prove that PV system generates electricity at a similar or
8-5
greater efficiency as those installed on ground.
The situations of other countries about water floating PV module development are as follows based
on related websites.
Singapore prepared the budget for the demonstration testing of 2 MW water floating
PV module in November 2011.
French and Israeli companies jointly started the demonstration test of water floating
PV module in September 2011.
Korea completed a water floating PV module for 100 kW as demonstration test on a
dam lake in August 2011.
An Indian company concluded a memorandum on engineering with French company
on November 15, 2011 about water floating PV module.
Based on the above, development of water floating PV module in other countries has just started.
Thus, it can be said that Japanese companies are already leading in such technology.
In the project site of Ipoh, there is a pond with an area more of than 20 ha. Implementing water
floating PV module for 10 MW PV system on this pond will be examined.
2) Investment to the Project by PV Module Manufacturers
Japanese PV module manufacturers suffer from the decline of module prices in the market. They
face crisis in continuing such business due to difficulty in the business model of simple product sale.
However, there are some PV module manufacturers with policy to invest in generation business,
downstream in the value chain. Considering this, there is a possibility for the PV module to be
procured through the participation of Japanese PV module manufacturers.
3) PV Module Production at Site
It is noted that Japanese PV module, which is a consumer product, has less price competitiveness.
However, Japan-made fabrication machine for PV module, which is a good investment, remains
superior in terms of price competitiveness. It is assumed that the business model of fabricating PV
module at the project site with Japan-made PV module fabrication machine using cheaper PV cell
from foreign companies is possible. Small scale and low price PV module fabrication machine has
been commercialized. The cost will be reduced if the fabrication machine is introduced on lease. The
Government of Malaysia wishes improvement of technology in Malaysia and employment
generation. Such business model is considered to be welcomed by Malaysian side.
8-6
4) Measure to Avoid the Risk due to Currency Exchange Rate Fluctuations
Regarding the raising of fund for the project, it is noted that interest rate of local currency is high and
loan period is short, compared with procurement using Japanese yen. However, in the case of
financing in Japanese yen, risk of currency exchange rate fluctuation poses a problem. The measure
to avoid such risk should be further explored. If there is a means of settling this through Japanese
government aid package on RE promotion, this will be an effective solution. For example, the
Government establishes a fund for renewable energy dissemination, and the fund covers foreign
exchange risk. By the fund, it will be easy for funding for project implementation. Foreign exchange
risk includes not only negative risk, but positive profit also. In the point of long-term view, it is
considered that the fund will be balanced by loss and profit caused by floating exchange rate.
Chapter 9 Financial Outlook
9-1
(1) Review of the Fund Source and Fund Raising Plan
In this project, investment by project finance is discussed. This is generally used as a lending form
for infrastructure-related projects, including power business, such as by independent power producer
(IPP), in developed and developing countries, and construction of expressways.
Project finance is different from normal financing for companies but is an independent form of
corporative credit capability. As a general rule, it refers to the lending form characterized by
payment resource from the profit of financed projects only. Therefore, banking institutions tend to
take longer time in analyzing business profitability and introduce greater complexity into financing
agreements as compared to financing for normal companies. Consequently, it is often adopted for
large-scale projects in terms of cost-benefit performance.
This project keeps necessary funds to a minimum, compared to normal steam power generation.
Hence, it considers whether utilization of project finance is possible or not. Also, in case utilization
is difficult, hearings with two Malaysian domestic banks and a local Japanese corporate bank are
conducted, focusing on what sort of incidental conditions are set.
(2) Feasibility of Fund Raising
1) Results of Interview with Banks
a. RHB Bank
RHB is the fourth largest Malaysian banking group in terms of assets (RM 117.5 billion as of end of
September 2011). Reply of RHB during the interview is quoted as follows:
“Financing for renewable energy or environmental projects will particularly be responded positively.
For banks, it is a priority area as they have separately participated in setting up and taking an active
part in green fund”
“This project is predicated on detailed due diligence, and its profit is virtually guaranteed by the
Malaysian government. Referring to solar PV power systems, in comparison with other power
generating facilities, as risks of incomplete construction and a breakdown during operation are
limited, it is possible to lend it with a fixed rate for the maximum of 15 years.”
“The application of Green Technology Finance Scheme, discussed below (a partial interest subsidy
and guaranteed repayment for environmental projects by the Malaysian government), is predicated.”
9-2
b. AM Bank
AM Bank is the fifth largest Malaysian banking group in terms of assets (RM 81.1 billion as of end
of September 2011). Reply of AM Bank during the interview is quoted as follows:
“Expansion of financing for environmental projects is part of the project‟s strategy for banks.”
“In this project, risks during the period of the project are limited. In terms of risks, it is suitable for
PROJECT FINANCE, but it is difficult to fund with a fixed rate due to its small scale. The desirable
period is for up to a decade.”
“It is possible to apply Islamic banking, and in this case, there is a possibility of keeping interest
rates low, fixed and at about 7% per annum.”
“The application of Green Technology Finance Scheme, discussed below (a partial interest subsidy
and guaranteed repayment for environmental projects by the Malaysian government), is predicated.”
c. Bank of Tokyo Mitsubishi (UFJ Malaysian subsidiary)
Reply of Bank of Tokyo Mitsubishi during the interview is quoted as follows:
“Due to the FiT mechanism, though an increase in the number of RE projects is expected in the
future, PROJECT FINANCE, long term, unsecured credit, is unable to deal with the financial
expenditure for FiT at the moment, as it is the first area to be cut when macro economy worsens,
which is seen from the cases in Europe.”
“If SPC is a main borrower for the project capital, parent company‟s corporate guarantee is required.
It will have similar condition as with the normal financing of companies (3.5~5% interest, 5 years
period).”
“In order to promote measures for RE projects, banks have requested local government financial
institutions to introduce directed credit.”
9-3
2) Green Technology Financing Scheme
Table 9-1 Outline of Green Technology Financing Scheme
Promoting Green Technology Purpose
Malaysian-owned companies(at least 51%)
All industrial sectors
Conserve the use of energy and natural resources
or pro
Objective
Budget Total of 1.5 billion ringgits
Up to 50 million ringgits per applicant
Tenure Maximum 15 years(Typically 7-10 years)
Incentives 2% interest subsidy from Government
60% loan guarantee from Government
Fee 0.5% of loan gurantee per annum
Application date 3 years from 1 January 2010
or upon approval of financing up to the 1.5 billion
ringgints, whichever is earlier.
Source : Made by Study Team based on Green tech Malaysia Website
As of July 15, 2011, green technology financing scheme was applied to 90 projects (19 projects
rejected). Also, the remaining budget is RM 1.29 billion.
(3) Cash Flow Analysis
1MW and 10MW cash flow projections are based on table 5-7 and 5-11 respectively. Also, 1MW
and 10MW sensitivity analysis are based on table5-4, 5-5 and 5-8, 5-9 respectively.
9-4
Table 9-2 Cash Flow Analysis (1 MW)
Source : Made by Study Team
Given a discount rate is 5% that is upper limit of 10-year Malaysian government bond issued in the last five years.
Also, initial investment cost is 3.018 million ringgits. Net Present Value of the 1MW project will be 1.295 million ringgits that justifies investment required.
Cash Flow StatementYear1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12 Year13 Year14 Year15
'000RM 2013/03 2014/03 2015/03 2016/03 2017/03 2018/03 2019/03 2020/03 2021/03 2022/03 2023/03 2024/03 2025/03 2026/03 2027/03
Profit before Tax 202 196 211 226 241 256 271 286 301 316 331 347 362 377 392
Tax - - - - - - - - - - -42 -253 -257 -261 -265
Depreciation 667 667 667 667 667 667 667 667 667 667 667 667 667 667 667
Amortization 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3
Principal payment (469) (469) (469) (469) (469) (469) (469) (469) (469) (469) (469) (469) (469) (469) (469)
Increase in Cash 403 398 412 427 442 457 472 487 502 517 490 294 306 317 329
Tax Shield - - - - - - - - - - - - - - -
Total 403 398 412 427 442 457 472 487 502 517 490 294 306 317 329
9-5
Table 9-3 Cash Flow Analysis (10 MW)
Source : Made by Study Team
Given a discount rate is 5% that is upper limit of 10-year Malaysian government bond issued in the last five years.
Also, initial investment cost is 30.18 million ringgits. Net Present Value of the 10MW project will be minus 5.347 million ringgits that does not justify
investment required
Cash Flow StatementYear1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12 Year13 Year14 Year15
'000RM 2013/03 2014/03 2015/03 2016/03 2017/03 2018/03 2019/03 2020/03 2021/03 2022/03 2023/03 2024/03 2025/03 2026/03 2027/03
Profit before Tax -342 -382 -222 -61 100 261 423 585 747 909 1,072 1,235 1,398 1,562 1,726
Tax - - - - - - - - - - - - - -153 -2,100
Depreciation 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673 6,673
Amortization 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33
Principal payment (4,695) (4,695) (4,695) (4,695) (4,695) (4,695) (4,695) (4,695) (4,695) (4,695) (4,695) (4,695) (4,695) (4,695) (4,695)
Increase in Cash 1,670 1,630 1,790 1,951 2,112 2,273 2,435 2,597 2,759 2,921 3,084 3,247 3,410 3,421 1,638
Tax Shield - - - - - - - - - - - - - - -
Total 1,670 1,630 1,790 1,951 2,112 2,273 2,435 2,597 2,759 2,921 3,084 3,247 3,410 3,421 1,638
Chapter 10 Action Plan and Issues
10-1
(1) Efforts to Realize the Project
The issues and efforts to realize the project are as follows:
1) Realization below the total investment cost of USD 2,500/kW for 10 MW system
It can be judged that investment cost of USD 2,500/kW, based on estimate by a local system
integrator, is feasible as such rate is not greater than the construction cost. Since the FiT rate for solar
PV becomes less costly when installed capacity exceeds 1 MW, the project economic efficiency
becomes low as well and thus, it could not be realized as a viable business. In the future, it is
considered to design, probe estimate contents and further minimize construction cost to ensure
affordability of the project.
2) Realization of long project finance with low interest rates
If financing is by Malaysia Bank, long-term finance for 10-15 years is possible. The financing with
low interest rate of around 5% is possible if the green technology financing scheme of the Malaysian
government can be applied.
3) Securing a less costly project site which can be used for long periods
The landowner of the proposed site in Ipoh is the local government, while the rights to the land
belong to a local private company as its holder. Compared with the unused land of other private
companies, the proposed site is less costly and can be utilized in the long term. Thus, the land rights
are granted to a holder based on the method of use of the site for project implementation.
4) Selection of an excellent local enterprise as a business partner
In order for a foreign company to become a FiT-approved holder, it is necessary to establish a joint
corporation with local companies. Many local companies expressed interest in this business. During
this Study, discussion with two or more companies has been carried out considering the business
scheme proposed.
a. Engineering Company
Category: Engineering Service
Main business: Wastewater treatment
Scheme for participation: Capital injection to SPC, effective utilization of their unused land
b. Engineering Company
Category: Engineering Service
Main business: Mineral exploitation such as tin
10-2
Scheme for participation: Contributed assets by provided by their unused land, maintenance of the
solar PV system at site
c. Engineering Company
Category: Engineering Service
Main business: Engineering, procurement and construction of power plant
Scheme for participation: Capital injection to SPC, engineering and maintenance of the solar PV
system
d. Energy Service Company
Category: Engineering Service
Main business: Engineering for the field of energy conservation and RE
Scheme for participation: Capital injection to SPC, engineering and maintenance of the solar PV
system
(2) Efforts to Realize the Project by Implementing
Organizations in the Host Country
1) Action of concerned organization
The application for FiT approved holder has started from 1 December, 2011, and the quota for solar
PV has closed until first half in 2014. The situation of the quota for solar PV until 2015 is shown in
Table 10-1, most of the quota until first half in 2014 has been approved.
Table 10-1 The situation of the quota for solar PV over 500kW
2012 2013 2014 2015
1/2 2/2 1/2 2/2 1/2 2/2 1/2 2/2
Approved(MW) 28.3 27.75 31.26 23.76 34.02 0.00 TBA TBA
Non-approval(MW) 0.48 0.46 0.55 0.52 0.35 0.00 TBA TBA
TBA: To be announced
Source : Made by Study Team based on web page of SADA
2) Result of consultation with MEGTW
The comments from MEGTW for the proposed project are as follows.
Foreign companies are welcome to the power generation business in FiT mechanism.
10-3
However, there are the rule of the foreign equity shareholding cap at a maximum rate of
49%, foreign companies require consideration of the rule.
The quota for solar PV has closed until the first half in 2014, so Malaysian government
will consider to increase the quota of 2014, and to review the quota after 2015.
Raising 1% of the electricity bill which the consumer used as the financial funds of a
renewable energy fund pays to 2% is recognized in the Diet to increase the quota after
2015.
Although high technical capabilities of Japan for RE are expected, since the power
generation business under FiT mechanism is undertaken as business, price competitiveness
is also important.
(3) Legal and Financial Restrictions
Since it is a power producing business undertaken based on FiT mechanism, the business may be
affected by the results of reexamining and correcting the FiT mechanism.
Specifically, the quota for the solar PV after the second half in 2014 is not decided at present.
Because many applicants and projects were applied for the quota of solar PV until first in 2014,
SEDA issued a notice on a 5 MW limit for each application. The schedule and design of the project
may be affected by such reviewing FiT mechanism.
(4) Necessity of Additional Detailed Analysis
None in particular.
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