Last mile, second wind before Malaysia’s FiT launch

Things are moving along for Malaysia’s upcoming feed-in tariff (FiT). While it’s probably more rush than rest for those pushing it to the starting line, it is still a tad slow for those who have waited many months for its launch. On the bright side, the Sustainable Energy Development Authority Malaysia (SEDA Malaysia), the statutory body tasked with ensuring the FiT’s success, finally came into its own on September 1st, after months of operating as Interim-SEDA.

The FiT scheme, initially scheduled to begin in September, will kick off only in December to allow the supporting laws to be readied. The 1% consumer electricity tariff hike to pay for renewable energy (RE) will start in tandem with the FiT scheme.  

Push for funding

The authorities are talking to banks to ensure that funding is available for those who want to be RE producers. However, no bank has officially come on board although the 20 commercial and Islamic banks under the Credit Guarantee Corporation’s (CGC) purview (in the Green Technology Financing Scheme) are deemed to be participating, says SEDA Malaysia founding chief executive officer Badriyah Abdul Malek, who was also the Ministry of Energy, Green Technology and Water’s undersecretary for energy. 

Badriyah says SEDA Malaysia has had discussions with the central bank, Bank Negara Malaysia (BNM), and wants to have further discussions with it and the Malaysian Green Technology Corporation (MGTC).

“We are looking at 80%-20% debt financing. For solar farms, you need RM100 million, and so the RM50 million cap in MGTC’s Green Technology Financing Scheme is not good enough for us. We need to talk some more with BNM and the banks on how this can be mitigated.” 

Minister of Energy, Green Technology and Water Datuk Seri Peter Chin, who had called the press conference to introduce the SEDA board and Badriyah, says banks cannot use normal banking considerations when evaluating RE projects.“You need to be more creative to make it bankable. We need BNM to step in, like when it says ‘I want you [banks] to do low-cost housing.’ We have to have a bit of direction.”

He also learnt from Indian New and Renewable Energy Minister Dr Farooq Abdullah that India has a bank for RE alone. “This is a new paradigm. We will introduce this idea to the government.”

Quotas and displaced costs

In the meantime, adjustments have been made to the 2011–2014 RE quotas, reflecting displaced costs that have gone down slightly. The displaced cost, which fluctuates, is the average cost of generating electricity from non-RE sources. The lower the displaced cost, the greater the difference between the FiT (which is fixed) and the displaced cost – and consequently, the more money that must raised via electricity tariffs to fund RE. All things being equal, the alternative to increasing electricity tariffs is to reduce RE quotas.

Asked why the displaced costs have dropped, Badriyah says the numbers are the latest obtained from Tenaga Nasional Berhad, Malaysia’s power utility company.

“It is 19 sen [from 20.47 sen] for medium voltage and 26 sen [from 31 sen] for low voltage, but the figures have yet to be verified by the Energy Commission, the authority that deals with all energy matters.” 

Thus, both the quotas and displaced costs published on the SEDA Malaysia website are still tentative, although they are unlikely to be far from the final figures. The figures will be finalised before December 1st.

Badriyah says RE quotas are adjusted every six months to ensure that unused quotas are not wasted. Unused quotas will be re-allocated to the four sectors that are eligible for FiT, i.e., biomass, biogas, solar and mini hydro. 

FiT degression will start in 2013 as there is only a month left to 2011 when the FiT is launched. Degression refers to the lowering of the FiT for new power generators.

SEDA Malaysia chairman Tan Sri Dr Fong Chan Onn says one of the functions of SEDA Malaysia is to inculcate and popularise the idea of RE among Malaysians, and to inculcate the ideas of sustainability and energy efficiency as social values so that they become part of Malaysian culture and lifestyle.