Malaysian feed-in tariffs: Benefiting is believing

Posted: October 3, 2011
  • FiT will provoke consumers to think about carbon emission reduction via solar energy
  • RM70 bil can be generated by renewable energy power plants, with taxes amounting to RM1.75 bil

By Stephen Ng

 

The Malaysian feed-in tariff (FiT), which is scheduled to come into force on December 1st, will guarantee income for producers of renewable energy for a period of up to 21 years for those who meet requirements and are allocated the quotas.

 

The tariffs, analysts say, will determine whether investors will eventually venture into generating renewable energies as independent power producers and help the country comply with its Copenhagen commitment to cut carbon emissions to 40% of 2005 levels by 2020.

 

Schneider Electric has conducted some preliminary studies based on a 15-panel solar photovoltaic (PV) installation on the roof of its manufacturing plant in Shah Alam in the state of Selangor. Producing 330 kilowatt-peak units (kWp), the system can create a continuous income stream of between RM450 (US$147) and RM500 per month, given that the FiT is RM1.49 per kWh (RM1.23 plus RM0.26 bonus for installation on building structures). In a year, it works out to be about RM6,000, based on an average energy yield of 12 kWh per day. The studies also showed that the payback period for the installation is estimated to be less than ten years; thereafter, the PV installation becomes a cash cow.

 

Even as it sells solar power at this price to the grid, the power producer itself consumes electricity from the grid at a much lower price; the current industrial tariff is only 34.5 sen per kWh for those using less than 200 kWh. This is the optimism shared by many PV suppliers who are flocking to the Malaysian market: that power consumers, including residential homes, will turn independent power producers come December 1st with the commencement of the FiT.

 

 

Schneider Electric’s Malaysian country president Peter Cave says: “[This] also opens up the minds of consumers and provokes them to think about how they can contribute to carbon emission reduction via the use of solar energy and at the same time make money from being green.” 

 

Electricity in Malaysia is still largely generated from fossil fuels. Coal, oil and natural gas account for around 85% of total electricity generation in the country, while renewable resources make up only around 1%. Power demand in Malaysia is expected to rise 5% annually from 2011 to 2015. With the recent electricity tariff hike by the government, electricity bills are expected to rise, which can turn into an unnecessary burden for businesses.

 

 

During the disruption in gas supply due to maintenance shutdown of gas production platforms owned by state oil company Petronas in May this year, Malaysia had to purchase electricity from Singapore for an entire month. The deal between Malaysian company YTL Power’s PowerSeraya, located in Singapore, and Malaysia’s Tenaga Nasional Berhad was the first commercial deal for the export of electricity between the two countries.

 

 

Cave says solar power not only reduces carbon emissions, but also contributes to the GDP of the country. “It is expected that a minimum of RM70 billion can be generated from the operation of renewable energy power plants, which leads to a tax income of RM1.75 billion for the government.” He adds that some 52,000 green collar jobs will be created to construct, operate and maintain these plants.