@ green | January-February , 2021

ASEAN CLEAN ENERGY WEEK 2020

It ’ s a driving force in Malaysia ’ s solar PV agenda

By A SPECIAL CORRESPONDENT

Of the renewable energy resources in our country , solar photovoltaic ( PV ) has the highest availability . This is not a surprise given that Malaysia is located along the Sun Belt .”

– Dr Wei-nee Chen

Officer of the Sustainable Energy Development Authority ( SEDA ) of Malaysia before she joined Hibiscus a few months ago .

In 2019 , SEDA began developing the Renewable Energy Transition Roadmap ( RETR ) 2035 . Part of the study included the assessment of renewable energy available in the country .

The study showed Malaysia had a total of 269 GW of solar PV availability of which ground-mounted took the lion share of 210 GW , the rooftop of 42.2 GW , and floating PV of 16.8 GW .

Solar energy represented nearly 93 per cent of the total renewable source available in the country , and the total is inclusive of large and small hydropower , bioenergy , and geothermal .

In Malaysia , the primary drivers of the solar PV market were the Feed-in Tariff ( FiT ) scheme implemented by SEDA on Dec 1 , 2011 .

Over the past 15 years , Malaysia has witnessed a drop of nearly 90 per cent of the cost of the system of solar PV . To this effect , solar PV graduated from the FiT scheme to other schemes such as the Large Scale Solar ( LSS ), Net Energy Metering ( NEM ) and Self-Consumption ( SELCO ).

The LSS and NEM were instrumental to further drive down cost competition , thanks in part to the green investment tax incentives provided by the government for qualifying companies under the Income Tax Act 1967 and the Green Technology Financing Scheme ( GTFS ).

NEDA , a new kid on the block

Perhaps not known to many is that there is another avenue for developers to expand their portfolio of solar PV assets . The NEDA , which stands for “ New Enhanced Despatch Arrangement ”, is a pre-cursor to a merchant electricity market whereby participants of the NEDA can sell their electricity to .

It was introduced in June 2017 and operated by the Single Buyer . The key objectives :

• bring down the cost of electricity supply through healthy competition ,

• allow energy-efficient technologies such as Cogeneration Plant to participate in the electricity market ,

• let non-PPA ( power purchase agreement ) generators , including renewable energy , to take part in the electricity market .

( source : singlebuyer . com . my )

Objectives of NEDA

As of today , there are only three participants in the NEDA , although there is growing anticipation that the solar PV developers may consider participating in the NEDA . However , the biggest challenge is the bankability of the PV system under the NEDA framework .

It has taken years for the local financial institutions to gain confidence in the PPA for solar PV . Under the NEDA , as in any merchant electricity market , there is no PPA . In that regard , bankability of solar PV projects under the NEDA relies on companies having a strong and robust balance sheet .

Innovative financing for merchant participants

In other advanced merchant electricity markets , e . g . in the US and Australia , solar PV has secured bankability through innovative financing solutions such as the proxy revenue swap ( PRS ) and synthetic PPA .

Both these solutions are premised on the concept of contract-for-difference ( CfD ) whereby the differences in wholesale electricity price and the agreed strike price will be settled between the hedge provider or corporate off-taker , and the solar PV project developer .

The differences may not just be managing the price risk but can also be extended to include volume risk of the solar PV generation under some threats such as curtailment . In essence , the solar PV developers secured a steady stream of income from the hedge provider ( as in PRS ) or corporate off-taker ( as in synthetic PPA ), and this will help in improving the bankability of their projects .

While there is no energy exchange between the solar PV developers and the hedge-provider ( PRS ) and corporate off-taker ( synthetic PPA ), under both concepts , the counterparty can opt to purchase the associated environmental attributes .

This is especially true for synthetic ( or virtual ) PPA in which renewable energy certificates ( RECs ) are traded between the solar PV developers and the corporate off-takers .

What are RECs ?

Renewable energy has two attributes that can be monetised : electricity and environmental quality . In this regard , a REC is an instrument where it tracks all ecological features of 1MWh of renewable generated power .

REC is a prevalent instrument among RE100 companies to reach their goal , it allows residual electricity consumption to come from the purchase of unbundled RECs .

Race to nett-zero

The world is undergoing a race to Nett Zero , and corporates will be required to demonstrate their ESG commitment . Deploying solar PV will be one of the visual and impactful ways for corporates to demonstrate environmental sustainability .

While Malaysia provides an exciting future for solar PV opportunities , the role of government in giving enablers is very crucial to sustain the local PV market development .

Efforts , such as opening the grid for third party access ( TPA ), can further facilitate front-of-meter ( FTM ) corporate PPAs for direct procurement of solar electricity . It will also enable other innovations such as the virtual nett energy metering ( VNEM ) and P2P energy trading . — @ green