My Say: The green energy agenda
11/30/2011 By Pola Singh
Dec 1 will mark an important milestone in the development of renewable energy (RE) in the country. From this day, small RE power producers (those with 30mw or less of generating capacity) will be able to sell all their clean energy to the national grid at premium prices.
It will be mandatory for the utilities such as Tenaga Nasional and the Sabah Electricity Services Board (SESB) to purchase electricity generated from renewable sources.
This is indeed a breakthrough compared with the current small RE programme (SREP) that started in 2001. With only the RE policy framework in place, the SREP did not make much headway due to weak regulatory, institutional and financial support. Hence, only 63mw of green power capacity is in place today.
In April this year, Parliament passed the Renewable Energy Act 2010 and the Sustainable Energy Development Authority (Seda) Bill. The Act focuses on the orderly development of the industry in the country while the Bill empowers the newly established government agency to oversee the implementation of RE and to manage the feed-in-tariff (FiT) mechanism.
The FiT ensures that all RE-based electricity generated is sold to the power utilities at a premium price for 16 years for plants using biomass and biogas and 21 years for solar photovoltaic (PV) and small hydro plants. The basis for the higher prices is that electricity from RE has a higher initial cost as it is a new technology and not directly subsidised.
Four categories of RE sources have been identified â ” biomass (including solid waste), biogas (including landfill gas and sewage), small hydro and solar. The tariff varies according to the type of RE based on the technology available and the cost of generation. For instance, the price offered to small RE producers using biomass (including solid waste) ranges from 27 to 35 sen/kWh (compared with the current 21 sen/kWh) while those generating solar PV can get as much as RM1.78/kWh. However, the tariff will be subject to an annual degression of 8% for solar PV and 0.5% for biomass and biogas.
What is degression?
Since RE technology costs are expected to decrease over time, it is a mechanism that ensures the price (or tariff) paid to RE power producers also comes down over time. The degression rate for each source of RE depends on the maturity of the technology and the existing cost reduction potential to prevent market abuse through overpricing. For instance, solar PV technology is making rapid advancements and with economies of scale, the price of solar panels has dropped sharply over the past few years. Hence, the degression rate for solar PV-based electricity is 8% a year. For mature technologies such as biomass and biogas, the rate is only 0.5% a year.
Like the many countries that have implemented FiT, Malaysiaâ s policy includes specific targets for each technology by year. For example, in 2011/12, its overall quota is 282mw, of which the quota for solar PV is 60mw and 117mw, 30mw and 75mw for biomass, biogas and small hydro respectively. The RE target in 10MP is to account for 5.5% of the total generation mix in 2015 or 985mw.
Why is a capacity limit or quota needed for new feed-in approvals in respect of each renewable resource? This is directly related to the funding capacity of the FiT mechanism. Many have the impression that since this is a government initiative, much of the resources will be sourced from it.
Not in the case of RE. The key contributors will be electricity consumers. From Dec 1, those who consume more than 300kWh per month will contribute 1% of the electricity bill to a dedicated RE fund. The RE power producers will be paid from this RE fund and the size of the fund will be constrained by the total amount collected from this new levy. Based on the 1% levy, Seda expects to collect about RM300 million a year. The quota will ensure that Seda has adequate money to pay the RE power producers for the entire contract period.
Seda is also ensuring that approval procedures are streamlined and clear. Applications can be made online and approvals given almost instantly if all requirements and conditions are met.
Fast-depleting fossil fuels and rising greenhouse emissions have led to a race among nations to drive the RE agenda forward. Malaysia is one of them and is doing so with strong commitment. With electricity demand rising at about 3.8% a year, RE can be called upon to meet the rising demand, especially during peak periods when the sun is shining brightly.
For biomass, it makes commercial sense for palm oil millers to make money out of the waste by turning it into electricity and selling it to the utilities at premium prices. (Interestingly, they can purchase electricity from the utilities at normal prices.)
At the same time, these efforts can contribute to energy security by reducing our dependence on fossil fuel-based electricity.
Current intensified efforts to develop RE are certainly in line with the governmentâ s commitment to the world that Malaysia will reduce its carbon footprint by 40% from 2005 levels. More green energy and the subsequent reduction in carbon emissions could make a difference to the quality of life of Malaysians.
More often than not, the government is chastised for its lukewarm efforts, but for RE, it is different. The government has made good its commitment to develop RE with strong policy, regulatory, institutional and financial support. In short, the political will has been very strong and this indeed augurs well for the future of RE in the country.
Dr Pola Singh, former deputy director of energy at the Economic Planning Unit, is a board member of the Sustainable Energy Development Authority. The views expressed here are his own.
Copyright 2011 The Edge Communications Sdn. Bhd.
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