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Impact of Feed in Tariff (FiT) on RE
Power Generation
22 April 2014
Residence Hotel Uniten
Ir Dr Ali Askar Sher Mohamad
COO SEDA Malaysia
Contents
• History of RE in Malaysia
• The FiT
• Status today
• Blockers and enablers of RE
Renewable Energy Development in Malaysia
• RE as the 5th Fuel
8TH Malaysia • Implied 5% RE in energy mix
Plan (2001 2005)
• Targeted RE capacity to be connected to power utility grid:
• 300 MW – Peninsular Malaysia; 50 MW - Sabah
9th Malaysia
Plan
(2006 –
2010)
RE as of 31st
December
2010
• Targeted power generation mix:
• 54.2% natural gas, 40.2% coal, 5.2% hydro, 0.2% oil,
• 0.2% Renewable Energy
• Carbon intensity reduction target: 40% lower than 2005 levels by 2020
• Connected to the utility grid: 61.2 MW (17.5% from 9th MP target)
• Off-grid: >1GW (private palm oil millers and solar hybrid)
3
Malaysian RE Plan
Original National Renewable Energy Policy & Action Plan
National Renewable Energy Policy & Action Plan
Year Cumulative
RE Capacity
2015
985 MW
RE Power
Mix
(vs Peak
Demand)
5.5%-6%
2020 2,080 MW
11%
2030 4,000 MW
17%
The Feed-in Tariff (FiT) Mechanism
A
mechanism that allows electricity that is produced from indigenous RE resources to be
sold to power utilities at a fixed premium price and for specific duration.
FiT is guaranteed via the RE Act, whereby:

Access to the grid is guaranteed


utilities legally obliged to accept all electricity generated by RE private producers
FiT rates
 high enough to produce ROI + reasonable profit (not excessive) to act as an incentive
 fixed for a period (typically 16 or 21 years) to give certainty & provide businesses with clear investment
environment
 Adequate FiT rate "degression" to promote cost reduction and achieve “grid parity”

Adequate fund is created to pay for the FiT rates & guarantee the payment for the whole FiT
contract period
 Provides
a conducive and secured investment environment
 Provides fixed revenue stream for installed system
 Only pays for electricity produced: promotes system owner to install good quality and maintain the
system
5
Status Today (31 March 2014)
BIOGAS
BIOMASS
SMALL HYDRO
SOLAR PV
All
No of Application
No of
Application
No of
Application
No of
Application
No of
Application
PENDING
--
--
--
3
3
REFUSED
6
11
3
718
738
REVOKED
2
2
--
32
36
1
2
1
87
91
APPROVED
11
9
17
315
352
FiTCD
6
5
4
2266
2281
All
26
29
25
3421
3501
STATUS
WITHDRAWAL
Status Today
With 1 % contribution to RE Fund, at 31 March
2014
• Total approved capacity = 477 MW
• Commissioned capacity = 185 MW
BIOGAS
BIOMASS
SMALL HYDRO
SOLAR PV
All
Total Installed
Capacity
Total Installed
Capacity
Total Installed
Capacity
Total Installed
Capacity
Total Installed
Capacity
PENDING
--
--
--
0.0184
0.0184
REFUSED
7.2
118.718
30.71
64.1017
220.7297
REVOKED
3.8
17
--
17.4156
38.2156
WITHDRAWN
0.6
20
4
2.4491
27.0491
APPROVED
13.4
79.093
119.29
79.7036
291.4866
COMMISSIONED
11.7332
52.3
11.7
109.4862
185.2194
TOTAL
36.7332
287.111
165.7
273.1746
762.7188
STATUS
Lessons learned from FiT implementation
Lesson 1
• RE Fund contribution of 1 % (about RM 300M annually) is not enough!
•
•
•
•
Very limited quota
Government finally increased the contribution to 1.6 % from 1st Jan 2014
This translates to about RM 600 M annually (due to increased tariffs)
With this increase, and also revision of displaced cost (dc), tentative new quota release
from 2015-2025 is about another 1100 MW, which includes approximately:
•
•
•
•
•
•
170 MW biogas
240 MW biomass
60 MW MSW
400 MW small hydro
200 MW PV
30 MW geothermal
LESSON 2
• FiT rates need to be carefully studied and balanced
• Obviously high rates for solar PV
• Rates in 2012:
(i) up to and including 4kW
(ii) above 4kW and up to and
including 24kW
(iii) above 24kW and up to and
including 72kW
(iv) above 72kW and up to and
including 1MW
(v) above 1MW and up to and
including 10MW
(vi) above 10MW and up to and
including 30MW
1.2300
1.2000
1.1800
1.1400
0.9500
0.8500
(i) use as installation in
buildings or building
structures
(ii) use as building
materials
(iii) use of locally
manufactured or
assembled solar PV
modules
(iv) use of locally
manufactured or
assembled solar
inverters
+0.2600
+0.2500
+0.0300
+0.0100
Compare with biogas
(i) up to and including 4MW
(ii) above 4MW and up to and
including 10MW
(iii) above 10MW and up to and
including 30MW
(i) use of gas engine technology
with electrical efficiency of
above 40%
(ii) use of locally manufactured
or assembled gas engine
technology
and biomass
0.3200
0.3000
0.2800
+0.0200
+0.0100
(i) up to and including 10MW
(ii) above 10MW and up to
and including 20MW
(iii) above 20MW and up to
and including 30MW
(i) use of gasification technology
(ii) use of steam-based
electricity generating systems
with overall efficiency of above
14%
(iii) use of locally manufactured
or assembled boiler or gasifier
0.3100
0.2900
0.2700
+0.0200
+0.0100
+0.0100
Action from Lesson 2
• PV Rates
• In 2013, PV rates were degressed by 20 % for commercial plants while rates for individual
applications were degressed by 8 %
• In 2014, PV rates for all categories have been degressed by another 10 %
• In 2015, PV rates will probably be degressed by an additional 10 %
• Biogas and biomass rates
• FiT rates and bonuses of biogas and biomass plants were subject to degression of 0.5 %
and 1.5 % in 2013
• Degression rates for these plants have been set to 0 % starting from 2014
• Agri and animal waste (including POME) biogas plants are now qualified to get the landfill
gas bonus (now 7.7 sen/kWh)
• Bonus for local manufacture or local assembly of boilers and gas engines has been raised
to 5 sen/kWh from 1 sen/kWh
• From Industry feedback, and PSS applications submitted to TNB/SESB, there is a huge
interest in biogas and biomass today
LESSON 3
• Even with better FiT rates, development of RE plants can be affected by Grid
connection problems
• PV plants are normally on factory/warehouse rooftop where grid connection is
simple due to onsite substation and sufficient load
• Most biomass, biogas, and especially small hydro plants are located in remote areas
where the Grid (i.e. medium voltage network) is either non existent, weak, or does
not have sufficient local load to accept the RE generator
• Although RE Act guarantees grid connection, but the interconnection facilities are
the responsibility of the RE generator
• If point of connection is too far, the costs and unit losses are too high to be economically
viable
Action from Lesson 3
• Negotiate with utility to allow:
• Connection of a cluster of RE plants to the Transmission network
• Each individual plant may be too small to warrant connection to Transmission voltage but in a
cluster, they can add up to 30 MW or more
• Already agreed, and can proceed
• Suitable for small hydro plants, and some remote biomass plants
• Flow of power from Distribution network to Transmission network when there is not
enough local load
• Still in negotiations with utilities
• May require all RE generators connected to medium voltage to provide SCADA facilities to
convince the utilities
• Set up Grid Interconnection Committee (GIC) chaired by SEDA, with the Energy
Commission (EC) as Secretariat, and members comprising TNB, SESB, and NUR
• GIC to discuss all issues relating to Grid connection and bring the proposal to Distribution
Code Committee (DCC) or Grid Code Committee (GCC) under EC for approval and
implementation
The Way Forward
• FiT is not meant to be permanent but only to kick start the RE Industry
• New applications for FiT are proposed to end
• 2017 for solar PV
• 2020 for small hydro
• 2025 for biogas and biomass
• Last FiT payment in 2041
• As fossil fuel power generation costs rise, and RE technology matures, Grid Parity will be
achieved one by one for each technology
• Small hydro already at grid parity (23 sen/kWh or 24 sen /kWh compared to dc of
23.8sen/kWh)
• Non PV technologies can afford to sell to the utility at dc, especially if the real dc is determined
• Small PV can be installed under Net Energy Metering (NEM) while utility scale plants can be
built through existing power plant bidding exercises
• An alternative Legal Instrument is needed to ensure the utilities buy from the RE generators
at dc and accept NEM because the existing RE Act only implements the FiT.
Conclusion
• Malaysia went into the FiT after studying its implementation in other countries
• Although we have weaknesses, but we managed to avoid many of the pitfalls
experienced by others
• Some countries almost went bankrupt and had to cancel the FiT since there was no quota
system
• Within 2 years we managed to increase the grid-connected RE from 61 MW to 185 MW
• By 2020, we’ll have a minimum of 1000 MW or more under the FiT
• The FiT can only go so far
• New Legal Instruments are needed as we approach grid parity