Renewable Energy Program-gy gOpportunities & Challenges for

M l iMalaysia

By:Ir Halim Osman CIRED Malaysia

CIGRE-AORC Meeting 2011,

Ir. Halim Osman – CIRED Malaysia

L/O/G/Og ,

Chiang Mai Thailand26-28 October 2011

Renewable Energy Development in Malaysia The Pastin Malaysia – The Past

• RE as the 5th FuelMalaysia 8TH Malaysia

Plan (2001 -2005)

RE as the 5th Fuel• Implied 5% RE in energy mix

• Targeted RE capacity to be connected to power utility grid:• 300 MW Peninsular Malaysia; 50 MW Sabah

Malaysia 9th Malaysia Plan

(2006 2010)

• 300 MW – Peninsular Malaysia; 50 MW - Sabah• Targeted power generation mix:

• 56% natural gas, 36% coal, 6% hydro, 0.2% oil• 1.8% Renewable Energy

(2006 – 2010)gy

• Carbon intensity reduction target: 40% lower than 2005 levels by 2020

RE as of RE as of 31st

December

• Connected to the utility grid (as of 2010): 61.2 MW (17.5% from 9th MP target)

• Off-grid: >430 MW (private palm oil millers and solar hybrid)

2

2010

RE Development in Malaysia –New Stimulants : Beyond 2011New Stimulants : Beyond 2011

Established policy, regulatory and support mechanism framework & action plan to stimulate greater investment i RE & t t in RE & targets

National RE policy & Action

RE act, rules & regulations, g

Feed-in Tariff ( 1st Dec 2011)Feed-in Tariff ( 1st Dec 2011)

RE Implementation agency –SEDA

3

N i l RE P liNational RE Policy & Action Plan& Action Plan

Malaysian National RE PolicyMalaysian National RE Policy

Policy Statement:

Enhancing the utilisation of indigenous renewable energy resources to contribute towards national electricity supply security and sustainable socio-economic development

Objectives:Objectives:

To increase RE contribution in the national power generation mix;To facilitate the growth of the RE industry;To ensure reasonable RE generation costs;To conserve the environment for future generation; andTo conserve the environment for future generation; andTo enhance awareness on the role and importance of RE.

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Strategic Thrusts of National RE Policy

Strategic Thrusts of National RE Policy Policy Policy

Strategic Thrust 2: Strategic Thrust 3: gProvide Conducive

Business Environment for RE

Strategic Thrust 3: Intensify Human

Capital DevelopmentEnvironment for RE p p

Strategic Thrust 1: Introduce Legal

St t i Th t 5

1: Introduce Legal and Regulatory

Framework

Strategic Thrust 5: Create Public

Awareness & RE

Strategic Thrust 4: Enhance RE

R h d Awareness & RE Policy Advocacy

Programmes

Research and Development

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Strategic Thrusts of National RE Policy

Strategic Thrusts of National RE Policy Policy Policy

THRUST 1

•Introduce Appropriate

THRUST 2

•Create Conducive

THRUST 3

•Intensify Human

THRUST 4

•Enhance RE Research and

THRUST 5

•Create Public and Appropriate

Legal Framework

•A new RE Act

Conducive Business Environment for RE

Human Capital Development

• RE in Technical and 

Research and Development

• RE Research & Development 

and Stakeholder Awareness & RE Policy Advocacy P

e ct•Feed-in Tariff (FiT)

•RE Fund (Professional F d M )

• Promote RE businesses –SME and manufacturing 

• Long term low i t t fi i

Tertiary Curricula• RE Training Institutes and Centres of E ll

pAction Plan –reduce cost of technology & promote wider application

Programmes

• Effective & continuous informationFund Manager)

•FiTImplementing Agency

•Responsibilities

interest financing • Standard evaluation process 

• Fiscal Incentives • Special Incentives

Excellence• Pool of experts to fulfil local and overseas market

• Fiscal relief for RE

application• Coordination & co‐operation in technology & economic research 

information dissemination

• Relationship with media, NGOs & private entities •Responsibilities

and obligations on power utilities and RE developers

• Special Incentives for Locally Developed R&D

• Incentives to Promote Local 

Fiscal relief for RE courses

• Financial incentives for training programmes

bet Government & private sector

• Strong linkages bet local & international

• Demonstration & awarenessprogrammes in primary & secondary Content

• RE Centre for SMEs

international research institutes

• Development of RE innovations

secondary schools

•Periodic monitoring & evaluation of

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RE

National RE TargetsNational RE Targets

Year Cumulative RE  RE Power Mix  Cumulative Capacity (vs Peak Demand) CO2 avoided

2011 73 MW 0.5 % 0.3 mt

2015 985 MW 6% 11.1 mt

2020 2,080 MW 11% 42.2 mt

2030 4 000 MW 17% 145 1 mt

Notes: RE capacity achievements are dependent on the size of RE fund

2030 4,000 MW 17% 145.1 mt

Assumptions:

Feed‐in Tariff (FiT) in place

15 6% d l th t (CAGR) f RE it f

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15.6% compound annual growth rate (CAGR) of RE power capacity from2011 to 2030.

RE Policy & Action Plan: Targets25,000  Cumulative RE Installed Capacity (& Ratio to Peak Demand)

2050:21.4 GW (73%)

2050 11 5 GW

20,000  RE (RE Policy & Action Plan)

RE (Business as Usual)

( )2030 

3.5 GW

11.5 GW

15,000 

W

10,000 

MW

2030:4,000 MW (17%)

5,000 

2020:2,080 MW (11%)

2015:985 MW (6%)

1090% increase of BAU

‐

( )

BAU 2050: < 2,000 MW

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

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2036

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2038

2039

2040

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2045

2046

2047

2048

2049

2050

Year9

RE Support MechanismFeed in Tariff- Feed in Tariff

Feed-in Tariff (FiT)Feed-in Tariff (FiT)

A mechanism that allows electricity that is produced from indigenous RE t b ld t tiliti t fi d i i d fresources to be sold to power utilities at a fixed premium price and for

specific duration.

Provides a conducive and secured investment environment which will make financial institutions to be comfortable in providing loan with longer period (>15 years)period (>15 years).

Provides fixed revenue stream for installed systemOnly pays for electricity produced: promotes system owner to install y p y y p p ygood quality and maintain the systemWith suitable degression rate, manufacturers and installers are promoted to reduce prices while enhancing qualitypromoted to reduce prices while enhancing quality

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Critical Elements in Legal Framework for Effective FiT MechanismCritical Elements in Legal Framework for Effective FiT Mechanismfor Effective FiT Mechanismfor Effective FiT Mechanism

FIT must be guaranteed via the RE Act, whereby:g , yAccess to the grid is guaranteed – utilities legally obliged to accept all electricity generated by RE private producersLocal approval procedures are streamlined and clearFiT rates

high enough to produce ROI + reasonable profit (not excessively) to act as an incentivefixed for a period (typically 20 years) to give certainty & provide p ( yp y y ) g y pbusinesses with clear investment environmentadequate "degression" to promote cost reduction to achieve “grid parity”

Adequate fund is created to pay for the FiT rates & guarantee the payment for the whole FiT contract periodImplementation by a competent agency for constantImplementation by a competent agency for constant monitoring, progress reporting and transparency

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Renewable Energy Act 2011

T id f th t bli h t d i l t ti fTo provide for the establishment and implementation of a

special tariff system which is Feed-in Tariff System (FiT)

To catalyse the generation of renewable energy and to

provide for related mattersprovide for related matters

Outlines provisions for:

FiT mechanism‘s implementation

Establishment of RE FundEstablishment of RE Fund

SEDA Malaysia as implementing agency for FiT

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mechanism

Feed-in Tariff Rates

Technology / Source 

FiTDuration

Range of FiTRates

Annual DegressionSource  Duration Rates

(RM/kWh)Degression

Biomass (palm oil waste, agro based) 16 0.27 – 0.35 0.5%

Biogas (palm oilBiogas (palm oil waste, agro based,

farming)16 0.28 – 0.35 0.5%

Mini Hydro 21 0.23 – 0.24 0%

Solar PV & PP 21 0 85 – 1 78 8%Solar PV & PP 21 0.85 – 1.78 8%

Solid waste & 16 0.37 – 0.45 1.8%

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Sewage

Proposed Source of Fund for FiTProposed Source of Fund for FiTSource of Funding

2011 - additional tariffs collection from electricity consumption by

FiT C t

from electricity consumption by consumer in the electricity bill

Every RM100/Month - RM1 for REFiT Cost RE

Additional 1% (proposed in 2012)

The size of RE fund will determine1%

The size of RE fund will determine the RE target for Malaysia

B fitBenefit polluters pay conceptwill not affect low incomewill not affect low income consumers (<300 kWh/mth)encourages EE and DSM

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Renewable Energy Act 2011

T id f th t bli h t d i l t ti fTo provide for the establishment and implementation of a

special tariff system which is Feed-in Tariff System (FiT)

To catalyse the generation of renewable energy and to

provide for related mattersprovide for related matters

Outlines provisions for:

FiT mechanism‘s implementation

Establishment of RE FundEstablishment of RE Fund

SEDA Malaysia as implementing agency for FiT

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mechanism

Opportunities for Malaysiapp y

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RE Related Opportunities for Malaysia

RE Related Opportunities for Malaysia Malaysia Malaysia

Generating economic activity and new

• RM 19 billion loan values to banksactivity and new

businessesbanks

• RM70 billion revenues & tax income of 1.75 billion50 000 j b • 50,000 jobs

Meeting CO2 emission d ti t t &

RM2.1 billion savings of external i CO2 t iti tireduction targets &

savings, environmental committments

in CO2 cost mitigation

Contribution towards energy security

??????

E h d ti l ??????Enhanced operational efficiency & lower cost of delivery for utilities

??????

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Challenges for Malaysiag y

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Key Challenge – Striking A Balance in Managing RE agenda in Managing RE agenda

SUSTAINABLE DEVELOPMENT RE

MARKET SUSTAINABILITY DEVELOPMENT – RE

AGENDASUSTAINABILITY

Cost of delivery & BalancedRE Act &

Regulationsefficiency

Quality of Supply

BalancedIndustry

governance-Policy RE Fund & FIT Pricing

Mechanism/ReviewEnergy Prices

-Policy, guidelines,codes &

stds

RE DEVELOPMENT &C O

stds

Smart GridIMPACT ONECOSYSTEM

Smart Grid????????

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Key Challenge – Adequacy of RE fund & pressure on tariff fund & pressure on tariff

Limited RE fund & cappingcapping

on staggered RE dev

Increase in RE Fund-Increase in levy on

electricity tariff

Tariff – energy prices

electricity tariff

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Key Challenge – FIT mechanism & changing utility cost parameters changing utility cost parameters

Fit built upon avoided cost of utility + premiumCost of services or of utility + premiumCost of services or

avoided costs, displaced cost

h tilit t Avoided cost or displaced cost

are locked for the

may change , utility at risk at being squeezed

out unless are locked for the periodthere is transparent

costing methodology & adjustment is j

allowed

Cost of services mayCost of services may increase under shallowConnection schemes

due to network

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due to network reinforcement

Key Challenge – Enhancing security & optimization of RES& optimization of RES

RES t ib ti tUtility needs to meet RES contribution to energy security, system capacity is relatively low

Utility needs to meet Obligations on system Security, reliability &

PQ t tPQ to customersNeed to provide

balancing and reserve Industry

solutions lies in capacity if RES not secured or reliable

under normal

technologies & incentives - SG

capabilities& contingency

Utility may develop

capabilities

Utility may develop methodology to include RES in

resources or capacity

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resources or capacity planning

Key Challenge – Optimal solutions in connection/integration of RESin connection/integration of RES

RE Act & regulationsUtility has obligations RE Act & regulationsUtility has obligations to optimize service

delivery costs, i t i itmaintain security,

reliability, PQ etc. Utility has to fully

Industry has to seek “optimal

Commercial rules-Connection charge

scheme??mitigate effects of RES connections –fault level, system

psolutions” -

fully developed guidelines,

scheme??

Simplified, yreinforcement

beyond PCC etc.

guidelines, methodology, c

odes etc.

Simplified technical rules -

processing, design methodology connmethodology, conn

ection schemes

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Conclusions

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Conclusions

Malaysia implementing new regulatory/policy framework to

ramp up RE into 2080 MW by 2020.

Major opportunities lie in stimulating economy throughMajor opportunities lie in stimulating economy through

developing RE market & contribution towards carbon

reduction emission.

Mix of challenges lies ahead that requires stakeholder policyMix of challenges lies ahead that requires stakeholder policy

makers responsible for industry governance to make

coherent, balanced approach as RE goals must be

managed along with other

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g g

Conclusions

Malaysia will face mix of unique challenges - striking a

balance between RE agenda and other industry imperatives

is essential in an industry not achieving maturity in bothis essential in an industry not achieving maturity in both

capabilities and performance

Industry stakeholders/policy makers responsible for industry

governance to have holistic view of industry and managegovernance to have holistic view of industry and manage

RE agenda/objectives in harmony other industry objectives.

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Thank You!

L/O/G/O