Feed-in Tariff: The Malaysian Experiences

Ir. Ahmad Hadri Haris

hadri(a)mbipv.net.my

Chief Technical Advisor (Renewable Energy)

Ministry of Energy, Green Technology & Water

20th June 2011

FiT in Malaysia: The Beginning

June 2005: Study mission to Berlin, Germany

2011

Why FiT
Stern Review Report: Sir Nicholas Stern stated that Comparisons between deployment support through tradable quotas and feed-in tariff price support suggest that feed-in mechanisms achieve larger deployment at lower costs. UNDP-GEF Report: Promotion of Wind Energy - Lessons Learned From International Experience and UNDP-GEF Projects Feed-In tariff policies have been very effective in Germany, Spain and Denmark, leading to the worlds first, second and fifth installed wind energy capacities. International Energy Agency: Deploying Renewables - Principles for Effective Policies Feed-in Tariffs are more effective and cheaper than quotas for RE Ernst & Young Report: Renewable Energy Country Attractiveness Indices: Feed-in Tariffs are cheaper than Trading System Traditional RPS country/state moving towards Feed-in Tariff
2011

Learning Process: from Pioneer of FiT

2011

Learning Process: from Pioneer of FiT

2011

Learning Process: from FiT Advocates & RE Policy Experts

2011

Learning Process: from Other Countries & Reports

Germany Italy Thailand Taiwan Spain South Korea USA France Portugal Switzerland Others
7

2011

Critical Factors for an Effective FiT Implementation

Must be guaranteed via the RE Act, whereby: Access to the grid is guaranteed utilities legally obliged to accept all electricity generated by RE private producers. Local approval procedures are streamlined and clear. FiT rates must be high enough to produce a ROI plus reasonable profit (not excessively) to act as an incentive. FiT rates will be fixed for a period (typically 20 years) to give certainty and provide businesses with clear investment environment. Adequate "degression" for the FiT rates to promote cost reduction to achieve grid parity Adequate fund is created to pay for the FiT rates (incremental cost) and guarantee the payment for the whole FiT contract period. The design of the FiT must be customized to suit contextual conditions of the country. Implementation by a competent body in a professional manner that includes constant monitoring, progress reporting and transparency.
2011

Malaysia: Renewable Energy Policies

8th Malaysia Plan (2001 2005)
RE as the 5th fuel Implied 5% RE in energy mix

9th Malaysia Plan (2006 2010)

300 MW in Peninsular Malaysia 50 MW in Sabah

10th Malaysia Plan (2011 2015) & beyond

New RE Policy & Action Plan
2011

National Renewable Energy Policy

Approved by Cabinet on 2nd April 2010
Policy Statement: Enhancing the utilisation of indigenous renewable energy resources to contribute towards national electricity supply security and sustainable socio-economic development. Strategic Thrusts (RE Action Plans): 1. Introduce appropriate regulatory framework. 2. Provide conducive environments for RE businesses. 3. Intensify human capital development. 4. Enhance RE research and development. 5. Design and implement an RE advocacy programme.
2011

10

Feed-in Tariff: Government Policy

10th Jun 2010: 10th Malaysia Plan (chapter 6) 15th Oct 2010: National Budget 2011 (paragraph 34) 25th Oct 2010: Economic Transformation Programme (chapter 6)

2011

11

Renewable Energy Bill

RE Bill: an Act to provide for the establishment and implementation of a special tariff system to catalyse the generation of renewable energy and to provide for related matters. Part I: Preliminary Part II: FiT System Part III: Connection, Purchase and Distribution of RE Part IV: Feed-in Tariff Part V: Renewable Energy Fund Part VI: Information Gathering Powers Part VII: Enforcement Part VIII: General Part IX: Savings and Transitional

Passed in Parliament: April 2011

2011

12

Definition of Renewable Energy

Renewable Energy (RE) is any form of primary energy from recurring and non-depleting indigenous resources, such as agricultural produce, hydro-power, solar, wind, solid-waste, etc.

2011

13

RE Law Enables Feed-in Tariff System

Establishment of FiT System

Biomass Biogas Solar PV

Small Hydro

Feed-in Tariff (FiT) system provides: Connection to supply line by RE installations Priority of purchase and distribution by DL Payment by DL to FIAH according to FiT rates

2011

14

National RE Goals
30,000

Cumulative RE Installed Capacity

Solar PP Solar PV Small Hydro Biomass-Waste 2050: 26.3 2050GW (74%) 42.6 GWh/Yr (19%) 11.5 GW mil T-CO2 Cum. 597.2

25,000

2030 3.5 GW 2020 2.1 GW

2030: 7,088 MW (25%) 21.0 GWh/Yr (12%) Cum. 165.7 mil T-CO2 2020: 3,140 MW (14%) 12.6 GWh/Yr (9%) Cum. 45.6 mil T-CO2

20,000

Biomass Biogas-Waste Biogas

MW

15,000

10,000

5,000

2015: 1,275 MW (7%) 5.7 GWh/Yr (5%) Cum. 11.3 mil T-CO2

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050

Year
2011

15

RE Law Schedule: Biogas

2011

16

RE Law Schedule: Biomass

2011

17

RE Law Schedule: Small Hydropower

2011

18

RE Law Schedule: Solar PV

Schedule: Renewable Resources, FiT Rates

2011

19

FiT Rates = Empirical Value

Conducive FiT rates

2011

20

Basis of Determining FiT Rates: Economic Viability of RE Projects

Factors IRR (based on typical rates for power generation sector) Simple Payback Period (SPB) Positive cash-flow
Factors to calculate IRR Capital expenditure Loan rates & tenure Fuel cost & transport O&M cost, depreciation, insurance Annual cost increment Revenues: FiT duration Capacity factor Other revenue
2011

Biomass 8% - 13% < 7 years Yes

Biomass 6-8.5 RM/W 7-8.8%, 15 yrs 30 RM/tonne % of capex 3% 16 yrs 70% N/a

Solid Waste 8% - 13% < 7 years Yes

Solid Waste RM/W 7-8.8%, 15 yrs N/a % of capex 4% 21 yrs 70% Yes

Solar PV 5% - 12% < 12 years Yes / Neutral

Solar PV RM/W 6-7%, 15 yrs N/a % of capex 3% 21 yrs 13-16%% N/a
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RE Fund: Allocation from Electricity Tariff

Cost Breakdown for Average Domestic Electricity Tariff
Subsidized Fuel for Power Generation Generation Cost Transmission & Distribution Cost FiT Levy FiTCost Customer Service Charge

1% collection goes to RE Fund under the RE Law

16% 1% 20% 38%

25%

2011

22

Balancing Act: RE Fund VS FiT Transaction Cost

Annual RE Fund vs Annual FiT Transaction Cost
1,400

Annual RE Fund Annual FIT Cost

1,200

Final RE Fund Collection (2030)

RE Fund start
1,000

RE Fund increment

RM-million million

800

The quota (MW) allocated for each RE technology for each year is based on the: Availability of RE Fund Cash flow management of RE Fund.
Last REPPA (FiT) (21 years) 2048
2044 2045 2046 2047 2048 2049

600

400

200

First REPPA (FiT) (21 years)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043

2011

23

2050

FiT Quota: Open & Transparent Platform

2011

24

FiT Rates: Open & Transparent Platform

2011

25

RE Fund: Open & Transparent Platform

2011

26

FiT Application: Online

FiT quota approvals on first come, first served basis upon submission of complete application & document FiT quota is dynamic
2011

27

Other Critical Issues: RE Connection & Approvals

PMU 132kV / 33kV
DL A

PPU 33kV / 11kV

PE 11kV / 0.4kV
FiT Meter

Feeder Pillar 0.4kV / 0.23kV

PPU 33kV / 11kV

DL Meter DL B

1MW

FiT Meter

DL Meter FiT Meter

2011

DL Meter

28

FiT Payment
FiT payment is calculated based on actual kWh reading by the revenue meter [ (new kWh reading minus last kWh reading) x FiT rate ] RE installations RE installed capacity [A] RE generation/month [B] Biogas 4 MW Biomass 10 MW Small Hydro 10 MW Solar PV 6 kW

2,044 5,110 4,166.67 600 MWh/month MWh/month MWh/month kWh/month RM 0.34 per kWh 16 years RM 694,960 per month RM 40 mil 4.8 RM 0.33 per kWh 16 years RM 1,686,300 per month RM 90 mil 4.5 RM 0.24 per kWh 21 years RM 1,000,000 per month RM 90 mil 7.5 RM 1.46 per kWh 21 years RM 876 per month RM 90,000 8.6
29

FiT rate [C] FiT duration [D] FiT payment by TNB to FIAH per month = [C x B] Capex Simple Payback Period
2011

Recovery of FiT Payments by Power Utilities

(F) RE Fund (SEDA) (D) (U) (S) SEDA (U) Distribution Licensee (D) (S) (S) Grid Connection Point Medium voltage 1kV Low voltage <1kV (F) FIAH
2011

FiT payment Displaced Cost Recovery of Money Admin fee to DL Admin fee to SEDA

(A)

(S) = (F) - (D) (U) = 2% x (S) (A) = 3% x (S)

Displaced Cost 0.2047 0.3131

displaced cost means the average cost of generating and supplying electricity from resources other than the renewable resources through the electrical supply line up to the point of interconnection with the renewable energy installation 30

FiT Degression: To Promote cost reduction towards Grid Parity

Degression rate to commence on 1st January every year Revision: at least once every 3 years
2011

31

1.80 1.70 1.60 1.50 1.40 1.30 1.20 1.10

Degression & Grid Parity (Projected)

Upon grid parity: FIAH will be paid prevailing DC rate. DL cannot claim from RE Fund (SEDA)

Displaced Cost (LV) Displaced Cost (MV) FiT Biogas FiT Biogas-Waste FiT Biomas FiT Biomass-Waste FiT Small Hydro FiT Solar PV

RM/kWh

1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042

FiT Solar PP

Grid Parity

2043

2044

2045

2046

2047

2048

2049

2011

2050

32

Other Critical Factors: Quality Standard and Reliable Services

2011

33

Sustainable Energy Development Authority of Malaysia (SEDA Malaysia)

Ministry of Energy, Green Technology & Water
Energy RE (& EE) Sector Green Technology
Green Technology Sector MGTC SPAN Regulator

Water

Electricity Sector

Water & Sewage Sector

ST

JBA Implementing Department

JPP Implementing Department

SEDA
Regulator Implementing Authority Green Technology Promoter

2011

34

SEDA Bill
SEDA Bill: an Act to provide for the establishment of the Sustainable Energy Development Authority of Malaysia and to provide for its functions and powers and for related matters. Part I: Preliminary Part II: The Authority Part III: Functions and Powers of the Authority Part IV: Employee of the Authority Part V: Finance Part VI: General

sustainable energy means energy which, in its generation, provision and use, is such that it meets the needs of the present without compromising the ability of future generations to meet their needs, and includes renewable energy.
2011

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Part III S.15: Functions of SEDA Malaysia

a) b) c) d) e) f) g) h) i) j) k) l)
2011

Advise the Minister & Government entities on all matters relating to sustainable energy; Promote & implement national policy objectives for renewable energy; Promote, stimulate, facilitate & develop sustainable energy; Implement, manage, monitor & review the Feed-In Tariff system; Implement sustainable energy laws including the Renewable Energy Act & recommend reforms; Promote private sector investment in sustainable energy sector; Carry out / arrange research, advisory services & disseminate information; Conduct, promote & support sustainable energy researches & innovations; Conduct, promote & support sustainable energy training and human capacity development; Implement measures to improve public awareness; Act as focal point to assist the Minister on matters relating to sustainable energy & climate change matters relating to energy; Other function under sustainable energy law.
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Thank You
More info on feed-in tariff is available from www.mbipv.net.my coming soon... www.seda.gov.my