Bullish on solar plants

Posted on May 16, 2011. Filed under: Energy |

-The Star-

PETALING JAYA: Entrepreneurs are rushing to submit their plans to build solar plants following the disclosure of the Feed-in Tariff (FiT) scheme and the imminent gazetting of the Renewable Energy Act.

At a recent briefing held by the special division in the Energy, Green Technology and Water Ministry, as many as 300 people turned up – more than twice the expected number – to hear presentations by officials on details of the mechanics of the FiT.

One of the reasons for the rush is simply because the FiT will be dished out on a first come, first served basis, once applications are open.

A main speaker at the event, RE/Malaysia Building Integrated Photovoltaic Technology Application (MBIPV) national project team leader and chief technical adviser Ahmad Hadri Haris told StarBiz there would be a “quota” for producing renewable energy given the limited funding for the time being.

Tentatively, the combined quota for renewable energy for 2011 is 111MW for all renewable energy technology. The FiT is scheduled to start in the second half of the year.

Ahmad Hadri said the quota was designed to ensure the Sustainable Energy Development Authority (Seda), the body created to oversee the implementation of the FiT, could be certain that the FiT payment would be honoured for the entire period of contract with the power utility.

“How many MW can be offered annually depends on how much money can be collected for the RE fund, what are the commitments to pay for the FiT and the expected future cost of FiT, and the drive to promote renewable energy.”

Under the initial plan, electricity tariffs will be hiked by 1% to cover cost associated with the FiT scheme. The tariff hike, however, has yet to happen but the Government is committed to kickstart the FiT.

Hence to meet the initial demands of funding the FiT, the Government will allocate RM189mil to finance the higher rates that Tenaga Nasional Bhd (TNB) will be paying for renewable energy although the longer-term plan remains for electricity tariffs to be raised by 1%.

According to government officials, such a tariff hike will bring in RM300mil a year to be administered under the FiT scheme.

“Under the RE Bill, the management and utilisation of the RE fund must be openly reported and tabled in parliament annually. Thus, the public can scrutinise the information. We are also putting the information on the Seda website,” Ahmad Hadri said.

So far, no approval has been given to any party to operate renewable energy as the FiT application is not open yet. The application will be on a first come, first served basis; “therefore there is no opportunity to book any quota,” said Ahmad Hadri.

“To be fair, Seda will first launch the web portal (information) and communicate to the public about the FiT opportunity. We anticipate this to start in late June. After three or four months only will Seda open the FiT application, and the public can apply for up to three years in advance.”

Last month, both the RE Seda Bills were passed by parliament. The FiT is expected to be implemented by the third quarter while Seda will be legally established. Comparing the FiT scheme with other neighbouring countries, Ahmad Hadri said Malaysia’s FiT would be better. “Better because we have learned from their experiences and other countries’ experiences too. We have adapted all the good parts and avoided the mistakes and also customised for the Malaysian context.”

One interested entrepreneur, Gerard Teoh, said “the Malaysian FiT scheme of RM1.14 for installed capacity above 72kWp and up to and including 1MWp makes building solar farms viable.” Teoh is the executive director of Asia Solar Generation Ventures Sdn Bhd, an investment holding company incorporated to develop and operate solar farms in Malaysia. Its shareholders currently have equity interest in an operating solar farm north of Bangkok.

Teoh opined that the effective period of 21 years was good as it would enable players to recoup their return on investments.

But it is his hope that the application process for producing renewable energy would be done in a fair and transparent manner. He said the licence should be given to only those who are serious and have the capability and financial strength.

Meanwhile, OSK Research head Chris Eng believes biomass was more viable than other RE technology.

He said land costs remained one of the biggest elements for solar producer as cheap land could be located far from the grid. “They will then have to build a long transmission line to connect to the grid.”

Eng expects it would take five years before anything significant can take place in the solar energy sector. He said a lot of promotional campaigns would be needed to inform the public on renewable energy.

“The industry players may jump at the chance to produce solar power but I doubt the residential sector will.”

He expects more biomass plant to be sprouting up but doubts companies which are using it internally would sell it to the grid.

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