Participation in the rise of renewable energies in Malaysia – an overview

​Article published on 9th December 2019

Malaysian Environment and Energy Minister Yeo Bee Yin aims to generate 20% of electricity from renewable energy sources by 2025. Currently, the share of renewable energy sources is only about 2% so the government intends to stimulate the development of this sector by introducing special incentives.

Net Energy Metering (NEM)

Enhanced Net Energy Metering (NEM) is one of the most important programmes enabling both private households and companies and other entities to feed excess solar power into the grid operated by the electricity transmission network operator Tenaga Nasional (TNB). The volume of electricity fed into the grid is then offset against the consumed electricity purchased from TNB at times when the sun was not shining ("one-on-one" offset).

At the beginning of the year, the Solar PV investor directory was implemented for this purpose. The investor directory enables domestic and foreign investors to participate in the NEM procedure. They can choose between two options. On the one hand, they can enter into a power purchase agreement (PPA) with the buyer/consumer on whose property the PV power plant will be installed. In such an agreement, both contracting parties agree on a fixed price per generated kWh. Conversely, this means that the payments made by the customer to the investor in this case only vary depending on the electricity generated by the power plant.

The second option, solar leasing, on the other hand, provides for fixed monthly payments to the investor for the use of the power plant. After expiry of the lease contract, the customer becomes the owner of the PV power plant. But in order to obtain, as a foreign investor, the status of a Registered Solar PV Investor (RPVI), certain criteria should be met. For example, the capacity of the power plant must be at least 250 kW, the foreign company must be registered in Malaysia and have a paid-in capital of RM 10 million (RM – Malaysian Ringgit, EUR 1 = RM 4.7). In addition, the company must comply with provisions on employing local employees (80% of staff must be local) and on technical planning, construction and procurement (100% from local suppliers). The latter also involves the requirement of designating a Registered PV Solar Service Provider. Local companies are subject to similar yet less strict conditions.  In any case, a registration fee applies (RM 3,000 for foreign companies), whereas the registration must be renewed every year. Since January, 17 projects have been approved in connection with the Solar PV Investor Directory.

Large Scale Solar (LSS) PV power plants

Another possibility for participating in the solar energy sector is through the Large Scale Solar (LSS) Programme designated for larger PV projects. This programme, too, is a competitive bidding programme open also to foreign companies. Their participation is however restricted because the share of foreign partners in a consortium submitting a bid may not exceed 49%. Bids are compared based on the level of their LCOE (levelised cost of energy) and compliance with regulatory and technical standards and regulations. The winning bidder signs a PPA with the national electricity network operator and is guaranteed a fixed price per kWh for a period of 21 years. The operator is however responsible not only for the construction, ownership and operation of the power plant but must also arrange for connecting the LSS power plant to the grid and acquire/lease the necessary space. Also here, 100% of the planning, construction and operation of the power plant must be handled using local service providers.  In the third round of the LSS Programme, 500 MW were tendered by the government this year, whereas bidders could submit their bids from February to August 2019. This year, the minimum bid capacity was increased from 30 to 100 MW in order to enable project developers to obtain more favourable terms of loans from banks and thus further reduce LCOE.

E-Bidding under The FiT-Programm

Further steps have also been taken in the area of projects subsidised with feed-in-tariffs (FiTs). For example, the bidding procedure is now conducted online through the e-Bidding Platform of the Sustainable Energy Development Authority (SEDA). Here, quotas are regularly tendered for capacities from small hydropower plants, biomass, biogas and geothermal energy, which are earlier determined by the Malaysian government.

Commissioned renewable energy projects (as of: end of June 2019)

FiT-approvals (as of: end of June 2019)

As for biogas projects, auctions have already been conducted. For example, the most recent auction involved a capacity of 30 MW, whereas bidders could submit their bids from 15 to 29 July 2019. The contract was awarded to the bidder who offered the lowest price per kWh. The first bidding procedure for small hydro with a volume of 160 MW started on 2 September, whereas bids could be submitted until 17 September. Foreign companies looking to participate in this programme must also be registered in Malaysia.