City&Country: Green Moves-- Growing interest in photovoltaic industry

The term “solar energy” is not new to us — electricity is generated from the sun’s rays, directly via photovoltaics (PV) or indirectly through concentrating solar power.  The latter uses the sun’s energy to boil water, which is then used to provide power. But let’s be honest, most of us wouldn’t know a PV cell or a solar cell if it hit us in the face.

Last October, a mission trip was organised to the US under the Malaysia Building Integrated Photovoltaic (MBIPV) Project, which comes under the Ministry of Energy, Green Technology and Water, for government decision-makers to understand better the viability of solar PV to generate electricity on a large scale and the potential of solar energy in an emerging economy.

Representatives from the Energy, Green Technology and Water Ministry, the Economic Planning Unit, the Malaysian Investment Development Authority,  the Ministry of International Trade & Industry, Khazanah Nasional  Bhd and Petronas Research formed part of the contingent. The trip was led by the ministry’s secretary-general Datuk Dr Halim Man.

Given the the ever-diminishing supply of fossil fuels, sourcing for ideas and ways to save or make money while doing our part for the environment is highly relevant and urgent. As this goes to print, Malaysians are bracing for yet another electricity tariff hike.

Malaysia is not the only country with a growing interest in the rapidly expanding PV industry. PV has become a RM115 billion business worldwide, with analysts forecasting market volume to rise to RM180 billion this year.

The world leader in the PV industry, Germany, installed more than 8.3gw in PV capacity in under five years. In 2006, it installed 850mw of new PV capacity and 1,300mw in 2007. Another 2gw was added in 2008 and 2.5gw in 2009.

It has been reported that Malaysia’s PV industry received RM12 billion to RM14 billion in foreign direct investment from 2007 to 2009. MBIPV’s national project leader Ahmad Hadri Haris says of four investors — First Solar, Q-Cells,  Sunpower and Tokuyama — two started operations last year (see table).

The SMUD story
City & Country was part of the study tour to the US. One of the areas visited was the Sacramento Municipal Utility District (SMUD) in the capital city of California.

SMUD is a customer-owned municipal utility that serves about 590,000 customers. It is governed by a seven-member board of directors who are elected by voters in the SMUD service area.

SMUD was an initiative of business and civic leaders back in the 1920s, who wished for cheaper electricity and a more reliable service.

The task was challenging. After residents voted to create their own municipal electricity utility in 1923, a long court battle ensued between SMUD and Pacific Gas and Electric Company (PG&E), the investor-owned utility that provided service at the time. It was 23 years before SMUD was up and running. On Dec 31, 1946, it replaced PG&E as Sacramento’s provider of electricity.

Demand for electricity tripled as the number of customers rose from 65,000 to 170,000. SMUD then purchased power from PG&E and hydroelectric power from the US federal government, and later went on to build its own hydroelectric plants at the Upper American River. In the 1960s, SMUD built Rancho Seco, a 900w nuclear power generation station in an effort to be more “energy independent”.

According to SMUD, Rancho Seco experienced delays and outages while upgrades and more security were required following the Three Mile Island incident in 1979 in Pennsylvania, when a partial core meltdown occurred in a pressurised water reactor.

SMUD customers were forced to face years of rate increases due to a rise in costs and in June 1989, customers and ratepayers voted to close Rancho Seco down. SMUD then phased out nuclear power and increased its focus on renewable resources like wind and solar while purchasing more hydroelectric power combined with cycle cogeneration plants.

Today, SMUD is the sixth largest public utility in the country.

For MBIPV’s Hadri, the most exciting story about SMUD is that it is a public-owned power utility with tremendous support for renewable programmes such as hydro, solar and wind.  SMUD has established renewable portfolio goals of 20% for the procurement of RE (renewable energy) by 2011, meaning 20% of energy will come from a combination of solar, wind and geothermal energy. More importantly, the utility recently introduced feed-in-tariff (FIT) for purchasing renewable energies from its customers. This voluntary move by SMUD to offer FIT to its customers is a rising trend among US utilities, he says.

The main role of FIT is to promote RE, where national or regional utilities are obliged to buy energy produced at above market rates under long-term contracts. As of 2009, FIT has been enacted in 63 jurisdictions around the world, including Australia, Austria, Brazil, Canada, China, Cyprus, the Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Iran, Ireland, Israel, Italy, South Korea, Lithuania, Luxembourg, the Netherlands, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, and some states of the US. 

Hadri says it is not a government-enforced move but a win-win situation where the utility enhances its RE portfolio for obligatory greenhouse gas reduction while the consumers have a choice of generating clean energy with the ability to sell it at a fair market price. “This is an exemplary corporate attitude we hope many electricity utilities will embrace in the near future,” he adds.

Going solar
SMUD’s supervisor for power contracts (energy trading and contracts) Gary Lawson says PV holds the most promise in SMUD’s service area for the future. Installing solar PV adds premium to a property, he says, adding that “some builders find that houses with PV sell faster — maybe up to three or four times faster. It has now even become part of marketing.”

Three developers in Malaysia are using solar PV in their projects (or certain phases) under MBIPV’s Suria 1000: S P Setia Bhd in its Setia Eco Park bungalows in Shah Alam; Putra Perdana Development Sdn Bhd in its bungalows in Precinct 16 in Putrajaya; and Amarin Wickham Sdn Bhd in its low-rise condominium Amarin Wickham in Kuala Lumpur. 

At the Solar Power International Conference held in Anaheim, California, last October, the principal analyst for Navigant Consulting (PV Services Programme) Paula Mints said the market for PV products is still driven by incentives and will continue to be incentive-driven for some time to come. If these incentives go away, so will the market for the technology.

Some 15,000 people attended the annual conference last year. It was also reported last year that President Barack Obama wants the production of RE to double over the next three years to 10% by 2012.

Among some of America’s largest solar PV projects is The Nellis solar power system at Nellis Airforce Base in Nevada, which was completed at the end of 2007. The 14mw solar PV project spans 140 acres, of which 33 acres are capped landfills, reused for this project. Other major projects coming up are First Solar’s 2gw of thin film PV plant and eSolar’s 2gw solar thermal plant, both in China.

Need for incentives to promote usage of renewable energy

Some years ago, Malaysia initiated the Malaysia Building Integrated Photovoltaic (MBIPV) Project, with co-financing from the Global Environment Facility and disbursed through the UNDP. Its main objective is to reduce the long-term cost of solar BIPV technology and address the country’s long-term energy supply security.

According to MBIPV’s national project leader Ahmad Hadri Haris, in terms of grid-connected photovoltaic (PV) installations in the country, the project is ahead of its target as nearly 1mw of grid connected building integrated PV systems have been installed. Public awareness of solar energy has increased and FDI from renowned PV companies has elevated Malaysia’s position in the global supply chain in the PV industry,
Generally, it takes 10 to 15 years for any country to develop renewable energy (RE) as a source of energy security. “While the MBIPV Project serves as a launching pad for solar PV, a sustainable programme for all types of RE is important and should be reflected in subsequent Malaysia plans,” he says.

The government introduced RE as the fifth fuel source under the Eighth Malaysia Plan while in the Ninth Malaysia Plan, solar energy under the MBIPV Project was introduced.

Malaysia as a country has underperformed in its renewable energy targets, Hadri says. To date, only 32mw of RE generated power has been connected to the national electricity grid via the Small Renewable Energy Power Programme (SREP).

There is a need for electricity power producers to have better acceptance of RE as part of their energy portfolio. RE operators need the support of the government and the national electricity utility to overcome a host of administrative barriers, Hadri says.

One challenge lies in the required initial capital investment. Financial incentives and technical support, says Hadri, are needed to encourage public and commercial entities to instal RE either for their own use or for sale.
“Until grid parity is attained, incentives must be sufficient for financial justification of RE projects,” he adds. Grid parity occurs when the cost of generating electricity by RE sources is on a par with the cost of electricity generated by conventional fuel. Most of the US is expected to reach grid parity by 2015.

Lack of transparency
While the global cost of RE technologies is on a downward trend in Malaysia, Hadri says RE projects are priced exorbitantly. This is due to the lack of a transparent mechanism for pricing RE projects, which gives one an idea of the huge capital investment required for such projects, he adds.

Furthermore, he says, until a regulatory framework on RE is established, it will be challenging to expect RE to grow in a sustainable manner. Business risk is reduced if there is government commitment to RE in the form of regulatory framework, he says.

During the World Future Energy Summit in Abu Dhabi in January, Prime Minister Datuk Seri Najib Razak said the government is in the process of instituting a RE law, and that one of the mechanisms being looked into is feed-in-tariff (FIT) which should take off under the Tenth Malaysia Plan.

“FIT is a mechanism that allows electricity produced from RE sources to be sold to power utilities at a fixed price for a specific term. For FIT to be implemented, the country needs to have a RE Act to provide a framework for the FIT to operate in,” Hadri notes. Thus, if the RE Act can be in place by this year, then the FIT should be available by 2011.

So, will Malaysia have its own solar fields some day? Malaysia lies in the sunbelt, so the technical potential for the country to operate large-scale PV power plants is feasible, Hadri says.

PV applications are very versatile. PV is by far the only RE technology that is viable for urban applications. One can have PV integrated into small and large buildings, Hadri explains.

PV for urban applications has added benefits for a country undergoing rapid urbanisation.  Generating electricity for peak demand is costly and PV helps to manage such costs, he says, adding that the way FIT is structured will determine the type of PV installations.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 796, Mar 8 - 14, 2010

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