Green Moves: 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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