Malaysian Financial Mechanisms for Renewable Energy (RE) & Future Direction

Transcription

1 Malaysian Financial Mechanisms for Renewable Energy (RE) & Future Direction Ir. Ahmad Hadri Haris Malaysia Energy Centre (PTM) APEC Workshop th March st April, Honolulu Hawaii Malaysia Malaysian Electricity Supply Industry Population:. million () (Malay, Chinese, Indian, others) Land size:, km GNI per capita: US$, (GDP: % -.%) Maximum electricity demand:. GW () GW () Installed electricity capacity:. GW (). GW () Electricity generation mix: : % NG; % coal; % hydro; % oil : % NG; % coal; % hydro;.% oil;.% RE

2 Malaysia Energy Policy Malaysia Energy Policy To ensure provision of adequate, secure and cost-effective energy supplies by developing indigenous energy resources, both nonrenewable and renewable, using the least-cost options and diversifying supply resources within and outside the economy To promote the efficient utilisation of energy and the elimination of wasteful nonproductive patterns of energy consumption To minimise the negative impacts of energy production, transportation, conversion, utilisation and consumption on the environment Trends of Fuel Sources for Power Generation Untapped Potential: Solar Power Suitable building roof surfaces* > million m x Wp/m = >, MWp *. million houses (%) +, commercial buildings (%) PV covering.% ( km) land of Peninsular Malaysia can provide enough electricity supplied by TNB in (. TWh)

3 th Fuel Policy: RE Potential & Status Quo RE Support & Promotion Mechanisms Support Mechanism Approvals & licenses REPPA: RM/kWh. (biomass, biogas);. (hydro), net-meter (PV) Promotion Mechanisms Pilot projects & case studies Capacity building & lessons Financing & policy developments Fiscal incentives (<): Pioneer Status or Investment Tax Allowance; import duties and sales taxes exemption Key Issues Affecting RE Needs for a New RE Policy & Action Plan Reason To address current market failure Reason To provide long term sustainability (avoid start and stop policy) To stimulate a new growth industry Reason Reason To recognise the importance of the environment as an economic growth contributor Reason To develop human capital resources particularly in the field of R&D in RE technologies Reason To improve the coherence of current policy

4 New RE Policy & Action Plan Choices: RE Support Mechanism Source: BMU Feed-in Tariff (FiT): The Choice for RE Regulatory Framework A mechanism that allows electricity that is produced from RE resources to be sold to power utilities at a fixed premium price and for specific duration. Provides a conducive and secured investment environment which will make financial institutions to be comfortable in providing loan with longer period (> years). Provides fixed revenue stream for installed system Only pays for electricity produced promotes system owner to install good quality and maintain the system With suitable degression rate, manufacturers and installers are promoted to reduce costs while maintaining quality Disadvantage: does not address first cost barrier Verifications of FiT Effectiveness (selected) 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 world s 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 Renewable Energy Ernst & Young Report: Renewable Energy Country Attractiveness Indices: Feed-in Tariffs are cheaper than Trading System

5 Evidences of FiT Effectiveness FiT Effectiveness: Example of Solar PV Source: Fraunhofer Germany revolutionised RE deployment with the implementation of EEG (RESA) in Germany records exponential RE growth since (due to no limit of annual capacity) By, Germany s FiT model replicated by EU Member States By, EEG generates national economic benefits equivalent to Euro. billion VS cost of Euro. billion Critical Factors for an Effective FiT Mechanism Determining FiT Rates (Malaysia) Access to the grid must be guaranteed. Utilities must be legally obliged to accept all electricity generated by RE private producers. FiT rates must be high enough to produce a return on investment plus a profit (not excessively) to act as an incentive. FiT rates must be fixed for a long enough period (typically years) to give certainty and provide businesses with clear investment environment. There must be adequate "degression" for the FiT rates to promote cost reduction to achieve grid parity, where an annual stepwise reduction in tariffs by a certain percentage is mandated. Adequate fund is created to pay for the FiT rates (or the incremental cost) and guarantee the payment for the whole FiT contract period. There must be constant monitoring and progress reporting. Please refer to (World Future Council) Biomass Solid waste Solar PV Capex (investment cost) Loan: rates (.%), period ( years) Fuel: requirement (, t/yr), prices, transport charges Costs: O&M, depreciation, insurance Revenue: FiT rates, duration ( yrs), capacity factor (%), other revenue Annual cost increment (%): fuel, transport, O&M, insurance IRR, SPB, cash flow Capex (investment cost) Loan: rates (.%), period ( years) Fuel: requirement (, t/day), prices, transport charges Costs: O&M, depreciation, insurance Revenue: FiT rates, duration (yrs), capacity factor (%), other revenue (tipping fee, recycling) Annual cost increment (%): fuel, transport, O&M, insurance IRR, SPB, cash flow Capex (investment cost RM/Wp avg) Loan (%): rates (%), period ( years) Costs: O&M, depreciation, insurance Revenue: FiT rates, duration (yrs), capacity factor (%) Annual cost increment (%): O&M, insurance SPB, (IRR), cash flow

6 FiT Rates = Empirical Values FiT Rates: Comparison FIT revision: provides opportunity to adjust FIT prices & degression towards objective/ target RE Technologies Retail Electricity Tariff (average) Germany FiT Rates Italy. US$/kWh. US$/kWh Malaysia /. US$/kWh (Subsidised) Solar PV. x retail. x retail. x retail Wind. x retail. x retail. x retail Biomas. x retail. x retail. x retail Biogas. x retail. x retail. x retail Mini hydro. x retail. x retail. x retail Cost to consumers (% of retail tariff).%.% % (proposed) Source: BMU Source: BMU, GSE Grid Parity FiT changes to net-metering when grid-parity is achieved (real cost + external cost for fossil fuel and nuclear) Important to prepare local RE industry prior to start of FiT regulatory framework Towards benefiting local industry Promotes quality & cost reduction Meeting expectation Healthy growth MBIPV Project ( - ) Objective: To reduce GHG emission by reducing long-term cost of BIPV technology via development of a sustainable BIPV market Component : BIPV information services, awareness and capacity building programme Component : BIPV market enhancement & infrastructure development programme Component : BIPV policies and financing mechanisms programme Component : BIPV industry development and technology localisation programme

7 C: financial & technical support C, C: quality installations (ISP accredited training) Competency Training ISP accredited training days: theory, practical, exam C: quality products, C: quality services C: consumer awareness & appreciation C: grid access, net-meter, license C: monitoring C: policy makers C: RE-FIT (study) Approved Service Provider Scheme Quality Control Centres License valid for year with annual review. Only for companies. Staff passed ISP training. Use certified electrician. Company shall be financially sound. Company shall have workers insurance and public liability insurance. Company shall follow APVSP Industry Best Practice Guidelines. Company shall abide by the APVSP Code of Conduct. Complemented by Quality Assurance Scheme Inverter Quality Control Centre Mounting Structure Quality Control Centre

8 Performance Monitoring Communicate Internationally Exchange of knowledge & lessons learned Accelerate learning process & minimise mistake Friendship Awareness & Understanding Most Critical Towards achieving RE Targets,,,,,, M W Year Cumulative RE Installed Capacity Solar PV Solid Waste Mini Hydro Biogas Biomass :, MW (%). TWh (%) :, MW (%). TWh (%) :. GW (%). TWh (%) : MW (%). TWh (%) FIT Reviews

9 RE Generation Mix: PV expected to contribute significantly post,, Annual Electricity Generation from RE Thank you,, Solar PV %,,,,,, h W,, M,,,,,, Solid Waste Mini Hydro Biogas Biomass % % % TWh % % % % % % TWh % % TWh % % % MBIPV Project Pusat Tenaga Malaysia No. Jalan /, Persiaran Usahawan, Seksyen Bandar Baru Bangi, Malaysia,, P: + F: + E: infopv@mbipv.net.my Year Comparison between FiT and Quota System Feed-in Tariff (FIT) Renewable Portfolio Standards (RPS) Proven to be the cheaper option Less successful in achieving targets Performance based incentive - (e.g. UK, Sweden) encourages reliable operation Involves tradable green certificates Provides long-term investment security which are unpredictable in prices and returns Must have a penalty system Creates stable and predictable revenue Requires strong enforcement to pay for cost of investment mechanisms Degression and periodic reviews allow No clear identification of source of and stimulate price reductions due to funds to meet additional costs technological advances (e.g. solar PV) Unpredictable RE prices and costs Simple to implement specific RE because of bidding and trade developments and FiT costs can be predetermined and planned in advance would be promoted Usually only one RE technology Encourage smaller and distributed Usually only bigger company (with power producers and new industries resources) would be interested to greater number of jobs become developers RE developer to provide Submission of Application Form by RE developer additional information Checking and verification of Application Form by SREP Secretariat SREP Secretariat to obtain advice and comments from utility and the respective government agency Additional information Any advice/comments from from RE developer utility and the respective government agency NO NO RE developer to discuss Preriminary Consent by NO with utility and submit the utility on project location result of the discussion site Submission of recommendations by SREP Secretariat for consideration of Special Committee on RE (SCORE) at MEWC Approval by Special NO Committee on RE RE developer to discuss with utility on the interconnection to the utility s distribution system *Commitment Fee refundable to RE RE developer to provide Commitment developer upon off-take of power: Fee* for the Utility System Study RM, for capacity < MW RM, for capacity from MW to MW Negotiation and signing of Renewable Energy Purchase Agreement (REPA) RE developer and utility to submit between RE developer and utility monthly report on progress of negotiation to SREP Secretariat Commitment of RE developer to design and RE developer to submit application for construct the interconnection facilities & SREP licence to EC system reinforcement (if any) in accordance with Utility System Study Consideration for approval NO Notification to RE by Licence Committee developer RE developer to present RE developer to remit finalised plant design & payment to utility for all approval from utility for necessary system interconnection facilities reinforcement works END design Preparation of licence for NO signature by the Minister RE developer to start construction of proposed RE developer/utility to plant and interconnection perform necessary works facilities to reinforce system RE developer to pay licence fee RE developer to submit protection coordination studies/setting, testing & Licence awarded to RE developer commissioning schedule etc Notes:. The SREP Secretariat is hosted by the Energy Commission (EC).. The utility refers to Tenaga Nasional Berhad (TNB) in Final verification of design, testing & Peninsular Malaysia, and Sabah Electricity Sdn. Bhd. (SESB) commissioning, O&M procedures in Sabah.. MEWC = Ministry of Energy, Water & Communications. Plant operation and supply of power to grid