Paying for clean power

PRODUCING energy from renewable sources generally costs more than from petroleum, gas and coal because the fossil fuels are highly subsidised. Which is why clean power producers under the Feed-in Tariff scheme get paid rates that are higher than normal electricity tariffs.

The money for this comes from the Renewable Energy (RE) Fund which is contributed by consumers through the surcharge in their monthly electricity – 1% since December 2011, and raised to 1.6% in January.

The surcharge is below those implemented by other countries: 3% in China and Japan, 18% in Germany, and 2% to 3% in Britain. Many, however, still question why consumers should foot this surcharge.

“The 1.6% is not fair,” says former Department of Environment director-general Datuk Dr Abu Bakar Jaafar.

“Why should consumers pay for it? It should be the beneficiaries of RE, which are TNB (Tenaga Nasional Bhd) and the Treasury. You are producing power during peak demand and selling it to TNB, thus reducing its need to invest in more energy infrastructure. And the Government saves on the foreign exchange incurred in the imports of coal and natural gas. These savings by TNB and Treasury should be shared with RE generators. Or go by the ‘polluter pays principle’ … charge the 1.6% to fossil fuel-power generators.”

The surcharge is based on the “polluter pays principle” – we all are carbon emitters, after all, because we all use electricity. And the more electricity one uses, the more one has to contribute to RE development through the RE Fund. Sustainable Energy Development Authority (SEDA) chief executive officer Datin Badriyah Abdul Malik says this will compel Malaysians and local companies to conserve energy and use it efficiently.

“The RE Fund is vital to ensure sustainable growth of renewable energy which has been identified as the alternative source of energy for the country in its effort to reduce overreliance on fossil fuel. The key to successful implementation of the FiT mechanism is the creation of the RE Fund. It enables RE power producers to be paid premium tariff for the electricity generated,” says Badriyah.

She says Seda – which has been accused of a lack of transparency in its management of the fund – publishes the audited financial figures in its annual reports (available at www. seda.gov.my).

As of December, the (unaudited) RE fund totals RM776.5mil (this includes the initial RM300mil government grant); RM73mil has been paid to FiT power producers and RM3.65mil as administrative fees to Seda (which gets 3%) and TNB (2%). Between RM8bil and RM9bil under the RE Fund is needed to pay FiT power producers over the tenure of their power purchase agreements with TNB (21 years for solar and hydropower, and 16 years for biogas and biomass).

Malaysian Green Technology Corporation chief executive officer Ahmad Hadri Haris says one initial plan was to get TNB and independent power producers (IPP) which now generate electricity from fossil fuels, to contribute to the RE Fund. “But there was fear that they might pass on the cost to consumers … so we may end up paying our contribution and theirs, too.”

He says one promising method that is employed in some countries to encourage generation of RE is the Renewable Portfolio Standard, whereby the Government mandates that power generators (TNB and IPPs) generate a certain percentage of their energy from renewable sources.

The Malaysian Photovoltaic Industry Association says “carbon tax” can be a source of funding for renewable energy. It says taxing carbon polluters, which include coal power plants, the transport sector and industries, will compel these sectors to curtail their carbon emissions.

It says in 2011, TNB and IPPs generated 45,160,000MWh of electricity from their combined 7,000MW coal-powered stations, and emitted 40.6 million tonnes of carbon dioxide in the process (assuming that every MWh emits 0.9 tonnes of carbon dioxide). Imposing a carbon tax of RM70 per tonne on emissions (using the Australian benchmark figure of AUD$23/tonne), the Government could collect RM2.85bil annually to fund renewable energy installations.