What ails the FiT

Hur­dles block the path to clean en­ergy.

The Star Malaysia - Star2 - - ECOWATCH - By TAN CHENG LI star2­green@thes­tar.com.my

Gen­er­a­tion of so­lar power is at an all­time high, but such promis­ing growth is ab­sent in the other re­new­able en­ergy sources of biogas, biomass and hy­dropower.

Many agree that the Feed-in Tar­iff (FiT) scheme has given the green en­ergy sec­tor a much-needed prod, but two years in the off­ing and teething prob­lems have sur­faced, rang­ing from un­met tar­gets, un­der­de­vel­oped sec­tors, un­cer­tainty in the re­lease of quo­tas for re­new­able en­ergy gen­er­a­tion, an in­va­sion of for­eign pho­to­voltaic com­pa­nies, and pay­ment fail­ures.

“There has been good progress in the de­vel­op­ment of re­new­able en­ergy, but not as much as ex­pected. We could have achieved more,” says Ah­mad Hadri Haris, chief ex­ec­u­tive of­fi­cer of Malaysian Green Tech­nol­ogy Cor­po­ra­tion. For one, he says, too much fo­cus and at­ten­tion have been given to so­lar pho­to­voltaic (PV), re­sult­ing in un­der-per­for­mance of the other RE re­sources.

He says the ap­proved projects (un­til June 2015) to date met only 31% of the 10th Malaysia Plan tar­get for the biomass, biogas and solid waste sec­tors, and 45% for small hy­dropower. For so­lar PV, how­ever, it is 322% over the tar­get. He says the poor show­ing of the other sec­tors means that we are un­likely to meet the goal of pro­duc­ing 985MW of re­new­able en­ergy (5.5% of the to­tal) by the end of 2015.

And be­cause the so­lar en­ergy sec­tor uses more of the RE Fund (pay­ment to the power pro­duc­ers are high­est for so­lar en­ergy), this re­sults in less funds for the other RE re­sources. Ah­mad Hadri says the Sus­tain­able En­ergy De­vel­op­ment Author­ity (SEDA, the statu­tory body that ad­min­is­ters the FiT scheme) needs to ad­dress the low take-up in the biogas and biomass sec­tors, which were sup­posed to be the “early suc­cess story for Malaysia” in terms of RE.

He also ques­tions Seda’s plan to study the po­ten­tial of pro­duc­ing en­ergy from geo­ther­mal sources and wind.

“Ear­lier stud­ies in the de­vel­op­ment of the RE pol­icy have al­ready iden­ti­fied biomass, biogas, small hy­dro and so­lar as the RE re­sources to be im­me­di­ately tapped un­der FiT. Why would Seda di­ver­sify its re­sources into geo­ther­mal and wind when the im­me­di­ate po­ten­tial has not been fully tapped, and ex­pand its fund to other ini­tia­tives in­stead of fo­cus­ing on mak­ing a suc­cess of the iden­ti­fied RE re­sources?”

Then there is the un­cer­tainty in the re­lease of quo­tas for RE gen­er­a­tion. (To qual­ify for the FiT scheme, com­pa­nies and house-own­ers ap­ply on­line and Seda sets quo­tas each year for the var­i­ous RE sec­tors).

“The quota was sup­posed to be up­dated ev­ery six months and pro­vide the mar­ket po­ten­tial for the next three years so that in­dus­try play­ers can bet­ter plan their busi­ness mod­els and in­vest­ments. But the re­lease has been in­con­sis­tent. No­body knows when the quota will be re­leased, and how much,” says Ah­mad Hadri.

There are also com­plaints of “quota hog­ging” (sev­eral com­pa­nies with the same own­ers made mul­ti­ple ap­pli­ca­tions, and were suc­cess­ful) and of de­layed projects re­ceiv­ing ex­tended dead­lines, in­stead of be­ing re­jected and the quota given to other ap­pli­cants.

The Malaysian Pho­to­voltaic In­dus­try As­so­ci­a­tion says for­eign PV com­pa­nies have mo­nop­o­lised the mar­ket.

“FiT now only ben­e­fit big play­ers as when the quota was first an­nounced, they were taken up very fast by big for­eign firms such as Sunedi­son and Hyundai. FiT was sup­posed to pro­mote and de­velop lo­cal ex­per­tise, but lo­cal com­pa­nies have ob­tained few projects,” says vice-pres­i­dent Chin Soo Mau.

Ah­mad Hadri agrees with this: “Due to their ac­cess to in­ter­na­tional fi­nanc­ing and abil­ity to of­fer com­pet­i­tive pric­ing, the for­eign com­pa­nies took over the mar­ket and this has hin­dered the growth and de­vel­op­ment of the lo­cal PV in­dus­try.”

He says a lack of fi­nanc­ing for home own­ers is an­other is­sue.

“When FiT was be­ing planned, it was en­vi­sioned that lo­cal banks will of­fer per­sonal loans to fi­nance PV sys­tems, so ev­ery­one can par­tic­i­pate. When FiT was launched, how­ever, the banks were not ready. Home own­ers faced dif­fi­cul­ties in se­cur­ing fi­nanc­ing and only the af­flu­ent could af­ford to in­stall so­lar PV in their homes, re­sult­ing in the im­pres­sion that FiT only ben­e­fits the rich. It was only in mid-2013 that banks started of­fer­ing fi­nanc- ing pack­ages for in­di­vid­u­als. How­ever, the tim­ing was poor as by then, only a limited quota was avail­able.”

Faced with an on­slaught of crit­i­cisms, Seda is seek­ing to make things right. Chief ex­ec­u­tive of­fi­cer Datin Badriyah Ab­dul Ma­lik as­sures of im­prove­ments in the FiT im­ple­men­ta­tion process. This in­cludes re-en­gi­neer­ing the on­line ap­pli­ca­tion sys­tem and stricter guide­lines: ap­pli­cants to in­clude share hold­ing de­tails to pre­vent quota hog­ging by a few in­di­vid­u­als or com­pa­nies; re­stric­tions on ap­pli­cants who al­ready hold FiT per­mits; mora­to­rium on com­pa­nies with re­voked FiT ap­provals; caps on gen­er­a­tion ca­pac­i­ties; and rea­son­able time for the mar­ket and in­dus­try to re­spond to quota an­nounce­ments.

This year, there will also be sub­stan­tial changes in the Re­new­able En­ergy Act 2011 which will im­pact pay­ment rates, rules and reg­u­la­tions.

Seda has so far re­voked 11 ap­proved projects with a to­tal ca­pac­ity of 30.96MW. Badriyah says project de­lays are in­evitable as FiT is still in its in­fancy here.

“In due course, the ne­ces­sity for projects to ap­ply for ex­ten­sion of time will re­duce as the coun­try ma­tures in this mar­ket and in­dus­try.”

She adds that so­lar PV sys­tems have been read­ily taken up be­cause their in­stal­la­tion faces less risk and takes less time. Biomass and biogas projects, on the other hand, face is­sues such as avail­abil­ity of feed­stock (raw ma­te­ri­als), hikes in feed­stock prices due to com­pet­ing uses, trans­porta­tion costs, dis­tance to the grid, ac­cess to cap­i­tal, com­pe­tency in de­sign­ing the sys­tems, and hard­ware qual­ity.

“Seda has re­viewed these con­straints and will re­vise the Act for at­trac­tive biomass/ biogas (pay­ment) rates to pro­vide fi­nan­cial jus­ti­fi­ca­tion for in­vestors. We are also talk­ing to fi­nan­cial in­sti­tu­tions to ex­plain the mea­sures taken to re­duce var­i­ous risks as­so­ci­ated with RE projects and con­duct­ing train­ing to im­prove com­pe­tency for this in­dus­try.”

Badriyah says the achieve­ments of the FiT scheme is re­stricted by the size of the RE fund. She says to ex­pand the gen­er­a­tion of re­new­able en­ergy, the En­ergy, Green Tech­nol­ogy and Wa­ter Min­istry is de­lib­er­at­ing on other mea­sures such as net me­ter­ing and re­verse bid­ding (the low­est bid by the so­lar project de­vel­oper will be selected). Seda has also com­mis­sioned stud­ies on geo­ther­mal and wind re­sources for pos­si­ble fu­ture in­clu­sion in the port­fo­lio of re­new­able en­ergy.

Pow­er­ful gases: Meth­ane emit­ted by de­com­pos­ing trash can be tapped to gen­er­ate en­ergy, as is done at the bukit Ta­gar land­fill in Hulu Se­lan­gor and the ayer Hi­tam land­fill in Pu­chong, Se­lan­gor.

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