Little glitter in largescale solar projects
It’s not all that financially lucrative and a luxury that Malaysia can do without
THE drive towards having 20% of power generated from renewable energy (RE) has resulted in the popularity of large-scale solar (LSS) plants and the building of an ecosystem revolving around the sector.
The growing number of companies participating in the government’s series of exercises to award private companies the mandate to build and operate LSS power plants with a capacity of up to 100MW is a clear indication that there is a growing interest in solar power plant projects.
From manufacturers of solar panels to companies specialising in installation works and operators of solar plants, the ecosystem of the LSS segment of power-generation is growing.
The hype has reached the capital markets, where companies are seeking a listing to raise money on the back of participating in solar-related projects.
However, can the solar-power ecosystem grow at a sustained pace for the longer term?
So far, there is little to show that the LSS projects are viable for the longer term. Even though the prices of the rates to supply solar power and panels are dropping, there are doubts on their financial viability. The government has conducted three exercises inviting the private sector to bid for LSS power plants. The first exercise in 2017 attracted 70 bidders. The second in 2018 saw 116 companies participating and the third exercise attracted 112 bids.
The rates have been coming down, just like the prices of solar panels. In the first exercise, the rates offered were between 39 sen and 55 sen per unit. Finally, 19 were awarded at an average rate of 40 sen per unit.
Among the bigger names that got the award were Tenaga Nasional Bhd (TNB), Mudajaya Group Bhd, a consortium with Scomi Group as a partner, a joint venture of Malakoff Corp Bhd and Drb-hicom Bhd, and a little-known private company, Gading Kencana Sdn Bhd.
Several operators that have put up their power plants when they were awarded LSS projects under the first competitive bidding exercise in 2017 do not find the proposition attractive.
Among the reasons are that there are problems with the efficiency of the plants, as they are not able to hit near-capacity. Generally, they say that the peak period for sunlight is only four hours a day.
Apart from efficiency, the maintenance of the panels can be difficult because solar power plants require vast amounts of land. The rule of thumb is four acres of land for every one megawatt of solar power. For instance, a 50MW LSS power plant requires 200 acres of land and several hundred thousand solar panels.
Maintaining the panels is difficult, as detecting the faulty ones can be a tedious exercise if the system is not well-built and fenced up. The cost of replacing solar inverters is huge and it tends to happen once every seven or eight years.
Also, because of the requirement for vast tracts of land, the solar plants are located far away from the main grid. The company undertaking the LSS power plant has to build the transmission line to the main grid at its cost. TNB places its meters to record the power intake near the grid.
As more and more companies embark on LSS power projects, more land is being sought. The location of LSS gets further and further away from the grid and the cost becomes higher.
Hence, there are some bidders who had been awarded LSS projects under the second competitive bidding exercise who have not put up their power plants yet. Out of the 116 companies that had participated in the exercise in 2018, 41 bids were shortlisted and awarded about 560MW.
Industry players say the rates are at about 34 sen per unit, which they feel is still financially viable, given that the cost of the panels is coming down. However, there are several successful bidders who have yet to put up their plants even though they had been awarded the project last year because they are not able to get the financing.
The third round of bidding for LSS power plants attracted 112 companies, with the lowest offering 17.7 sen for 100MW. The rest of the bids offered rates of between 25 and 32 sen per unit. The outcome is not known yet, but industry players feel that the LSS power plants are not viable at rates of below 30 sen per unit unless the operators do not have to pay for the cost of the land.
The government’s efforts to push for more RE is good and in accordance with what the developed countries would like to see happen. However, it is a costly exercise for a country like Malaysia because energy from solar power plants is generally only used during peak periods.
It cannot replace the reliability and consistency of the base load power plants that are fired by gas, coal or oil. So, the government still needs to facilitate the building of gas and coal-fired power plants.
The spate of LSS power plants will not reduce the need to continue building gas and coal-fired power plants. The duplication in having multiple sources of electricity-generating plants is a cost to the country.
It is a cost that the well-developed nations with healthy coffers that champion clean energy can afford. Malaysia, which is still a developing country, cannot afford 20% of its energy needs coming from renewable sources, especially solar.
The views expressed here are the writer’s own.