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Monday, 24 February 2014

What ails the FiT

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.

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.

Hurdles block the path to clean energy.

Generation of solar power is at an all-time 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 financing 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.

Related stories:

Understanding FiT

Paying for clean power

Energised by the sun

Tags / Keywords: Environment , Environment , ecowatch , renewable energy , feed in tariff , FiT


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