Cypark Resources Berhad, largest solar developer in Malaysia, has called on the Malaysian government to remove the cap on maximum installed capacity for renewable energy projects in order to give investors better opportunities.
While biomass power derived from oil palm waste has potential in Malaysia, supply stability is an issue, so solar and wind power are seen as promising alternative energy choices.
The Malaysian government introduced a feed-in tariff (FiT) system for renewable energy in December 2011. The contract period for solar, biomass and small hydroelectric plants is 21 years, while that of biogas is 16 years. The FiT rate for solar photovoltaic (PV) is the highest at 0.85 to 1.78 ringgit per kilowatt hour (kWh).
The Small and Renewable Energy Programme (SREP), established to monitor the renewable energy industry, allows output of no more than 10 megawatts (MW) per project to be sold to the grid through Tenaga Nasional Berhad (TNB), the largest utility in Malaysia.
Achmat Nadhrain Ibrahim, general manager of Cypark Resources, said the FiT had encouraged investors in renewable energy, especially solar. Feed-in tariffs typically are payments above standard rates under long-term agreements that help investors in renewable energy recover their costs.
Although Malaysia is the world’s second largest palm oil producer, enabling the country to invest in biomass energy, adequate supplies of feedstock remain a concern. Investors need a large area for oil palm plantations, which have become increasingly controversial because of their impact on the environment. Solar energy is easier to enter as investors can buy solar panels, install them and connect to the grid.
However, the solar energy could grow even faster if the government were to remove the capacity cap, said Mr Nadhrain.
“Cypark is the largest solar developer in Malaysia, but we have only an eight-megawatt solar project in Pajam connected to the grid since March 2012. This is very little if compared with our Thai counterpart SPCG, which has 250 MW,” he said.
Mr Nadhrain said Thailand had set a good example that Malaysia should emulate. Thailand has different sets of rules for renewable energy projects based on their size, ranging from lower than 5 MW to higher than 50 MW per site.
“This is the key factor that has made Thailand the leader in renewable energy in this region,” he said.
As of 2011, renewable energy accounted for just 0.5% of total output in Malaysia. The government has set a target for renewable energy to account for at least 5.5% of power generation by 2015.
Renewable energy is also expected to generate 70 billion ringgit in revenue and 1.75 billion in tax to the government, and create 50,000 jobs.
Mr Nadhrain said that investors in Malaysia were still able to enjoy profits from solar projects despite their smaller size when compared with Thailand.
“Malaysian companies have potential to invest in larger renewable energy projects. Capping the installed capacity may be one of the constraints on developing renewable energy in the country,” he added.
The quota system for annual target capacity is intended to mitigate any risk of insufficient funding due to short-term spikes in supply.
The other constraints on solar energy investment are land availability and grid connection.
Cypark diversified into solar from its core business of rehabilitating landfill sites, some of which it believes can be turned into solar farms.
In Mr Nadhrain’s view, investors need to know where they can connect to the power grid and how much capacity they can connect.
Cypark began operating its 8-MW solar farm in Pajam in March 2012 and is now investing to increase capacity to 13MW. It is undertaking similar projects at other closed landfill sites, where it expects to have three projects by the end of this year.
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Writer: Nalin Viboonchart