Tariffs and Incentives – The Source of Public Motivation towards Renewable Energy Adoption
It is possible to head out for a full solar PV system placement at your rooftop without thinking about Tariffs and Incentives, but why not ? You will get extra rewards for supporting the renewable energy revolution, and that will keep you motivated and proud about your system.
The storm are getting worst, summer are hotter, rain falls ends with flash floods, lower sea level area are flooded, arctic ice glacier are melting … etc. Global Warming is a hot debate for decades and renewable energy revolution is imminent. We need to cut down green house gases and carbon dioxide emission. Hence different nations had come out laws and regulations regarding transformation from fossil fuel to renewable energy and the quest for sustainability.
The transformation is a step by step process, but with Tariffs and Incentives accessible to the public, more people can take part in the transformation process. We had seen a steep increase in adoption in renewable energy across the nation by private and government for the past decade, more remarkable since the year 2015. China had join in the quest and slashing the price of the Solar PV down to a level that most moderate home owners can effort for a solar PV installation.
Feed In Tariff
Feed-in Tariff (FIT) is a policy mechanism used to encourage adaptation and installation of renewable energy. A FIT program policy can differ according to places, usually according to the renewable policy of the country and local laws. In generally FIT program guarantees that the customer who own a FIT-eligible renewable electricity generation facility will receive a set price from their utility for all of the electricity they generated and provided to the grid. The pay out price and duration is according to the agreement amount in the contract.
FIT applicable to Solar PV installation, which can also expand to other renewable energy installation including wind, mini hydro and biomass, according to locality.
The contract can be as short as 5 years, typically around 10 years, which can be also long term contract up to 20 years. Longer term usually applicable to Solar PV installation as solar PV can last very long, with typical warranty up to 25 years.
The FIT price is calculated by price per kilowatt-hour, which similar to the bill of the power utility grid. The FIT rate can vary from time to time but will be set at a fix rate upon the signing of the contract, irregardless if the actual retail rate of electricity. Although the price is usually slightly higher than the actual retail electricity rate initially during contract signing, however the retail electricity rate may increase overtime and diminish the net income from the price between the two.
Over generous FIT may lead to more extensive investment installation than intended, causing drop in FIT rate for subsequent installations due to burden to the government, and may lead to suspend of FIT.
Feed In Tariff in Malaysia
In order to promote the growth of renewable energy sector in Malaysia, feed-in tariff (FiT) mechanism has been introduced by Malaysian government in 2011, in accordance with Renewable Energy Act 2011 and Sustainable Energy Development Authority Act 2011.
Malaysia’s Feed-in Tariff (FiT) system obliges Distribution Licensees (DLs) such as TNB (Tenaga National Berhad) and SESB (Sabah Electricity Sdn Bhd), to buy from Feed-in Approval Holders (FIAHs) the electricity produced from renewable resources and sets the FiT rate. The DLs will pay for renewable energy supplied to the electricity grid for a specific duration.
The FiT rate is a fixed premium rate payable for each unit of renewable energy sold to Distribution Licensees. The FiT rate differs for different renewable resources and installed capacities. Bonus FiT rate applies when the criteria for bonus conditions are met.
The latest FiT rates can be seen in the SEDA official website portal at http://seda.gov.my/
The latest FiT rates for PV for the year 2017 starting from January 2017 is as follows:
Basic FiT Rates for Solar PV (Individual) (for 21 years from FiT Commencement Date)
- Installed capacity up to and including 4kW : RM0.7424 per kWh
- Installed capacity above 4kW and up to and including 12kW : RM0.7243 per kWh
Basic FiT Rates for Solar PV (Non-individual) (for 21 years from FiT Commencement Date)
- Installed capacity up to and including 4kW : RM0.7424 per kWh
- Installed capacity above 4kW and up to and including 24kW : RM0.7243 per kWh
- Installed capacity above 24kW and up to and including 72kW : RM0.5218 per kWh
- Installed capacity above 72kW and up to and including 1MW : RM0.5041 per kWh
Other bonus for FiT rates will applicable for following criteria:
- use as installation in buildings or building structures
- use as building materials
- use of locally manufactured or assembled solar PV modules
- use of locally manufactured or assembled solar inverters
In order to be entitled to sell renewable energy at the Feed-in Tariff (FiT) rate, a Feed-in Approval (FiA) will have to be applied to and granted by SEDA Malaysia. The application for the FiA can be done both manually or online via SEDA Malaysia’s official website.
Renewable energy that applicable for FiT includes biomass (inclusive of municipal solid waste), biogas (inclusive of landfill/sewage), small hydro and solar photovoltaic.
No FIT is available in Sarawak. It should be noted that Sarawak Energy (SEB) is not member for the Feed-in Tariffs application yet, for now. Hence most PV installations in Sarawak is for personal off-grid use or in rural villages that do not have direct grid power connections.
Incentives for Renewable Energy (RE) in Malaysia
There is various incentives applicable for producing clean energy from renewable sources, and it varies from location to location. Below are some of the example of incentives for Renewable Energy (RE) and Energy Efficiency (EE) in Malaysia. Do check out the local authority on requirement for getting the incentives and its limitations. The terms are also subject to change from time to time.
Pioneer Status (PS) : – A fiscal incentive granted under the Promotion of Investments
Act (PIA) 1986 to companies proposing to generate RE or undertake EE initiatives. The incentive is in the form of full income tax exemption on statutory income generated from RE business and EE projects for 10 years.
Investment Tax Allowance (ITA) : – A fiscal incentive granted under the Promotion of Investments Allowance (ITA) Act (PIA) 1986 to companies proposing to generate RE or undertake EE initiatives. The incentive is in the form of a tax allowance of 100% on qualifying capital expenditure incurred within 5 years from the date the first qualifying capital expenditure is incurred. Companies can use this allowance to offset against 100% of their statutory income in the year of assessment. Any underutilized allowance can be carried forward to subsequent years until the whole amount is fully utilized.
Import Duty and Sales Tax Exemption : – Companies generating RE can also apply for import duty and sales tax exemption on imported machinery, equipment, materials, spare parts and consumables used directly in the generation process and that are not produced locally. For locally purchased machinery, equipment, materials, spare parts and consumables, full exemption is given on sales tax. Exemption is given for a period of one year, commencing from the date the application is received by MIDA.
Companies that provide electricity to the national distribution grid system must obtain
approval from the Ministry of Energy, Green Technology and Water (MEGTW) under the
Small Renewable Energy Programme (SREP). They must also obtain a power generating
Licence from the ST. The maximum capacity that can be sold to the distribution grid system
under this programme is 10 MW.
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