Frequently Asked Questions on the Renewable Energy Surcharge

It was announced yesterday by the Ministry of Energy, Green Technology and Water (KeTTHA) that there will be an increase in electricity tariffs in Malaysia.The electricity tariff in the peninsula will increase by 14.9 per cent or 4.99 sen to 38.53 sen for every kilowatt per hour (kWh), and 5 sen for Sabah and Labuan, effective January 1 next year.

As shown in the figure below, these hikes will only affect those who use more than 300kWh per month, excluding 70 per cent of households in the peninsula and 60 per cent of those in Sabah and Labuan.

It was also announced that there will be an increase in collection for the Renewable Energy (RE) fund from 1 per cent to 1.6 per cent effective January 1 in the peninsula. Similar to the electricity tariff hike, the 1.6% RE surcharge only applies to heavy users above 300kWh. Anticipating many questions from the public, SEDA disseminated a FAQ which I took the liberty to summarise as follows. (The full text of the FAQ can be downloaded here.)

1. What are the reasons for implementing RE initiatives?

There are 3 key reasons: to achieve energy security, to achieve energy autonomy, and to mitigate climate change.

Firstly, Malaysia is blessed with indigenous fossil fuel resources and is heavily dependent on such resources. For example, in 2010, our energy mix to generate power was natural gas (51.5%), coal (43.3%), hydro (4.2%) and Renewable Energy (1%). However, fossil fuel resource in the country is dwindling. Malaysia is already importing coal, and natural gas has approximately 20 years of supply left.

Secondly, an economy that reduces reliance on imported fuel is also one that is free from fluctuating global energy prices. It is not sufficient just to have energy security. It is essential that the country has its own indigenous supply of energy resources that is renewable, and therefore sustainable in the long run. The increasing use of renewable resource creates an energy source which is autonomous and in turn creates a more resilient economy.

Thirdly, scientists have already established a strong link between climate change and GHG emissions. The effect of climate change is best demonstrated in recent times by some countries such as Philippines. The Prime Minister has pledged a commitment at the United Nations summit on Climate Change in Copenhagen in December 2009 to a 40% reduction in GHG emissions intensity of GDP by the year 2020, compared to 2005 levels. Understanding the risks of climate change and its effect on the rakyat’s lives, the Prime Minister has set a clear stance that the country will be part of the solution to mitigate climate change.

Aftermath of Super Typhoon Haiyan (Source)

2. Why do we need to worry about doing RE now when the country is a net exporter of fossil fuel?

In countries where non-renewable energy dominates, the gestation period for renewable energy to reach some level of significance takes a long lead time.

For instance, Germany started its FiT scheme in 2000, and only achieved notable success in recent years. At end of 2011, the country had a total of 65.7 GW of RE capacity installed (44.3% wind, 38.1% PV, 10.9% biomass, 6.7% hydropower). Today, renewable energy makes up 26% of the total power generating capacity. The target for Germany is to achieve 100% renewable energy by 2050 .

In Malaysia, under the National Renewable Energy Policy and Action Plan (2010), the country is expected to achieve 73% RE in the total power generating capacity by 2050. In order to achieve this target, certain assumptions are in place. One of them is to implement the FiT by 2011. In the region, the ASEAN Centre of Energy has formulated the ASEAN Plan of Action For Energy Cooperation (APAEC) 2010 – 2015, to achieve overall RE target of 15% target share of RE in ASEAN power generation mix.

3. Why must the electricity tariff be increased even though the country is a net exporter of gas?

Subsidized electricity tariff has been identified as one the largest barriers faced by RE deployment. The price distortion of electricity brought about by subsidy which fails to internalize the cost of externality into fossil fuel (such as coal) has created an unequal playing field with renewable energies. For this reason, rationalizing of subsidy is an important step towards motivating electricity consumers to change towards energy efficiency lifestyle and habits.

As the country progresses towards achieving a developed country status by 2020, there is a need for paradigm shift towards a mindset of social responsibility. A developed nation does not seek dependence on subsidy across the board but embraces subsidy on need basis and is financially responsible for the measures towards achieving energy security and autonomy, and mitigating climate change.

4. What has SEDA achieved with the 1% surcharge collected?

As at the end of 2010, connected to the utility grid was only 61.2MW; which is 17% from 9th MP target through Small Renewable Energy Programme (SREP). As of end of October 2013, the achievements of the FiT can be found in the tables below:

FiT Statistics as at end of October 2013 (Approved)

Applications Capacity (MW)
Solar PV (Ind) 2,392 89.10% 26 5.40%
Solar PV (Non-ind) 239 8.90% 167.63 34.80%
Small Hydro 22 0.80% 130.99 27.20%
Biogas 17 0.60% 24.23 5.00%
Biomass 16 0.60% 133.49 27.70%
Total 2,686 482

 

Operational RE Capacity (MW) as at end of October 2013

No. Renewable Resource No. of Applications Capacity (MW)
Overall Sabah
1 Biogas 5 8.53
2 Biomass 5 50.4 36.9 (3)
3 Small hydro 5 15.7 6.5 (2)
4 Solar PV (Individual) 755 10.15
5 Solar PV (Non-individual) 52 34.68
 Total 822 119.47 43.4 (5)
% of total 100% 36.33%

The total operational RE capacity (under the FiT) as at end of October 2013 represented approx. 1.8% of the total power generating capacity.

5. Why should domestic electricity consumers contribute only to benefit largely the companies?

Domestic consumers with less than 300 kWh of electricity (or equivalent to RM77) are exempted from contribution to the RE fund. In Peninsular Malaysia, only 29% of domestic electricity consumers are obliged to such contribution. Whereas under the FiT programme, 89.1% of the total approved FiAHs are for the individuals (2,392 applications) and a total of 755 individuals (91% of FiAHs) have successfully achieved commercial operation for their solar PV systems.

6. How much is 0.6% additional surcharge collection equivalent to per annum?

0.6% additional surcharge collection is equivalent to RM 300 million per annum.

7. How much are other countries, which are implementing the FiT, contributing from their electricity bills to their RE fund?

  • China – 3%
  • Germany – 18%
  • Japan – 3%
  • Portugal – 5.6% (industrial), 6.2% (residential)
  • UK – 2 to 3%
  • Thailand – < 2% (2013) and estimated 8 – 10% once the 4,000 MW of solar PV and 3,000 MW of biomass projects have achieved commercial operation.

Today Malaysia is moving towards 1.6 % surcharge on electricity bills for the RE fund and this is well below the surcharge implemented in all other countries. It should also be noted in most of the above countries, the electricity tariff is unsubsidised and therefore a 1.6% surcharge imposed on a subsidised electricity tariff is not foreseen to be a huge economic burden to the people.

8. What are the other potential renewable resources to be included under the FiT portfolio?

SEDA is currently conducting two resource assessment studies which will span over a 24-month period. One study is on wind and another on geothermal. A potential geothermal site has been identified in Apas Kiri, Tawau and SEDA is reviewing the Schedule under the RE Act 2011 and the relevant subsidiary legislations to include geothermal as one of the renewable resource under the FiT programme.

Disclaimer

For readability, I removed the citations and some information that I considered to be interesting but not necessary. Please download the original file for sources and the complete text. This article is sponsored by SEDA Malaysia.

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