InternationalJournalofEnergyandPower(IJEP)Volume2Issue2,May2013www.ijep.

org

FeedinTariff(FiT)ConcepttoPromotethe UsageofRenewableEnergyinMalaysia
A.Johari1,S.SitiHafshar*2,H.Hashim3andM.Ramli4
DepartmentofChemicalEngineering,FacultyofChemicalEngineering UniversitiTeknologiMalaysia,81310Skudai,Johor,Malaysia
1

anwar@cheme.utm.my;*2sitihafsharsamseh@yahoo.com;3haslenda@cheme.utm.my;4ramli@cheme.utm.my program was implemented under this act as a means to encourage the generation of RE in the country and toachievesustainableenvironment. Feed-in-Tariff (FiT) FiT mechanism is expected to create significant increase of RE usage in developing and developed countries. However, FiT requires support from law enforcement created by government. Currently, FiT mechanism is the most successful policy to simulate the rapid development of RE in the country, which is becauseFiThasbeenestablishedwithsimplestructure and actively involves general public in generation of their own RE that enables the country to achieve a sustainableenvironmentinlongterm. UndertheSEDAMalaysiaAct2011,SEDAMalaysiaas astatutorybodyhasbeenestablishedtoimplementthe objectives of the NREPAP. The functions of SEDA Malaysia is to promote, manage and monitor the progressofREthroughFiTProgram. FiT is a mechanism that allows electricity generated from renewable resourcesto be soldfor power utilities at a fixed premium price at a specific duration. In general,FiTisapaymentsperkilowatthour(RM/kWh) forelectricityproducedfromrenewableresources. In FiT, individuals or businesses that hold a feedin approval issued by SEDA Malaysia shall be known as feedin approval holder. RE generator plants for feedin approval holder will be linked directly to the national grid to provide clean electricity. The natural RE (in kWh) generated by feedin approval holders will be sold at a fixed premium price (FiT Rate) to distribution licensee or the holder of the licence to distributetheelectricity. The Fit Rate is effective and fixed for a specific period as stated in Renewable Energy Power Purchase

Abstract Energyisessentialinourlife.EnergysourcesinMalaysiaare heavily dependent on fossil fuels. Today, Malaysia starts to realizetheimportancetoadoptrenewableenergy(RE)inthe energy mix to ensure sustainable energy and security. This paper aims to present and discuss the feedin tariff (FiT) outlook in Malaysia, which is enacted under Renewable Energy Policy by the Malaysian Government. The overall approach of how FiT mechanism works towards the RE and how to benefit from it was discussed. The FiT implementation globally is positive indicators to implement FiT in Malaysia. Potentials of FiT on RE are currently very promising in Malaysia and able to give opportunities to public in generation of energy from RE. In terms of cost, solarenergy(solarphotovoltaic) predictedtobethe mainRE ofthefuture,surpassesallotherREs. Keywords RenewableEnergy;SustainableEnergy;Feedintariff;Energy Policy

Introduction Energy has become the most important issue for the development of economy and social growth in Malaysia. Presently, the countrys source of energy is largelymetbyfossilfuels.Withtherisingtrendoffuel pricesintheworldmarket,thegovernmenthaslooked into the potential of renewable energy (RE) from the sourcesofsolar,biogas/landfill,biomass/solidwasteor hydro as another alternative to ensure the sustainability of energy resources and energy security. In the effort to ensure energy security and promote sustainable environment in the country, the Ministry of Energy, Green Technology and Water launched National Renewable Energy Policy and Action Plan (NREPAP) have passed RE Act and SEDA Malaysia Act (Sustainable Energy Development Authority of Malaysia) in April 2011, which is meant to boost RE market and reduce dependency on fossil fuels in energy generation. Therefore, FeedinTariff (FiT)

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ww ww.ijep.orgInterna ationalJourna alofEnergyan ndPower(IJEP)Volume2Issue I 2,May2013

FIG.1FITME ECHANISM,(K KETTHA,2011)

Ag greement (RE EPPA) which h is an agree ement betwee en a dis stribution lic censee and fe eedin appro oval holder (L Law of Malaysia, 2011). Und der the RE Act 2011, the stribution lic censee is com mpulsory to buy b every sin ngle dis un nit of RE gen nerated by feed f in appr roval holder rs to ens sure that th he investmen nt is guaran nteed. Figur re 1 ind dicateshowthe t FiTconce eptworks.
TABLE E1FiTRATEFO ORRE,(KETTH HA,2011) Fi iTRate (R RMper k kWh)* 0.8 851.78 ective Effe per riod Initi ial Annu ual Degres ssion Rat te 8% uota REQu untilyear y 2012(M MW) 50 0

The e FiTs rate given to f feedin appr roval holder r is diff ferent, depen nding on th he types of RE technolo ogy use ed and ca apital inves stment inv volved in RE tech hnology ins stallation. G Generally, the t technolo ogy sele ected under r FiT is a technology y with prov ven pot tentialonloc calenvironm ment.Table1liststheFiTr rate, REP PPA period (effective p period), degr ression ratea and REquotafortheyear20112 2012. The e FiT payme ents given to feedin app proval holder r as inco ome for elec ctricity gener ration from RE sources are fun nded by RE Fund F whose e income ach hieved from the coll lection of 1% % by distribu ution license ee to all elec ctric use ers who uses u electric city exceedi ing 300 kW Wh (equ uivalenttoRM77) R perm monthshould dcontributeto t 1% from m their total electricity bill to distri ibution licen nsee as income for electricity generation fro om RE sour rces (KE ETTHA, 2011 1). In other word, RM1 goes to RE for eve ery RM100 per p month, which will not affect low l inco ome consum mers as they consume les ss than300 kW Wh per r month (H Haris, 2010). The collect tion of 1% by dist tribution lic censee has s started effect tively from 1st

Solar otovoltaic Pho (PV V) Bio ogas Bio ogas Sew wage Bio omass Bio omass Wa aste Small Hydro

21years y

0.2 280.35 0.3 380.43 0.2 270.35 0.3 370.45 0.2 230.24

16years y 16years y 16years y 16years y 21years y

0.5% 1.8% 0.5% 1.8% 0%

20 0 10 0 60 0 20 0 30 0

*FiT T rate range is s depend on th he capacity of RE installation n and bon nusincentivesth hatqualifiedtobeaccepted.

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De ecember 2011. To ensure RE Fund managemen nt is we ell implemen nted, distribu ution license ee is respons sible tomakeallFiT Tpaymentsto t feedinapp provalholde erin eve ery month and a distribut tion licensee will only make m any yclaimfrom mREFundifthereisapo ositivediffere ence bet tween FiT payment, sup pply cost and d administra ation fee e.Figure2sh howselectric citybillwithcollectionof f1% by TNB (distri ibution licen nsee) to the electricity users u wh ho use electricity exceedi ing 300 kWh h whilst Figu ure 3 sho ows electrici ity charge to t consumer rs that consu ume les ssthan300kW Whpermont th.

G.3ELECTRICI ITYBILLFORC CONSUMERSTHAT T CONSUM ME FIG LES SSTHAN300K KWHPERMON NTH

F 2ELECTRIC FIG. CITYBILLWIT THCOLLECTIO ONOF1%BYTN NB

Deg gression rate e on RE is d different in each year. The T bas sisofthedeg gressionrateisthecostof fREtechnolo ogy wh hich decrease es when the RE industry y becomes more m matured with increase of f feedin ap pproval hol lder rticipation in n year onwar rds. The FiT rate prescrib bed par und der REPPA is guarantee ed during agreement a te erm and disnotsubje ectedtoanyr reduction.At A thesameti ime, the quota for RE R is based on RE Fund d available and a ven on a firs stcomefirst t serve basis s. Table 2 lists l giv esti imatedREqu uotafor10y years

TABLE2REQUOTA Q INMA ALAYSIA(MWPER P YEAR),(Pa aulGipe,2011) Year Sola ar PV V 29 50 63 95 127 7 149 9 166 6 179 9 193 3 203 3 Biog as 20 20 15 25 25 25 30 30 30 25 B Biogas Sewage S 5 10 10 10 10 10 10 10 10 10 Biom mass Biomass s Waste 15 20 30 40 50 30 30 20 20 10 Small Hydro 60 30 60 60 60 60 50 40 30 20 Annual Total 219 190 238 290 342 354 376 379 383 368 Cumulative e MW 219 409 647 937 1,279 1,633 2,009 2,388 2,771 3,139

20 011 20 012 20 013 20 014 20 015 20 016 20 017 20 018 20 019 20 020

90 0 60 0 60 0 60 0 70 0 80 0 90 0 100 100 100

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ww ww.ijep.orgInterna ationalJourna alofEnergyan ndPower(IJEP)Volume2Issue I 2,May2013

Am mong these four types of sources; solar PV, sm mall hy ydro, biogas and biomas ss, residentia al homes wo ould ben nefit most from f solar PV P as a ren newable ene ergy sou urce.Theoth herthreesou urceswouldbe b moresuitable for r implemen ntation by businesses as the cap pital exp penditure co ould amoun nt to million ns (Ling, 20 011). Tab ble 3 demon nstrates the different co osts involved d in set ttingupdiffe erentsources s.
TABLE3REINSTALLA ATIONCOST,(L Ling,2011) Installed I c capacity E Expenditure SolarPV 6kW RM 90,000 Small Hydro H 1 MW 10 RM M90mill. Biomass 10 0MW RM90 R m mill. Biogas 4MW W RM40 4 mill l.

pacityistobe eincreasedfr rom2,080MW M to4,000MW, M cap it is estimated that the cou untry can av void 42 mill lion ton nsofCO2in2020 2 and145 5milliontons sofCO2in2030 resp pectively(W Weinee,2010). . FiT Ts Benefit ts FiT T financing concept is based on polluters pay p con ncept that gives g benefi it to those economizes in ene ergy consum mption where e consumer that uses high h ene ergy should contribute t to RE Fund. Based on FiT con ncept,FiTme echanismiso obviouslyno otagovernm ment sub bsidy to tho ose generatin ng RE but a cost rout ting mechanismuse edwidelyinm y. mostcountry early, FiT has h two fu unctions, as s environm ment Cle con nservation th hrough mon ney reward d given would spu ur greater RE develo opment and d increase RE gen neration. Ap part from t that, FiT al lso encoura ages sav vings in elec ctricity usage e through 1% 1 contribut tion con ncept to user rs of electrici ity exceeding g 300 kWj. This T stra ategywouldhelpthecou untrytoredu ucedependen ncy on fossil fuel in n energy gen neration and assist countr ries undtowardssustainablefuture. bou Co onclusion Imp plementation n of FiT mechanism m has prov ven effe ective in enco ouraging RE E industry market under the RE Act 2011 un nder which, the distribu ution licensee e is mpelledtoac cceptallofel lectricitygen neratedbyfe eed com in approval a holder. Due to o this, FiTis regarded as s an ince entive afford ded to give high return n of investm ment and d guarante eed under r a con ntract. Hen nce, imp plementation n of FiT mec chanism und der RE law will w beable a tocreate establecond ditiontoREmarket m forlo ong run n. With impl lementation of FiT mech hanism, energy can n be produc ced with sm mall scale tec chnologies and a able e to provid deopportunit ties to publ lic to gener rate clea an energy. Indirectly, , carbon emissions e and a pol llution in the e country co ould be redu uced. Curren ntly, FiT T mechanism m in Malaysia a is used in all a states exc cept in Sarawak du ue to the di ifferent prac ctise of law w to manage electric city supply. With FiT im mplementati ion, gov vernments ta arget on the acquisition of o green energy (985 5 MW in 2015) 2 should d be obtain nable with the incr reaseofmor rerenewableenergyproje ects. AC CKNOWLED DGEMENT The e authors s wish to Uni iversitiTekno ologiMalays sia. ackno owledge the

Ev ven though solar PV wou uld be more beneficial to o the res sidents; the FiT F applicati ion for solar r PV technol logy is limited l to maximum m cap pacity of 5 MWp M only. This T lim mit was cr reated by SEDA Ma alaysia due to con nsiderationof o theamoun ntofmoneyin i REFund. FiT T Move To owards RE Im mplementationofFiTmec chanismwillhelptoincre ease the e RE utiliza ation to rep place fossil fuels f in ene ergy gen neration. This is because e the mechan nism enables s the ele ectricity gene erated from RE to be so old to the ut tility com mpanyandwill w be able to o increaseRE E from less than t 1% % in 2009 to o 5.5% in 20 015 and up to 11% in 2020 2 (H Haris, 2010).F Figure 4 sho ows planned d increase in n RE cap pacitywithimplementati ionofFiTmechanism.

FIG.4SHOWSPROJECTION P OF O CUMULATIV VERECAPACI ITY W WITH IMPLEME ENTATIONOF FFiTMECHAN NISM(HARIS,20 010 ANDWEI INEE,2010)

Im mplementationofFiTmec chanismwill lincreasethe eRE inv vestments. The T increases s of RE utiliz zation in ene ergy gen neration wil ll provide an n annual CO O2 avoidance of 3.2 2 million ton ne (Haris, 20 010). Further rmore, if the e RE
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