Feed-in Tariff (FiT) in Malaysia Part 1

Feed-in Tariff (FiT) is among the most effective policy instrument to encourage the development of renewable energy in a country.

Facts:

1. FiT is simply a guaranteed price established for anyone who wants to sell renewable electricity to the grid, and a guarantee that they will have access to grid to do so.
2. The price, or tariff is set so that a modest profit is ensured, thereby unleashing the collective capital resources of the entire province, state or country to be part of the transition to renewable energy.
3.  Any incremental cost of purchasing the renewable energy is shared among all consumers of that energy.

Case study: Germany

The Malaysian government has approved the implementation of Feed-in Tariff Mechanism in Malaysia when Renewable Energy Act 2011 (Act 725) was enforced on 1^st December 2011. The aim of the policy decision is to promote the deployment of renewable energy (solar photovoltaic, biomass, biogas, and small hydro) in the country’s energy mix, which currently depends primarily on fossil fuels (e.g. gas and coal).

With the enforcement of the RE Act 2011, domestic consumers who consume more than 300kWh (equivalent to RM77) per month are obliged to contribute 1.6% additional surcharge on the total of their electricity bill to the Renewable Energy Fund or Kumpulan Wang Tenaga Boleh Baharu. This represents around 29% of the domestic electricity of Tenaga Nasional Berhad (TNB), 38% of Sabah Electircity Sdn Bhd (SESB), and 19.49% of NUR Distribution Sdn Bhd (NUR).

The main function for the establishment of the RE Fund is to pay the tariff for electricity generated from renewable sources by renewable energy producers under the FiT mechanism. The RE Fund is administered and managed by Sustainable Energy Development Authority (SEDA) Malaysia.

Source: www.seda.gov.my

How does FiT work?

The basic concept of Feed-in Tariff is that the Distribution Licensee pays the Feed-in Approval Holder (FiAH) for renewable energy that is generated and supplied to electricity grid on a premium tariff.

A meter will be installed to record the amount of renewable energy produced by the system and passed to the main electricity grid. In the main electricity grid, the energy generated from both conventional and renewable resources will be distributed to all electricity consumers like usual. Every month, Distribution Licensee (DL) will credit the payment of the total electricity generated and supplied into the Feed-in Approval Holder’s bank account. The DL will claim the money used to pay Feed-in Approval Holders from the Renewable Energy Fund. The RE Fund is a collection of 1.6% contribution from electricity consumers’ monthly bill.

In Malaysia, the FiT mechanism and also RE fund is being monitored and administered under the Sustainable Energy Development Authority Malaysia.

In the next part, we will look at the actual example of a Feed-in Approval Holder. Stay tuned!