KUALA LUMPUR (May 10): The government is lifting an 18-month ban on renewable energy (RE) exports — a move to allow the country to tap the rising demand in Singapore and subsequently accelerate local RE generation capacity.

When making the announcement, Minister of Economy Rafizi Ramli stressed that the government is committed to introducing “more RE programmes based on a willing buyer, willing seller basis” to induce private-sector participation.

A willing buyer, willing seller basis means that the RE generated will be sold at a negotiated rate that is agreed between the producer and taker. 

Rafizi added that the government commits to double the speed of its initial RE installation target and achieve a 70% generation capacity by 2050, from its previous target of 40%.

Industry players lauded the decision to lift the export ban, which opens the door for them to tap into the more lucrative Singapore market. As a simple comparison, Singapore’s average regulated household electricity tariff stood at 29.62 cents/kWh (99.29 sen/kwh) versus Malaysia’s 39.95 sen/kWh before rebate.

The export ban was put in place in October 2021, as the then-government wanted to keep RE supply domestically, as leverage to induce foreign and domestic direct investments from businesses that require clean energy.

However, investments into RE have been challenging. This is because regulated electricity tariff in Malaysia has remained low, on the back of high generation mix from coal and below-market pricing for gas sourced domestically.

When the new government came in, a review on the RE export ban was initiated in March, as it explored ways to encourage and fund the scaling up of RE capacity locally.

At the joint press conference, Minister of Natural Resources, Environment and Climate Change Nik Nazmi Nik Ahmad said RE exports will be subject to “certain conditions”, but did not underline the details.

When contacted, a ministry official said details for a mechanism are still being ironed out, citing Cabinet’s decision on the policy change just last week.

“The RE can be exported to anywhere, but it must be in accordance with our rules and regulations,” the official said in a brief response.

Responding to the announcement, Malaysia Photovoltaic Industry Association (MPIA) president Davis Chong said it indicates that the industry “will move further towards liberalisation”.

New mechanisms need to be introduced in order to facilitate exports of electricity, such as wheeling charges — a “toll” imposed by the grid operator Tenaga Nasional Bhd for the transmission of electricity from an independent power plant to its customer via third-party access (TPA) of the grid.

YTL Power International Bhd’s managing director Datuk Yeoh Seok Hong concurred. “Yes, low wheeling charges are necessary to create a vibrant green electricity market in Malaysia.”

“[The ban lift] is a good move, but Malaysia must position herself as the green energy hub for the region,” he said. “So, the priority is for Malaysia to open up for green energy project investments by the private sector.”

To be sure, Nik Nazmi has said in March that the government is targeting to introduce a framework for the TPA of the national grid in the third quarter of this year.

In October 2021, the government imposed wheeling charges of 2.28 US cents /kWh (10.14 sen/kWh) for sale of electricity to Singapore under “a two-year trial period”.

A trial was affirmed in January this year for TNB’s generation arm to export 100MW of fossil-fuel generated electricity to Singapore, which will be facilitated by a unit of YTL Power.

The government also allowed exports of conventional power to Thailand, but required the exporter to build a new dedicated interconnection for the purpose.

“The industry will await more clarity on the technical solutions, such as the necessary interconnection required to embark on the exports,” added Chong, who is also executive director and group CEO of Solarvest Holdings Bhd.

As Malaysia eyes selling a portion of its RE at a premium to part-fund future RE installations locally and cross-subsidise electricity costs for vulnerable groups, it is unclear as to how much RE will Putrajaya commit for exports, and how much will be allocated for domestic use.

The local market is not short of demand, as RE quota under green electricity tariff (GET) made available last year was fully taken up and further expanded this year — although large-scale solar roll-out has been at a slower pace in the last few years.

Meanwhile, players like YTL Power, Solarvest and other private developers eyeing large-scale solar projects are also keen to export, as well as the Sarawak state government, which has set a policy to export up to 1,000MW of its hydropower and has been in talks with Singapore.

To ensure domestic RE supply is not neglected, the government could also be looking at quota allocations — such as how property developers are required to deliver affordable housing within each development project.

Such requirements could still be absorbed by the industry players, said Chong. “There is no need to sacrifice domestic RE quota”, Chong said, adding that Malaysia’s RE resources would be adequate to supply to both domestic and export markets.

He added that energy export markets have more stringent requirements involving power quality, interconnection requirements and financial commitments such as performance bonds, and thus represents a higher barrier of entry.

This will indirectly create better segmentation of the industry where smaller players will have opportunities in the local market, while bigger players can compete in the new space, he opined.

Meanwhile, the immediate benefit for the local industry is the RM50 million allocation for the rooftop solar installations for government buildings that need to be completed in 2H2023, Chong said.

A project developer, when contacted, said what the industry needs now is to ensure necessary investments into the grid. “Those costs could be parked into the export pricing,” the player said.

“Like the LSS or the CGPP (corporate green power programme), the export market is simply another avenue for the industry,” said the player, who mulls going for exports if the government does not sanction local projects anytime soon.

The announcement is a positive surprise, as the government had initially set a deadline to announce the new policy in June, the industry player said. “There’s a bit more optimism; they are working at a different pace now.”

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