FIT - Critical Success Factors

The above illustrates the premium rate paid by the utility company for each unit of energy produced by your home Solar PV. This is the case for solar photovoltaic; there are three other renewable energy sources that enjoy the feed-in tariff (FiT) under the newly passed Renewal Energy Act, namely small hydro, biomass and biogas. For a complete guideline of the different rate, refer to the Feed-in Tariff Update by KeTTHA.

With this attractive FiT rate, the government hopes to solve the slow implementation and take up of renewable energy generation in the country. Remember how many signed up for the Suria 1000 incentive that the government mooted not too long ago? Only a handful.


Will the FiT for RE suffers the same fate as Suria 1000? Yes and No, but before we tick any of the two answers there are several critical factors that need to be closely monitored and or adhered to:

1. Feed-in tariff rates need to be high enough to produce ROI. Put in some carrot in the form of profit to woo takers. Where there is opportunity/profit there is risk worth taken.

2. "High enough" is not attractive if it is not coupled with a "long enough" period to make business sense. The RE Act provide for 21 years. I think that's long enough for any business venture.

3. Ready buyers. No worries there; TNB, SESB and SESCO are obliged to purchase all electricity generated.

4. Fund to finance FiT cost. I think it is the responsibility of everyone to make RE energy a success, and what a better way to take part than to contribute through your utility bills. Yes, we are expected to pay higher electricity tariff in a near future - maybe not all of us - and the extra money we pay to the utility companies can be used to finance the FiT cost.

5. Clear procedure on local approval. Not like the process you have to go through land applications in Sabah.

6. Transparency in implementation such as involvement of only competent persons, constant monitoring, periodical reporting of progress, etc. We do not want to see sudden mushrooming of Jacks and Joe's who know little about things but get the upper hands on what to implement.

7. Calculated degression. Degression means gradual decrease in the FiT rates until they come to parity with the prevailing electricity tariff. This way people are forced to improve such technology to lower the manufacturing cost. For solar PV, degression rate is 8%, a bit steep in my opinion but let's take this as a challenge and beat that figure with even cheaper solar panels!

8. There is an old Malay saying "Ukur baju di badan sendiri". We know the RE Act was adopted from what has been in practice by several Western countries. What we need is to carefully customise it to Malaysian context. A u-turn of decision after a couple of years down the line would not look impressive to say the least.

Let's hope the premium FiT rates spurs us on to achieve the country's goal to lower carbon emission, starting this 3rd Q of  2011. Fingers crossed we do not have to go through the 'brilliant' u-turn decisions on Teaching Maths & Science in English. No, the FiT has nothing to do with that.

Green fund to finance Renewable Energy

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[Solar panels integrated into the building - Image courtesy of BIPV Inc.]

I caught this late (this was in the news on April 6, 2011) but it still is a good read and it should give anyone a heads up of what is in store for those willing to adopt things early.

To sum it up, it stated that, a typical residential house requires 4kW of power which costs RM60,000 to install.

Of this:

• the consumers pays RM6,000 (10%), and
• loan from a bank of 90%

Monthly income generated: RM696.00
Monthly bank repayment : RM456.00
Thus, Net cash earned : RM240.00

Consider a 3.5% p.a. flat interest rate (as in motor vehicle hire purchase) and we are talking about repayment period of 15 years. Fifteen years may sound too long but we are not exactly forking out a single cent from our pocket. Instead, there is an income stream. The guaranteed feed-in period by the utility company is 21 years.

"Dear Sir, because you deserve it we've committed ourself to credit into your bank account an amount of RM240 per month for the first fifteen years, and RM696 per month for the next six years. Thereafter, we shall leave it entirely to you to do anything you see fit to the equipment and fittings related to the generation of electricity installed at your home." Yours truly, SESB.

How does that sound? Aha, that's just rang a bell in you hasn't it - something that's too good to be true must have a catch somewhere. That's for our next discussion.

For me, I'm going nuts in excitement but the residence I'm currently living in is not exactly mine and there is nothing much to pursue. Will definitely chase this goose once mine is ready in the near future.

Install a 6kW BIPV and generate RM1,000 per month. I can live with that.


Read the Online news here. But if you hate site hopping, here is the excerp:

PETALING JAYA: A renewable energy fund will be established to finance the higher rates that Tenaga Nasional Bhd (TNB) will be paying for renewable energy that will be sold into the electricity grid. This is according to information provided to industry players by the Energy, Green Technology and Water Ministry.

The soon-to-be-passed Renewable Energy (RE) Act 2010, which has already been passed by the Dewan Rakyat this week, will enable individuals and companies to sell electricity generated from renewable resources to TNB. The Act will facilitate a feed-in-tariff (FiT) mechanism whereby higher rates will be paid for renewable energy.

It is learnt that under the FiT, TNB will pay between 23 sen and 123 sen per kWh, depending on the type of RE power generated. (The current rate TNB pays traditional power producers is 21 sen per kWh.)

It is also learnt that the fund will be established and administered by Sustainable Energy Development Authority (Seda) to manage the FiT mechanism. The Government would have to subsidise the cost to TNB, either directly via subsidies or via the RM1.5bil Green Technology Fund,” he said, adding that in any case, the implementation of FiT would be neutral to TNB.

Not to be confused with the renewable energy fund being set up by the RE Act, the Green Technology Fund is a RM1.5bil fund that the Government set up last year as a funding scheme to encourage companies, especially in the energy, water and waste management industries, to use green technology.

However, he said, the entry level for solar photovoltaic (PV) could be very high.

“Some RM3.5mil to RM4.5mil investment would be needed to produce 1MW of solar electricity,” Eng said, adding that there were other challenges, such as land, to produce RE.

A normal house needs 4KW while the capital required is about RM60,000. However, with FiT, consumers need to pay only 10%, or RM6,000, while the rest will be borne as a loan from a bank. The monthly income generated from the 4KW will be RM696 and the monthly repayment is RM456 to the bank, thus earning consumers a net cash of RM240 per month,” Ahmad said.

More Incentives for Renewable Energy

[Picture from Google]

Firstly, my apologies for the slight mis-information in my previous article "Generate electricity at home and earn money".

In that article I stated "SESB will pay you up to RM1.75/unit for all “net” kWh your solar system feed-back to SESB grid"

Not so.

I met with Ungku Abdul Rahman (the Director of Power Technologies Sdn Bhd) a couple of days back and he mentioned that SESB will pay you the whole amount of energy produced at home and not the "net" kWH fed-back to their grid. Power Technologies S/B is one of the active turnkey Contractors for implementation of solar power systems in Malaysia. They are based in Shah Alam, Selangor.

What this means is that SESB will still bill you for the amount of energy consumed but at the same time pays you for whatever amount of energy generated by your home Solar System. This, according to him is the net effect of the recently enacted Renewable Energy (RE) Act 2010.

If you read my previous article, you might be pleasantly surprised that what you read in this updated article is a betterment of that information.

For example (previous figures re-used):

If your Solar System produced 200kWh this month and your energy consumption is 150kWH,

• SESB bills you : RM20.40 (40kWH x RM0.24, 110kWH x RM0.18)
• FIT, you get : RM350 (200kWH x RM1.75) RM1.75 is the max possible FIT rate.
• Your INCOME = RM329.60 (RM350.00 - RM20.40)

Of course you'll still need to service your bank loan, so, this "Income" is not net yet. I mentioned bank loan as you are eligible to take up financing from any of the commercial bank around for setting up of the residential solar system.

The initial capital expenditure looks daunting but taking into account the government incentive, the bank financing, the return of investment, the guaranteed 21 years of FIT, it really is worth looking into.

FIT: feed-in tariff

Dont' you think Malaysia is committed to its pledge to reduce the carbon emission to help mother earth live another day?