1.

Q A

What is the Feed-in Tariff? The FiT is Malaysia’s new mechanism under the Renewable Policy and Action Plan to catalyse generation of RE, up to 30 MW in size. This mechanism allows electricity produced from indigenous renewable energy resources to be sold to power utilities at a fixed premium price for a specific duration. What do you mean by indigenous resources? Indigenous means RE sources must be sourced from within the country and are not imported from neighbouring countries. Is FiT applicable to Sarawak? No, FiT is applicable to all states in Malaysia with exception to Sarawak as Sarawak is a state with its own legislation and regulations governing their electricity supply. The RE Act (that is currently being drafted) refers to the Electricity Supply Act under the purview of the Federal Government. How does it work? The basic concept of feed-in tariff is that the distribution licensee pays the renewable energy power generator a premium for clean energy that is generated. This allows owners to sell their clean energy to the distribution licensee for a fixed number of years; the duration is dictated by the type of renewable energy used for power generation. The incentive provides a fixed payment from the electricity supplier for every kilowatt hour (kWh) of electricity generated and a guaranteed minimum payment for every kWh exported to the grid. When will the FiT mechanism start? The FiT mechanism will start upon the completion of 2 processes; 1) Approval granted by Parliament on the RE Act and 2) Availability of the RE fund to pay the FiT. It is anticipated that FiT is expected to start in mid 2011. So far how's the progress of the Act? The Act is progressing as scheduled as both Acts (the RE Act and SEDA Act) have been presented for 1st reading at Parliament and Ministry of Energy, Green Technology and Water is targeting for the Acts to be tabled to Parliament for its 2nd and 3rd readings in the March 2011 session. Who will oversee the running of the FiT? The Sustainable Energy Development Authority (SEDA), which is a statutory body under the Ministry of Energy, Green Technology and Water, will be established under the Act of Parliament to manage and oversee the implementation of the FiT. The Act is targeted to be approved by parliament in March 2011 and is expected to be established by April 2011.

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Q A

Why Energy Commission is not tasked the responsibility of an implementing agency? Why does the government require a new agency? In Malaysia, currently the Energy Commission is the only agency focussing on energy sector. However, the Energy Commission is constrained in resources to discharge the full functions as required of an FiT implementing agency, hence the need for a dedicated and focussed agency to serve as a one stop renewable energy (RE) centre. What is the status of grid-connected Renewable Energy in Malaysia currently? As of end October 2010, Malaysia has: • 40 MW grid-connected power from Biomass; • 1.7 MW from Biogas; • 8 MW from Mini-hydro; • 7 MW from Solid waste; and • 1.5 MW from Solar PV Which RE resources are eligible? The following RE resources will be eligible for FiT: • Biomass (including solid waste); • Biogas (including landfill gas & sewage); • Small-hydro; and • Solar PV. What about solar thermal? Is it eligible for FiT? No, there is no FiT for solar thermal. What about wind and geothermal? Will there be a FiT for these two energy sources? No, FiT will not be offered for wind and geothermal when the FiT is launched in 2011 as the resource potential of wind and geothermal have yet to be determined nor analyzed. This is because at this point of time, the Ministry of Science, Technology and Innovation through SIRIM Berhad is still undertaking a study to identify the resource potential for wind in the country while the Ministry of Natural Resources and Environment will soon be commissioning a study on the potential of power generation from geothermal in the state of Sabah. As such, results from the two studies will only be ready from 2012 onwards. The FiT is sourced from all consumers therefore is not meant for financing of research and development of technologies but rather for proven technology with established resource potentials in the country. What are the rates/tariffs like?

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An indicative range of FiT rates for the various technologies concerned as well as their individual duration and degression, is shown in the table below. Please note that the rates may be adjusted during the legislation process of the RE Act and are therefore not final. Renewable energy technology Biogas Capacity of renewable energy installation • Installed capacity up to and including 4 MW Installed capacity above 4 MW, and up to and including 10 MW Installed capacity above 10 MW, and up to and including 30 MW Additional for use of gas engine technology with electrical efficiency of above 40% Additional for use of locally manufactured or assembled gas engine technology Additional for use of landfill or sewage gas as fuel source Installed capacity up to and including 10 MW Installed capacity above 10 MW, and up to and including 20 MW Installed capacity above 20 MW, and up to and including 30 MW Additional for use of gasification technology Feed-In-Tariff rate (in ringgit/kWh) 0.32 Effective period 16 years Annual degression rate 0.50%

0.30

16 years

0.50%

0.28

16 years

0.50%

+ 0.02

16 years

0.50%

+ 0.01

16 years

0.50%

+ 0.08

16 years

1.80%

Biomass

0.31

16 years

0.50%

0.29

16 years

0.50%

0.27

16 years

0.50%

+ 0.02

16 years

0.50%

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Small hydropower

Additional for use of steam-based electricity generating systems with overall efficiency of above 14% Additional for use of locally manufactured or assembled gasification technology Additional for use of municipal solid waste as fuel source Installed capacity up to and including 10 MW Installed capacity above 10 MW, and up to and including 30 MW Installed capacity up to and including 4 kWp Installed capacity above 4 kWp, and up to and including 24 kWp Installed capacity above 24 kWp, and up to and including 72 kWp Installed capacity above 72 kWp, and up to and including 1 MWp Installed capacity above 1 MWp, and up to and including 10 MWp Installed capacity above 10 MWp, and up to and including 30 MWp

+ 0.01

16 years

0.50%

+ 0.01

16 years

0.50%

+0.10

16 years

1.80%

0.24

21 years

0%

0.23

21 years

0%

Solar • photovoltaic •

1.23

21 years

8.00%

1.20

21 years

8.00%

1.18

21 years

8.00%

1.14

21 years

8.00%

0.95

21 years

8.00%

0.85

21 years

8.00%

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• •

Additional for installation in buildings or building structures Additional for use as building materials Additional for use of locally manufactured or assembled solar photovoltaic modules Additional for use of locally manufactured or assembled solar inverters

+0.26

21 years

8.00%

+0.25 +0.03

21 years 21 years

8.00% 8.00%

+0.01

21 years

8.00%

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14.

Q A

What sort of capacities of renewable energy can we expect once FiT is launched? The cumulative RE Capacity are as shown below: Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Cumulative RE Capacity (MW) Biogas Biomass Solid Waste Small Hydro Solar PV 20 35 50 75 100 125 155 185 215 240 90 140 200 260 330 410 500 600 700 800 20 50 90 140 200 240 280 310 340 360 60 110 170 230 290 350 400 440 470 490 9 20 33 48 65 84 105 129 157 190

Solar PP* 20 55 105 185 295 425 570 725 890 1,060

Total 219 410 648 938 1,280 1,634 2,010 2,389 2,772 3,140

*Note: Solar PV targets reported based on policy measures under NKEA OGE Lab but subject to formal confirmation

The long term targets (cumulative capacities) are shown below: Cumulative RE Capacity (MW) Year Biogas 2020 2030 2040 2050 240 410 410 410 Biomass 800 1,340 1,340 1,340 Solid Waste 360 378 378 378 Small Hydro 490 490 490 490 Solar PV 190 1,370 7,450 18,700 Solar PP* 1,060 3,100 5,000 5,000 Total 3,140 7,088 15,068 26,318

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15.

Q A

What is the impact of CO2 emission avoidance as a result of implementing the FiT? The FiT could, on a cumulative basis, avoid 46 million and 166 million tonnes of CO2 from the power generation sector by 2020 and 2030, respectively. This will be achieved when the country generates at least 3,000 MW and 7,000 MW (see table below) of RE capacities by 2020 and 2030, respectively, through the FiT.

Cumulative RE Capacity (MW) Year Biogas 2020 2030 16. Q 240 410 Biomass 800 1,340 Solid Waste 360 378 Small Hydro 490 490 Solar PV 190 1,370 Solar PP* 1,060 3,100 Total 3,140 7,088

2050 410 1,340 378 490 18,700 5,000 26,318 Currently, under the SREP programme, RE electricity will only be paid based on maximum generating capacity of 10 MW. Will SEDA Malaysia consider a revision of the maximum installed RE capacity? Yes, under the RE Act, the capacity limit (for some RE technologies) will be increased to 30 MW. Will Malaysia cap its capacity of RE once FiT System starts? Yes, Malaysia has to cap the various RE technologies from the very beginning to keep the costs within our projected funding capability once the FiT mechanism starts, and depending on the magnitude and availability of the RE Fund. How much PV capacity can an applicant seek to install and how will the applications be treated? Applicants can apply for any capacity that they wish to install but the capacity that can be approved will depend on the total capacity that is allocated for each of the respective RE technologies concerned. However for PV capacity, there will be two categories of capacities that will be offered; 1) one for installed capacities upto 1MW and 2) for capacities > 1MW upto 30 MW. For solar PV upto 1 MW, the capacities available will be offered equally among residential and commercial. All applications will be treated transparently and on equal basis according to the category of the installation such as residential, commercial, industrial, or power plant type, and whether they are roof or facade mounted, or ground mounted. How shall the biomass industry address the feedstock supply issue? The plantation owner, millers and RE developers are encouraged to work towards an agreeable solution should the investment be financially viable.

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How does SEDA address the issue of contending use of feedstock which leads to price competition between RE developers and other users of the feedstock? Feedstock should expand and include biomass waste which can be converted into energy. The use of waste provides another avenue for RE developers to generate revenue via producing green energy. How does SEDA address the issue of supply security of feedstock, if feedstock should be imported? The definition of RE requires that the feedstock be indigenous in nature. Malaysia will not consider imported feedstock as the principle is to fully utilise the indigenous sources and promote energy autonomy. In addition, Malaysia has a commitment to reduce 40% of GHG emission intensity in the COP 15 and this may not be achievable if we rely on imported fuel sources. If a co-generation plant uses fuel or sources from renewable energy, are they eligible for FiT? Yes. As long as the fuel source is indigenous and there is no fossil fuel sources. The RE Act imposes high penalty for dishonest use of fuel source to generate RE electricity. What if two RE technologies were combined for example, biomass and biogas? For RE systems with varying criteria resulting in varying tariffs, the rule is that the lowest rate will apply for the FiAH connected to a single meter. If an existing FiAH plans to increase its capacity in the following year or any time in future, the lowest rate will apply for the entire total capacity generated based on the rate established for the year of COD for the additional capacity if it is an extension to the earlier application and uses the same meter. In this case, the existing FiAH will have to terminate its previous REPPA and FiA upon receiving the approval of the new FiT rate. If the FiAH wishes to maintain the rates according to the earliest COD application, the FiAH is required to apply for separate meters and sign separate Renewable Energy Power Purchase Agreements (REPPAs).

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How does the Authority know if a person is a genuine applicant and not just intending to book the capacities for the resale market? During submission of application for the FiT, an eligible producer will be required to submit their work plan. Once the Feed-in-Approval is granted, SEDA will monitor closely each project and if any delays were detected, a dedicated time frame will be given to the Feed-in Approval Holder (FiAH) to declare their status failing which, a notice of revocation will be sent to FiAH. This is to prevent the RE developers from abusing the FiT system and to allow other interested parties apply for the FiT. There will also be stringent requirements for successful submission of Feed-in Approval (FiA) where only genuine applicants will be able to furnish the required information. Penalties will be imposed if an applicant is found to falsify any information.

25.

Q

Currently, under the SREP programme, there are many licensees that are not active/ pursuing their RE projects. Is there a possibility for the existing license holders to be revoked once FiT comes into effect? The Ministry and ST have been revisiting the current license holders. Those who are in progress can continue with their licence but those who have not shown any progress, will have their license revoked and will have to re-apply if they are interested to participate in the FiT. Do you allow an internal utilisation of electricity production? Yes. But the distribution licensee will purchase generated RE power based on the net energy exported to the grid* If RE Developers choose to utilise the RE electricity, then they forfeit the opportunities for higher revenue generation which may not make business sense. *Note: PV systems interconnected to the grid (direct feed) will have an FiT based on the gross electricity generated. Is there any limitation to apply for FiT? Limitation based on maximum capacity or number of approvals during the plan period? Limitation is only based on RE technology quota which will be made known via the online system. This limit is due to the RE Fund. How is the FiT programme financed by the Government? The FiT scheme is not financed by the government. Instead it will be financed by the electricity consumers themselves who will contribute an additional one percent (1%) of their total electricity bills through a tariff adjustment formula when the gas price for power generation and the associated utility tariffs are revised in due course. However, those customers who consume 200 units of electricity or less will not have their tariffs raised to accommodate this mechanism to pay towards the fund.

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Q A

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29.

Q A

Malaysians currently pay electricity bills based on a highly subsidized gas pricing. Is it possible to transfer a portion of the subsidy to finance RE projects? It is not possible to transfer a portion of the subsidy to finance RE projects as gas is in actual fact not a direct subsidy by the government but what it means is that the use of gas for electricity generation is at a subsidized rate. This is forgone revenue for the government in terms of taxes as the gas, if sold at market prices, will provide a higher income for the country. What are the measures to ensure funds allocated for the FiT programme is managed appropriately? The management of the fund will be under the supervision of dedicated financial experts appointed by the government (with possibility of secondment from BNM). Other measures include transparency in disclosing and publishing of financial reports on funding receipts, funding disbursement to FiT recipients, administrative fees payable to the utility and to the authority. The accounts of the authority will be presented to Parliament as is required for all such authorities and be subjected to Government Audit. Will the RE fund contribute to R&D for RE? The fund is not for R&D. Under the National RE Policy and Action Plan, the fourth Strategic Thrust addresses the need to strengthen R&D in the RE sector where the Ministry of Science, Technology and Innovation (MOSTI) will spear-head all efforts in this area with strong support from KeTTHA. Contribution to the RE Fund: While the lower income households are exempted from contributing, it appears that the industry (which makes up 40% of utility’s clientele) is the largest contributor to the levy. Is the Government aware of this situation? The Government is aware that the largest contributor to the RE levy is from the industrial sector. For this reason, the impact is only 1% of the electricity tariff where impact to the industry’s cost of manufacturing is minimal. Additionally, the industry may be motivated to offset the incremental electricity cost by applying energy efficiency measure in their factories and perhaps take the opportunity as well to generate RE under the FiT mechanism.

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Q A

How can the Malaysian government prevent energy price distortion with the implementation of feed-in tariffs? Currently, the energy price in Malaysia is already distorted due to the natural gas subsidy for power generation. Furthermore, the cost of electricity generation is not directly passed to consumers whereby the electricity tariff is still regulated. In this respect, the feed-in tariff mechanism provides the opportunity to pass over the cost of RE electricity generation to consumers but at a very minimum value that has almost no impact to the electricity tariff. The design of the Malaysian feed-in tariff system takes into account the type of electricity that the RE electricity will displace, including the associated transmission and distribution costs. For example, electricity from solar energy will displace peak electricity from natural gas, while electricity from biomass will displace medium load from coal. Thus the RE tariff prices are designed to reflect the true cost of electricity generation, transmission and distribution that it will displace. Hence the argument of energy price distortion is invalid. The feed-in tariff in Malaysia is designed with main objective to achieve grid parity once the subsidy for fossil fuel is removed and when all external costs of fossil fuel power generation are taken into consideration.

34.

Q A

I hear many people talk about grid parity. What does it mean and does it have anything to do with us here in Malaysia? Grid parity occurs when the cost of generating renewable electricity is equivalent or cheaper than the cost of generating electricity from conventional fossil fuel or nuclear energy. Yes, even though our electricity is subsidized in Malaysia, grid parity is still valid for us as we will one day reach grid parity for different RE technologies. Is it only the rate at which we reach grid parity that may differ from unsubsidized markets. Those with subsidised energy markets will reach grid parity at a later rate than those without subsidies. Is there a possibility for (retail) electricity tariff to increase beyond the contracted FiT rates before expiry of REPPA? Yes and it is stated in the RE Act. RE developers will be paid the electricity tariff (displaced cost) should displaced cost exceed that of the FIT rate and this will happen once grid-parity is achieved. Is the (retail) electricity tariff subjected to change? Yes, the (retail) electricity tariff is subjected to change and will be reviewed periodically by the government.

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37.

Q A

Could you explain what does “displaced cost of electricity” mean and what does it mean to me? Do I have to deduct this from the indicated FiT rate to get my tariff? Displaced cost of electricity is the cost of generating and supplying electricity from conventional fossil fuel sources up to the point of interconnection with the consumer. It will not affect potential RE developers and NO, you do not have to deduct this from your FiT rates. The displaced cost of electricity has relevance to only the distributor and the Authority where on a monthly basis, the distributor will claim the positive difference between the FiT payment and the displaced cost, for all RE generated power, from the Authority.

38.

Q A

What is a ‘degression’? What does it mean and why is there a need for one? Tariff degression refers to the annual reduction of renewable energy tariffs. The rate of reduction depends on the maturity and the existing cost reduction potential. Tariff degression applies to all technologies and will only affect a developer every time he/she comes applies for the FiT. For example, a home owner (A) installs a Solar PV system in year 1 and signs an agreement with TNB at an FiT rate of RM1.75 per kWh. Home owner (A) will continue to receive this rate throughout his/her agreement duration of 21 yrs. A year after home owner (A) installs the system, his/her neighbour, (B) decides to install a PV system in his/her home too. By year 2 the FiT rate has now reduced by 8% to RM1.61 per kWh. Therefore, home owner (B) will now have a 21-year contract with the TNB selling their PV electricity at RM1.61 per kWh. This form of degression rewards the early movers of RE in the country and also promotes cost reduction of the RE technology.

39.

Q A

How do you derive the degression rate? The degression rate is derived based on observation of historical market performance and as such, the rate is an empirically derived. Degression rate for each technology is based on its potential for future price decline and to prevent market abuse of over pricing and takes into account the status of the RE technology, the system cost trends, O&M costs, needs for fuel cost/transport, inflation, and the starting rates of FiT as well as balancing of the RE Fund. From the RE fund management perspective, the higher degression will imply higher RE capacity for FiT and allows prudent use of public fund. Based on the projection, the system price of solar is predicted to go down. But this is depending on market forces. What if the price goes up? Is the degression still applicable? These are the dynamics of the market which will have to match both government’s as well as the industry’s perspectives.

40.

Q A

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41.

Q A

Will my FiT rate within the REPPA contract degress in subsequent years? No, your FiT rate within REPPA is confirmed for the next 16 or 21 years depending on the RE technology applied for. The rate is fixed until such time as the displaced cost of electricity exceeds the FiT rate. This is to provide some form of security for your investment. The main objective of the degression is to encourage reduction in cost and increase in efficiency as well as to achieve grid parity at a faster rate. As FiT rate is based on COD, if I install my solar PV system today but I can’t commission my system within this year, what rate will I get? You will get the rate of that year minus the degression for that particular year. If I commission my PV system in 2011. What rates will I get? If FiT commences in 2011 you will get this maximum tariff. Then on 1st January of the subsequent year, the rates will degress by 8% for new applications. Interested parties are advised to refer to SEDA’s website for the applicable FiT rates. What is the cycle for the development of a biomass/ biogas plant? What if we apply for 2011 but, the plant will only be in operation in 2012? When you apply for the FiT, you need to be realistic in forecasting your COD. Most of these projects should be able to commission within 36 months but biogas plant development is faster than that which is around 24 months. How can we ascertain the COD (commercial operation date) since it depends on the utility’s availability? How can SEDA facilitate this, as any delay in commissioning will affect FiT rates as the rate degresses in the subsequent year? Under the RE Law, the distributor is obligated to interconnect and to purchase RE generated power, failing which a penalty will be imposed. Specific time-frames will be set for all parties involved and client charters will be established. Registered Service Providers (RSP)/contractors and FiAH are however reminded to set realistic targeted dates for COD. On solar PV technology, what is the definition for ‘installation in building’ or ‘building structure’? What does building material mean? ‘Installation in building or building structure’ shall mean roofed building structures which can be independently used and entered by humans and are primarily designed for the purpose of protecting humans, animals or objects whereas ‘building material’ means there must be no secondary building material beneath the solar PV serving the same function.

42.

Q A

43.

Q A

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Q A

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Q

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46.

Q A

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47.

Q A

Which tariff will apply for normal houses with existing roofs which are then installed with a PV system on it? If you install on top of an existing roof, you will be entitled for a tariff for ‘building structure’ but you will not be eligible for the bonus under ‘building material’. Unless, the PV itself is part of the roof (remove the roof tiles and replace with PV modules) then you are entitled for both ‘building structure’ as well as for ‘building material’. When will application be opened to the public? There will be announcements by KeTTHA on when the FiT will commence. How can I apply for the FiT? Application can be made either via the online portal (recommended) or through manual submission. Detailed application guidelines will be made available once the FiT is officially launched. Where can I apply? Application forms will be made available on the authority’s website but hardcopies will be made available at the authority’s office. There are future plans to make applications webbased hence you can apply from anywhere as long as you have a computer and internet access. Is there a number I can call to find out more? Yes, there will be a hotline number for the public to call but this is chargeable at standard telecommunication rates. The number will be announced closer to the time of the launch of the FiT. What I understand the renewable energy fund for FiT is based on “polluters to pay concept” so high volume consumers will get preference over smaller consumers? High volume consumers would pay about 1% which translates to a higher actual amount. But there are no preferential treatments for FiT applications.

48.

Q A

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53.

Q

Can you share with me the expectations of SEDA Malaysia for application in terms of information required? The following information must be furnished by the FiAH to SEDA Malaysia at the point of application including, but not limited to: The location of the facilities; The generating capacities & potential energy yields; The connection of such facilities to transmission systems and distribution systems, including technical specifications with respect to the connection; • The expected COD of the generating facility; • Information of applicant (Individual/company); • Information of consultant (Registered Service Providers/ other consultants); • Project description, • Technical specifications; • Fuel requirement; • Design & Operation Standards; • Project Financing Plan; • Possible source of financing (IRR, equity, loan rates, etc); • Work plan; other supporting technical documentations (equipment, machinery, licence, REPPA requirements and etc). *Note: This is not the final requirement and may include other necessary documentation at the point of time when FiT is launched. • • •

A

54.

Q A

How about guidelines for applications? Will there be any guidelines available for potential developers? Yes, guidelines will be made available for easy reference but this will be web-based and downloadable before the launch of the FiT. Please check KeTTHA’s website for updates on the availability of the guidebooks. Our company is keen to have a PV system at our manufacturing plant. What steps must we take? Please refer to Annex 1 Why do RE developers need a Registered Service Provider to act on their behalf? The choice is up to the individuals. They can do it themselves or may appoint their own consultants/RSPs to act on their behalf as application requires extensive technical input.

55

Q A

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57.

Q A

Does the project owner (RE developer) have to register with SEDA? The RE developer can engage any Registered Service Provider or may appoint their own consultants to act on his/her behalf. But both the RSP/consultants and the RE developer are jointly responsible for the project. In the case of two Registered Service Providers (RSPs) whereby I have authorised RSP A to act on my behalf and RSP B discovered about my project and hijacked by registering my project account. This means RSP A will not be able to proceed with me? No, you will still be able to proceed with RSP A as there is a stringent filtering process. First of all, you, as the client (RE Developer) will have to give consent to the Registered Service Provider and preferably have signed an agreement before the FiT application is lodged. Each submission of FiT application requires a processing fee and the RSP will have to obtain prior permission from you in order to proceed. Once the FiT application is lodged, you will be given a password to access the application portal to verify the details submitted by the appointed RSP. RSPs will not be able to hijack accounts as they will not be able to proceed without the consent of the client. What if I am a current SREP developer with an existing plant in operation? Can I apply for the FiT? Yes, you will be eligible for the FiT but you will need to re-apply for the FiT and re-sign a new REPPA You must also terminate your existing REPPA signed under the SREP programme. However your license period will be adjusted accordingly taking into account the number of years your plant had generated electricity for commercial sale to the distribution licensee. Will individuals get incentives or allowance for installation of related devices? How is government going to regulate this? The incentive for individuals to install for example a solar PV system in their homes is the FiT itself. For other incentives, the government has been very supportive of RE generation by providing fiscal incentives in the yearly budget. However fiscal incentives are available for companies while the third party exemption on equipment such as solar PV systems and solar heating, although not provided directly to individuals but to distributors or importers, provides for a reduction in the system price via exemption of sales tax or import duty. The Sustainable Energy Development Authority, which is a statutory body under the Ministry of Energy, Green Technology and Water, will be established under the Act of Parliament to oversee the implementation of the FiT.

58.

Q

A

59.

Q A

60.

Q

A

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61.

Q A

I have received grants as capital investment to construct a biogas plant. Will I still be eligible for FiT? All potential developers will have to declare all incentives received when filing the online application and eligibility for FiTs for those with existing incentives such as capital grants will be reviewed on a case by case basis. Would the other government fiscal incentives (such as those announced under Budget 2008 & 2009 – double tax allowances, waiver of import duty & sales tax) still be applicable for Feed-in Approval Holder? Yes, those fiscal incentives will still be applicable for Feed-in Approval Holders For Double Tax Relief (DTR), if a commercial entity applies to MIDA this year but commissions the solar PV system middle of next year (new building) would they be awarded the tax exemption? The fiscal incentives (ITA) or DTR as you call it, is currently applicable for all applications made before 31st December 2015. Successful applicants are given a 1 year period for the implementation of the project. Hence if your application is submitted before that date you can implement the project later but within the allowed time frame. Would the other government fiscal incentives (such as those announced under Budget 2008 & 2009 – double tax allowances, waiver of import duty & sales tax) still be applicable for Feed-in Approval Holder (FiAH)? Yes, government fiscal incentives such as claims on investment tax allowance and waiver of import duty and sales tax will still be applicable for FiAH. Those fiscal incentives will continue till 31 December 2012 as presented by Y.B Prime Minister in the National Budget Speech for the year 2011 while the fiscal benefits for GBI certified buildings will continue till 31 December 2014. If an RE developer were to set up the infrastructure and procurement for solar PV power plant this year, and the solar farm is commissioned middle of next year, would they still be eligible for double tax relief (application for ITA to be submitted this year 2010)? Under the present incentives regime, you should be eligible for the ITA incentives for setting up a solar PV farm, as mentioned for Q64 above. However, for it to be eligible for FiT, this issue needs some further clarification which we cannot confirm at present. The relevant criteria and other conditions for such investments will be put up on our MBIPV web-site once the details have been finalized in accordance with the conditions imposed under the RE Act.

62.

Q

A 63. Q

A

Q 64.

A

65.

Q

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66.

Q A

I do not wish to have the FiT but I am an existing SREP developer. Is this ok? Yes, you may proceed with your current REPPA. Am I still eligible for the FiT if I am a SURIA 1000 incentives recipient? Do I need to do anything or will my system migrate automatically into a FiT based system? Yes, you will still be eligible for FiT but no, migration is not automatic. You will need to apply for the FiT. Detailed information on the application procedures will be published once the FiT is launched. I understand that for me to be eligible for the FiT, I will need to re-apply for it even though I am already having a net-metering account with TNB for my solar PV installation. How do I do this? You can either apply yourself via our online application or engage any RSP/consultants to do it on your behalf. However, if RSP/consultants applied on your behalf, he/she will impose a service charge. Will existing players be given first priority for FiT? No, when FiT is launched, it will be open to all on a fair basis hence existing players will need to submit their applications just like any other potential FiAH. However, existing players will be able to provide earlier COD dates as all documentation required by the authority would have been prepared and ready for submission. Also as the RE installations are already in place, COD can take place much faster than any new plants coming on stream. I am a foreign investor and am interested to apply for the FiT. Am I eligible? What are the requirements for foreigners? Yes, you are eligible but the foreign equity shareholding is capped at a maximum rate of 49%. Why can’t the foreign equity be 100%? In the National RE policy & Action Plan it is clearly stated that the FiT is to encourage and develop the local industry. Foreign company can participate but equity shareholding is limited. Can the utility/distribution licensee participate in FiT? Yes but the equity shareholding is capped at a maximum rate of 49% if it is in its area of jurisdiction. Can the State Government and agencies participate in FiT? Yes. State Government can participate in FiT but it must be through a company. Off-grid for rural electrification – Can they be entitled for FiT? If the community is serviced by a distribution licensee, then they are eligible for the FiT.

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75.

Q A

My company is located in an area where NUR (Northern Utility) is the distributor. Will I be eligible for the FiT? Yes, you are eligible for FiT. Details on application requirements for potential RE developers in this segment will be available before the FiT is launched. Are CDM projects eligible to apply for FiT? We have not restricted the eligibility of FiT approval holders who apply for CDM but eligibility and approval for CDM will ultimately depend on UNFCCC (to be applied by the developers themselves and separate from the FiT mechanism). How will I know if I am successful in my FiT application? You will be notified via written notice/email by SEDA Malaysia if you are successful or otherwise. How long does it take for the application to be processed? Assuming all documents are submitted in order, applicants can expect notification within 2-4 weeks. I have received a notification from SEDA Malaysia stating I have been successful in my application. What next? Please refer to Annex 1. You mentioned TNB & ST licensing. What kind of licensing is this? Is it licensing for solar power generation or licensing to sell power back to the grid? All power generators above a specified capacity must have power generation license from ST. For PV power generation license fees, at RM 1.5 per kW of generation capacity, are payable for capacities of over 24 kW (for 1 phase) and above 72 kW (for 3 phase) power generation capacity. I have submitted my license application to ST. How long does it take for them to process it and how will I know if my submission was accepted? Client charters are currently being established for the FiT mechanism and will be made known to applicants once finalised (before the launch of the FiT) What should I expect when FiT starts if my house has a PV system and I am a successful FiT applicant? At the end of the month, your meters will be read (TNB meter and PV meter) by the distribution licensee and you will be given a bill on your energy use and an invoice on the energy you produced. You will have to pay the amount due to TNB for the electricity consumed while TNB will pay you for your PV generated energy. Mode of payment from TNB will be outlined once FiT is launched.

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83.

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What is a REPPA and how do I obtain it? REPPA stands for the Renewable Energy Power Purchase Agreement which is a legal contract between the potential RE developer (FiAH) and the distribution licensee (eg.TNB, SESB, etc.). Potential RE developers will be able to download a standard REPPA from the FiT website in future as KeTTHA is currently in the midst of preparing standardised REPPAs. Will the standard REPPA form indicate the effective period? Upon receiving an FiA, SEDA’s system will allocate the tariff and the duration for the tariff to be paid to the owner. ST as a regulator will issue a public license to generate electricity for a maximum period of 21 years (solar PV). For 16 years REPPA, the license will be 16 years. If the RE sources are different, are the REPPAs going to be the same? REPPA is dependent upon on the RE technology and installed capacity. What happens when my REPPA under this FiT scheme expires? You have the option of reapplying the FiT (if it is still available and have not reached gridparity). What happens if I decide to shift or sell my house? Can the signed REPPA and FiA be transferred the new owners? The FiA shall not assign, transfer, sublet or otherwise dispose of its rights, duties, liabilities, obligations and privileges or part thereof under the conditions of FIA. However for household solar PV systems, the standard REPPA for solar households & buildings allows the REPPA to be novated / transferred to the new registered owner of the house/building where the new owner of the house can continue with the rates established by the first FiAH. The term “novate” legally means to allow a new party to step into the shoes of the old party without requiring a new agreement. Is TNB supportive of this initiative? Will they take up my generated power from renewable resources? Yes, TNB is supportive of the Government’s initiative and yes, they will take up all generated power from renewable resources. What if the distributor (TNB/SESB) refuses to purchase all of my RE power? Under the new Renewable Energy Policy, the Renewable Energy Act obliges the distributor to interconnect and purchase all RE generated power failing which a penalty will be imposed on the distributor. You have mentioned that the distributor has given a written confirmation to support the FIT and agreed to enter into a new REPPA upon the launching of FIT. Can the distributor refuse to terminate the existing REPPA upon the launching of the FIT? Yes, but very unlikely. In any case, KeTTHA/SEDA can intervene.

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Who bears the cost for interconnection for FiT? The potential RE developer will have to bear the cost of interconnection but the distribution licensee will bear the cost to upgrade the network (if necessary). Who will bear the costs of interconnection if I were to develop a solar farm in a developing area where there is no substation provided? The RE developer (i.e. owner) will have to bear all costs (including cost for power system studies, if necessary) up to the point of interconnection. Therefore, you have to find the nearest interconnection point with distributor and conduct proper financial evaluation before submitting your FiT application. The distribution licensee will be responsible for reinforcing the network (if required). Will there be a requirement for Power System Studies (PSS)? Power System studies will be required for RE plants that are connected to Medium Voltage (MV) and above. For RE systems connected to Low Voltage (LV), safety requirement for interconnection will be as prescribed by the regulator (ST) to ensure safe supply of electricity. SEDA will provide the necessary guidelines for the PSS as reference for FiAHs. I heard there will be a minimum energy performance clause for FiAH when FiT starts. Is this true? What does this mean? Yes, this is true. This means that FiAH must guarantee security of supply for TNB/SESB at 80% of their declared energy yield based on an average annual output. FiAH who fail to comply will be slapped with a penalty by the Authority. This performance clause is however exempted for small systems (installed capacities 10 MW and below). Is the state authority obliged to give automatic approval once SEDA has given conditional approval for the FiT application? Will the Federal Government relax rules on this as the developers have to bear the additional cost? RE Act is a general legislation, thus the Federal Government has no jurisdiction on any issues pertaining to the State. However SEDA which has a role as one stop centre can liaise between RE developer and State Government to expedite the process. What happens if the state authority declines the application when I have invested in the project? In the FiT application, the applicant must submit the status / provide information on local authority requirements. Applicants are required to do preliminary enquiries on the situation/status before submitting the applications for FiT. However, SEDA will also look into this matter to expedite the process. Is FiT income considered as taxable income? Yes, it is and any exemptions would entail a policy decision from the government. KeTTHA will monitor progress of RE growth in the country and conduct necessary analysis wrt this matter before putting forth any policy recommendations in this respect.

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98.

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Will there be any special bank financing available for capital investment for individual/company? If so, please provide the details. Yes there will be special bank financing available, details for financing RE capital investment will be made available in the near future on the Authority’s web portal. However, prospective applicants can choose to use their own current banks to finance their investment in RE projects under the FiT regime. Why has Malaysia chosen the FiT? Are there any other countries with the FiT system? Malaysia has chosen the FiT because over significant number of years, the FiT has proven to be powerful and efficient in developing new markets for RE. The concept of FiT is simple and has low administrative costs making it a highly effective tool for boosting RE. As an example, Germany is the first country which successfully implemented the feed-in tariff under their German Renewable Energy Sources Act 2000. In ten years of FiT implementation alone, Germany has been able to increase their RE capacity substantially making them the world leader in RE with an RE contribution of 16.1% to their total electricity consumption in 2009 which created 300,000 green jobs. Germany also has not only developed the most dynamic solar PV electricity market but also a flourishing and robust PV industry as a result of the FiT and all this for a country that is not one of the sunniest in the world. Many other countries have also implemented the FiT. As of 2009, FiT policies have been enacted in many countries including most of Europe. 63 jurisdictions around the world, including in Australia, Brazil, China, Greece, Iran, Israel, the Republic of Korea, South Africa, Taiwan and in some states in the United States. It is gaining momentum in other countries such as India and Mongolia. In South East Asia, Thailand and Philippines have also implemented the FiT mechanism.

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Why does Malaysia not introduce the ‘green certificate’ like some countries in Europe which is found to be more successful? Is there any plan to establish green certificate scheme? Malaysia has decided not to confuse the market at this point of time. There’s no mechanism for green certificate unless we refer to CDM projects through CER. The Ministry has carried out extensive studies on the various schemes to catalyse development of RE in Malaysia and the outcome is that the FiT mechanism is best suited to catalyse grid-connected RE generation in the country. There will be an estimated 50, 000 RE jobs created as a result of the FiT implementation. What type of labour force will these RE jobs constitute? Will they be high-value jobs or lower value labour force? A majority of the estimated 50,000 RE jobs created will be high value ones that essentially provides professional services such as the design, supply and service of RE systems.

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Q 102. A

Would there be some mechanism for prospective owners of larger systems to make unsolicited bids to the government to offer solar energy at prices at or close to the FIT rate? No, all FiT applications would be treated equally through a transparent application process with an anticipated online application mechanism in place to ensure fair processing of applications. (*Note: The online application is expected to come online by end of Q3 2011). Will there be any precedence given to rooftop systems during what I understand will be quarterly applications and allocations based on funds? All parties can propose whatever system they like, but to comply with the FiT application requirements which would be available via online system (by August 2011). Is there any capacity limitation for building, campus, sites? No limit for building types. But there will be quota for each RE technology/resources due to RE Fund limitation. Do we need to engage with the ministry, government agencies and utilities companies to set up the structure for our project implementation? No, you do not need to engage with the named parties. But you still need to comply with any approval requirements (if any, and where necessary). The star quoted an example of solar PV systems earning RM696 a month from a 4KW solar installation. How did you to calculate this figure? Under the proposed RE Act, the RE power system can enjoy the feed-in tariff rate. The Star may have quoted an example of a solar PV system, but there are also FiT incentives for biomass, biogas, and small-hydro. For simplicity: A 4 kWp solar BIPV = RM60,000 (capex) And will generate = 400 kWh (yield per month) x 1.74 (FiT rate for 4 kW with BIPV) = RM696 per month (payment received from TNB) Investment = 10% down payment + 90% bank loan at 6% for 15 years = RM6,000 + [RM456 (per month) x 15 years] Key points: • • • • Not everybody has a RM60,000 cash to invest in a bank But many people has a home (with a roof) Thus, with only RM6,000 initial investment, the person can create secondary income of RM240 per month for 15 years, and RM696 per month for another 6 years. Thus, the roof can provide a shelter and also a cash to the person, and off-set CO2 from fossil fuel (1kWh = 0.7kg CO2). 23 | P a g e

Q 103. A Q 104. A Q 105. A Q 106. A

Annex 1: Feed-in Tariff Application Workflow

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Disclaimer: The answers to the above FAQ are given within the context of the RE. Ministry of Energy, Green Technology and Water has compiled this in good faith and information above may change without prior notice. 25 | P a g e