Malaysia Adopts German Solar Technology Model
GERMANY is the poster child for Feed-in-Tariff (FiT) success in promoting renewable energy (RE). The country’s Renewable Energy Law which was passed in 2004 led to a massive growth in solar and wind energy, making the country a global leader in green technology. It currently has the largest solar photovoltaic (PV) capacity in the world.
Malaysia’s FiT is based on the German model but comes with a quota system for each RE technology. The quota is also to ensure there is enough money to pay for RE purchases by Tenaga Nasional Bhd (TNB) to avoid the pitfalls other European countries have experienced. TNB customers in Peninsular Malaysia will have to pay a levy of 1% out of their total electricity bills starting this month to facilitate the FiT.
“For households, if their bill averages RM300 to RM400 a month, they should be prepared to pay an additional levy of RM3 to RM4 a month from this month. There is a price to be paid for cleaner air and the public and community must share in undertaking this responsibility,” says Sustainable Energy Development Authority (Seda) board member Pola Singh,
He says heavy industrial consumers such as the steel and cement industries may feel the “pinch” but they should regard the extra payment as part of their corporate social responsibility.
“Hopefully this will cause them to lower their consumption by being more energy-efficient. At the same time, they can be innovative by setting up solar panel systems on their roof tops and on unused land to export’ green electricity to the national grid operator,” he says.
According to Seda, Malaysia has chosen the FiT System because the FiT introduced in other countries has “proven to be effective and efficient” in developing new markets. The concept of FiT is simple and has low administrative costs making it a highly effective tool for boosting RE.
“Germany is the first country which has successfully implemented FiT. It is notable that in the first 10 years of implementing FiT, Germany has been able to increase its RE substantially, making it the world leader in RE with a contribution of 16.1% to total electricity consumption in 2009.
“This has also created 300,000 green jobs. Furthermore, Germany 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 this is truly a remarkable feat for a country that is not one of the sunniest in the world,” Seda says.
FiT is currently the world’s most popular RE policy mechanism. FiT offer a guaranteed purchase agreement for electricity generated from RE sources and these agreements are generally for the long-term, some up to 20 years.
“We are fortunate that our RE development framework is based on insights gained from the experience of various countries both developed and developing. For instance we chose the FiT system instead of other RE policies such as Renewable Portfolio Standards, Renewable Energy Standards and net metering as it is the best given our local conditions,” says Pola Singh.
He says the guaranteed tariff in the FiT lowers the risk of RE investment and therefore reduces the cost of capital investments.
According to a recent report by Renewables 2011 Global Status Report by REN21, more than 80 jurisdictions around the world now use or have used FiT to pay for new renewable generation. However, each country has a slightly different FiT and the more well known examples of FiT is in developed countries such as Germany and France.
REN21 (Renewable Energy Policy Network for the 21st Century) convenes international multi-stakeholder leaders to enable a rapid global transition to renewable energy. REN21 promotes renewable energy to meet the needs of both industrialised and developing countries that are driven by climate change, energy security, development and poverty alleviation.
According to the report, FiT now dominates policy for renewable energy worldwide. There is 60% more jurisdictions (states, provinces, and entire countries) using feed-in tariffs than are now using quota systems.
Energy, Green Technology and Water Minister Datuk Seri Peter Chin says the RE policies continue to be a driving force behind the increasing shares of RE around the world.
“Nearly 200 countries have RE policy targets or support policies, and the FiT remains the most widely implemented policy tool because more than 90 jurisdictions around the world now use or have used FiTs to pay for renewable power generation,” he says.
As more and more RE policies are adopted in various countries, the landscape of RE use is also changing.
Although RE policies started largely in Europe and the United States, a report by UNEP, Global Trends in Renewable Energy Investment 2011, states that developing countries collectively have more than half of global renewable power capacity.
Chin says one of the hallmarks of a sound RE policy is the ability of the policy to create new industries and generate new jobs. Globally, there are more than 3.5 million direct jobs in the RE industries.
The European Union alone has more than 400,000 people employed in the RE sector. Total investment in RE reached US$211bil in 2010, up from US$160bil in 2009, and is still experiencing a steady annual increase.
As of 2009, FiT policies have been enacted in many countries including Australia, Brazil, China, Greece, Iran, Israel, South Korea, South Africa, Taiwan, most countries in Europe and in some states in the United States. It is also gaining momentum in other countries such as India and Mongolia. In South-East Asia, Thailand and Philippines have also implemented a FiT mechanism.
First Solar Malaysia senior director of public affairs for Asia-Pacific Ahmad Hadri Haris says 2011 has seen annual installation of RE around the world surpassed that of fossil fuel.
“This clearly indicates that RE is gaining significant momentum and will contribute to energy mix in many countries. The leading country in terms of RE deployment is Germany, due to the innovative and sustainable FiT scheme. Other countries are following the examples set by the country,” he says.
Germany’s FiT has been a huge success and is often regarded as the best example of an effective FiT. Germany’s Feed-in Law underwent a major restructuring in 2000, being re-framed as the Act on Granting Priority to Renewable Energy Sources. In its new form, it has proved to be the world’s most effective policy framework at accelerating the deployment of RE technologies.
Germany was the first European country to adopt a FiT programme in the early 90s, with a tariff based on a percentage of the retail rate of electricity.
Denmark and Spain implemented their versions of this model later on. However, the tariff did not account for fluctuating electricity costs, and many investors were not comfortable with the resulting uncertainty.
In 2000, Germany and Denmark altered their FiTs to cost-based models, in which rates are set based on the cost of generation plus a reasonable rate of return. These governments mandated grid access for renewable energy, guaranteed payments for 20 years, and offered differentiated rates based on technology, project size, resource intensity, and application.
Many countries, including Spain and France, have since adopted this model. These changes were the catalyst for the dramatic renewable energy growth witnessed by Europe, particularly Germany and Spain, over the past decade.
With Germany leading the clean energy race for the future, it is still too early to say whether other countries will follow in its footsteps and emulate what Germany has done, amidst rapidly depleting fossil fuels.