Sun shines on a few in solar power industry

Last week, the public had to endure yet another spectacle of senior government officials admitting to being helpless to regulate affairs under their purview.

At a public hearing held by the Sustainable Energy Development Authority (SEDA) last Wednesday, CEO Badriyah Abdul Malek said the agency had no legal basis to reject applications for solar photovoltaic (PV) power generation quotas that it had awarded to "certain personalities".

Apparently, SEDA's lawyers had advised the authority that rejecting the approvals would open it to litigation, Badriyah said.

The issue had been raised by DAP publicity chief Tony Pua,who had accused SEDA of allowing a monopoly to take place through its Feed-in Tariff (FiT) system as 45.9% of the allocation had been awarded to 12 companies owned by Suzi Suliana Mohd Sidek and her business partners through various holding companies and joint ventures.

Suzi is the daughter of former chief secretary to the government Tan Sri Mohd Sidek Hassan, who is now the chairman of Petronas.

To add spice to the mix, SEDA chairman Tan Sri Dr Fong Chan Onn told the hearing:" Vou really think we don't want to revoke those ... we are unhappy but the lawyers keep telling us we cannot..." The explanation reeks of the "oh, silly me" variety of official responses that have been made to a long list of questionable executive actions going back for many years. To name a few, they include the approval of the Lynas rare earths processing plant in Kuantan without evaluating its long-term waste disposal plan, the execution of the Bakun dam project before ensuring that the massive electricity supply that would be generated would be taken up and the award of the crooked bridge project in Johor before obtaining Singapore's agreement on the project. A more methodical listing would surely confirm that the malaise has reached an endemic scale.

A closer look at developments in the renewable energy sector will surely enough bring home this view.

A curious thing happened when bidding was opened for the solar PV feed-in approvals after midnight on Nov 30 last year.According to an avid industry observer, the SEDA website crashed minutes after applications were accepted. When connectivity was restored some two hours later, the allocation for solar PV plants for the next three years had been taken up.

According to SEDA, some 20 solar PV projects ranging from Imw to 5mw have been approved. It is not surprising that the quota for solar PV plants was snapped up instantaneously by companies as the demand was very high in comparison to the available quota, there was a high premium for the power generated and also because earnings are guaranteed by law over 21 years. Under the Renewable Energy (RE) Act 20ll,Tenaga Nasional Bhd will pay from 95 sen to a maximum of RMl.50/kWh of energy produced from solar farms.

There are several issues of concern in this regard that indicate that the costs and benefits of the RE sector are not being well distributed.

The RE Act 2011 sets down a fixed annual quota for the various categories of renewable energy. As stated on the SEDA portal, the quotas have been taken up until the first half of 2015, with only a minimal capacity available in the solar PV category for individuals for the second half of 2013 and the first half of 2014. It is mystifying that the quotas have been awarded in advance as this reduces the opportunity for a fair distribution of FiT approvals, which is an avowed aim of SEDA. It is understood that the allocations had earlier been planned to be made at half-yearly intervals.

Interestingly, the Economic Transformation Programme (ETP) Roadmap notes that solar power plants are expected to become economically viable by 2017 or 2018 as capital costs are reduced and subject to other relevant variables such as the price of gas.

It is significant that there is no mention of solar PV power plants in the RE Act 2011.These came CONTINUES ON PAGE SS Other forms of RE neglected

FROM PAGE 62 along with the ETP, under Entry Point Project 10 on the oil, Gas and Energy sectors. Furthermore, there was no mention of a FiT for independent power producers (IPPs) in the ETP. So it is relevant to ask when the plan changed and for what reasons.

On the issue of the price of gas, the lessons from the lopsided contracts won by the IPPs make for a cautionary tale.The advantaged position of the IPPs because of the fuel-cost-pass-through mechanism has been the subject of much public debate. Although little information is available on the terms of these contracts, the fuel-costpass-through mechanism, combined with their high selling prices to Tenaga, clearly impose high costs on the nation through the opportunity cost of lost revenue to the public coffers. Petronas pays between RM18 billion and RM20 billion to keep the gas price for end-users in Malaysia the lowest in Southeast Asia.

It is also intriguing that SEDA has focused on solar PV plants to the neglect of other forms of renewable energy, such as biogas, biomass and small hydro schemes. Furthermore, the high FiT rate for solar PV at RMl.46/kWH, compared with biogas at RM0.34/kWH,biomass at RM0.33/kWH and small hydro at RM0.24/kWH, clearly invites scrutiny.

For comparison, it is instructive to note that solar PV plants in Thailand were able to achieve a return on investment of around 18% with a FiT of 26.3 US cents/kWH before the tariff was reduced last year to 21.3 US cents/kWH.

Another bone of contention is the claim that solar PV plants contribute to the nation's energy security. The yield for PV electricity is estimated at about 25% of that generated by other forms of RE. Therefore, there is little justification for SEDA's inordinate emphasis on solar PV, aided by an exorbitant FiT.

Information from the Ministry of Energy, Green Technology and Water shows that some RM300 million is collected from energy consumers annually at current tariff rates. This amount is meant for all forms of RE.

So far, unfortunately, the rollout of the RE road map appears to be benefiting a small number of businesses in a replay of the lopsided power purchase agreements of the 1990s. Only this time, ordinary consumers are being senselessly taxed for it.B R B Bhattacharjee is associate editor at The Edge

Resource: The Edge, Page: 62
Date: Monday, 30 July 2012

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