The Energy Regulation and Markets Review - Stikeman Elliott

Malaysia
Any person who wants to generate renewable energy must first obtain approval from
SEDA. The maximum permitted generating capacity for each renewable energy
installation is no more than 30MW unless the government approves otherwise.
Under the Renewable Energy Act, only the following renewable resources are
recognised, namely biogas, biomass, small hydropower (not exceeding 30MW) and solar
photovoltaic. As such, other renewable resources such as those from wind or wave farms
are currently not covered by the current feed-in tariff system.
The Renewable Energy Act provides a standard form of renewable power purchase
agreement which is to be entered by the parties as prescribed by SEDA. It also sets out
the terms of priority purchased which puts an obligation on the distribution licensee
to purchase renewable energy in priority of other non-renewable sources of energy. The
only exception to this rule is when SEDA grants an exemption on the ground of public
and private safety.
The feed-in tariff mechanism under the Act provides various tariff rates and
periods for different renewable resources. The tariff mechanism also takes into account
different technologies and materials used by providing differing rates. It is to be noted
that there are also provisions for a fixed annual regression rate of the feed-in-tariff rate.
SEDA has further a right to review and revise the regression rate every three years;
however, the Renewable Energy Act provides that such review must take into account,
inter alia, the ability of feed-in tariff approval holders to recover their initial cost and to
achieve satisfactory returns within a reasonable time scale.
In addition to the foregoing, the Renewable Energy Act further provides provisions
for technical and operational requirements. Assignment and transfer of feed-in tariff
approvals can only be made upon obtaining approval of SEDA.
VI
THE YEAR IN REVIEW
The past year has seen a flurry of major developments and activities in the energy industry
in Malaysia. Three major power purchase agreements with a total combined nominal
capacity of 4,400MW have been executed or awarded in the past year. Unlike in previous
years, the Energy Commission awarded the last two power projects on a tender basis.
The past year also saw a major structural change in the energy industry with the passing
of a new law on renewable energy and the setting up of a new independent commission
on renewable energy. This trend is expected to continue with more power projects being
introduced to replace the decommissioned first batch of power plants. In the renewable
energy sector, more projects are expected to be awarded to meet the goal for a more
sustainable electricity supply.
The past year has also seen the curtailment of gas supplied to gas-fired plants.
Petronas has been the sole supplier of gas for the gas-fired plants and is facing a depleting
supply of gas sourced locally. As such, it has built a major gas regasification plant to
overcome the demand but is using imported gas. For the past few decades, Petronas
has subsidised the price of gas supplied to the energy industry; however, with gas being
imported, it no longer wishes to subsidise the cost. This issue became the focus at the
end of 2011.
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