The prices are based mostly on the bottom public sale charges submitted by bidders for the Malaysian authorities’s Giant Scale Photo voltaic (LSS) programme, a aggressive bidding initiative aimed toward driving down the levelised price of vitality for big scale solar energy since 2016.
Ember discovered that the bottom public sale charges for LSS programmes have fallen 64 per cent from US$0.082 in 2016 to $0.029 in 2021, in the course of the fourth iteration of the programme (LSS4). The fifth spherical of the LSS bidding course of was opened in April this yr for packages totalling greater than 2,000 megawatts.
“These prices symbolize the worth at which electrical energy is offered upon mission commissioning, with tasks from auctions held between 2016 and 2021 beginning to generate electrical energy from 2017 to 2023,” stated Ember’s Southeast Asia electrical energy coverage analysts Dr Dinita Setyawati and Shabrina Nadhila, who co-authored the report.
The pattern aligns with the worldwide decline within the prices of photo voltaic technology, which in keeping with the Worldwide Renewable Vitality Company fell 55 per cent over the identical interval, the report stated.
“Photo voltaic technology prices [in Malaysia] have reached parity since 2021 and have continued reducing, whereas fossil gasoline technology prices fluctuated over time. The shift of fossil fuels may doubtlessly cut back the electrical energy tariff for non-domestic prospects by 38 per cent in 2023, cheaper than the precise electrical energy tariff utilized after the surcharge ($0.089 USD per kilowatt-hour).
It is very important think about, nevertheless, that the prices calculated by Ember didn’t embody the investments wanted for grid upgrades to accommodate extra solar energy, which may have an effect on how the electrical energy tariff charge is calculated, stated the report’s authors.
“It is usually price noting that the bid costs from aggressive photo voltaic auctions in Peninsular Malaysia may be decrease than the levelised prices of electrical energy, demonstrating a problem when evaluating each costs,” Ember’s report stated.
“Regardless of the discrepancies, utilizing these tender-determined costs as a benchmark to see photo voltaic value traits in Malaysia is a helpful indication that the federal government ought to think about prioritising photo voltaic tasks within the coming years.”
Decrease returns than fossil fuels
Nonetheless, the low charges submitted by bidders haven’t all the time translated into profitable photo voltaic tasks, Malaysian media reported in April. Underneath the LSS4 programme, low bids didn’t account for the eventual improve in materials and tools prices, overseas alternate fluctuations and better rates of interest, resulting in mission delays.
Such programmes have usually attracted firms which might be searching for a gradual, long-term supply of revenue, stated Yin Shao Loong, deputy director at Malaysian assume tank Khazanah Analysis Institute, however added that not all firms and financiers approached tasks in the identical manner. The LSS programme, as an illustration, has largely attracted infrastructure providers corporations as a substitute of oil and fuel gamers.
Citing monetary business numbers, Yin stated that the speed of return for renewable vitality tasks stands at about 5 per cent in comparison with 12-15 per cent for fossil gasoline tasks.
“Simply because renewables are low-cost doesn’t imply that it’s worthwhile to spend money on them,” he advised Eco-Enterprise on the sidelines of a current local weather finance summit in Kuala Lumpur. “For those who’re in an establishment that has a mandate to generate returns on funding, [why would you go into renewables] until there’s coverage intervention?” he stated.
The nation’s largest funding our bodies, with the most recent being civil service pension agency, The Retirement Fund Inc (KWAP), have expressed assist for the federal government’s renewable vitality objectives beneath its Nationwide Vitality Transition Roadmap, which goals to extend the share of renewables in Malaysia’s vitality combine to 70 per cent by 2050. The doc estimated that an estimated RM637 billion (US$143 billion) was required in new investments for renewables alone.
Nonetheless, the roadmap has not but regarded on the monetary limitations to implementation and funding, stated Yin. “I don’t assume the federal government has understood [that lack of profitability] as an issue to be solved,” he advised Eco-Enterprise.
Ember’s report additionally highlighted gaps in investments for extra battery vitality storage options (BESS), which is very crucial as an answer to deal with peak demand for electrical energy within the evenings. It identified that the federal government allowed for LSS builders to undertake BESS expertise within the third and fourth iterations of the LSS programme, however profitable bidders could have shied away from putting in batteries as this is able to improve photo voltaic prices.
The report proposed a number of totally different insurance policies focused at scaling up the usage of BESS expertise, together with integrating it in present authorities programmes or establishing a special tariff scheme for the expertise.
“Conducting research to analyse the financial and technical viability of utility-scale BESS methods would…allow the federal government to show the bankability of BESS tasks in Malaysia,” it stated.
