A FiT Malaysia? Part 2: A Cap that FiTs?

An Introduction to Feed-in Tariffs

You might already be familiar with the concept of Feed-in Tariffs (FiTs) from the UK FiT programme which was introduced in 2010, or other FiT programmes which have popped up all over the world in the past few years.  The basic purpose of FiT is to provide incentives for national investment in renewable energy technology.  To do this FiT schemes allow and encourage smaller providers (single to double digit kilowatts), including households, to generate electricity from renewable energy for feed-in to the grid.  These small-scale producers are paid a fixed price per kWh produced that is over the market price for electricity and is guaranteed for a long term (16-21 years in Malaysia, depending on the energy source). This premium price makes it worthwhile for them to invest in the initial outlay costs for installing the energy generation technology.

The rates that small-scale providers are offered differ depending on the form of renewable energy used: typically solar rates are higher and hydropower rates are lower, to reflect the efficiency of the technology – for example currently small hydropower generates electricity at a lower cost compared to solar photovoltaic (solar-PV) and is therefore more efficient.  This evens out the playing field for the different technologies so that non-mature technologies (such as solar-PV) will continue to receive investment, instead of investors opting for mature technologies that provide a higher return for cost without subsidy.  In Malaysia, rates can also be added to when the technology used achieves some ideal goals, such as being locally manufactured or assembled, or by using certain technology (see ‘bonus rates’ on the ‘FiT dashboard’ on the SEDA website).

The rates offered are also depreciated annually to reflect that over time as technology progresses, renewable electricity should get cheaper to produce.  So for instance an installation of solar-PV in 2014 will receive a higher annual rate than an installation of hydropower in 2014, but a lower annual rate than an installation of solar-PV in 2013, as it is thought that the solar-PV installation in 2014 would use better, more efficient technology to create a higher electricity to cost ratio.  In the Malaysian FiT programme, the annual rate for hydropower doesn’t depreciate over time, as it assumes that the technology for hydropower is mature and is unlikely to become much more efficient.

The Malaysian difference

The Malaysian FiT programme follows the basic FiT structure described above but differs significantly from other programmes in that it introduces an annual quota.  The quota caps the amount of electricity generation from each source of renewable energy available for the FiT scheme each year and is based on the amount of money collected from the 1% electricity bill charge (see my previous post) from the previous year.

The quota has two main purposes: the first is to ensure there is a maximum amount of money that the government pays out annually for the scheme, and the second is to control what renewable energy technologies are invested in that year, with the purpose of focusing the growth of renewable energy on proven and mature technologies in the short-term, and, once the mature technologies have reached capacity, on technologies that are currently still developing (such as solar-PV) in the long-term.  This means that Malaysia won’t be installing the bulk of the renewable energy technologies that are still developing until later, when they are more developed, which allows them to take advantage of research that the rest of the world have done.

The renewable energy technology available for the FiT scheme in Malaysia are: biomass; biogas; mini-hydro (not exceeding 30 MW), and Solar-PV.  SEDA, the Sustainable Energy Development Authority (SEDA) who is responsible for the management of the FiT believes that Malaysia is not well suited for wind power.

The National Renewable Energy Installed Capacity by source goals, from SEDA

To combat allegations of corruption, the allocation of the quota is based on a first come first serve basis. Applications are made by the SEDA website and the companies and individuals awarded are accessible on the website.

The obvious downside to the quota is that once the quota has been reached it is likely to disincentivise renewable energy installations.  It is easy to imagine a situation where, once the quota is reached, interested parties decide to wait until the next year to implement.  Once that year rolls around, the quota disappears like Glastonbury tickets but, like Glastonbury, hundreds or thousands are left without quota.  It is hard to say how likely this scenario could be, however the 2013 quota for 20MW Solar-PV disappeared within an hour of it being available[1].

On the flip side, no one can blame Malaysia for being eager to avoid the problems other nations have experienced with an unprecedented large take-up of FiT (see Limu’s take on the UK experience).  It could even be argued that the UK and Spanish FiT programmes had implicit quotas which, once breached, or with the threat of being breached, caused the FiT rate to be lowered (UK) or for the programme to be frozen (Spain).  Given this argument, it is unlikely that the quotas will ever disappear completely, however given time, experience and public support it is possible that the quota could rise to a level where it becomes more of a safeguard to government funds than a limit to the installation of renewable energy.

A note on Solar-PV

Despite the current limited quota for Solar-PV, SEDA seemed to be very excited about the potential for solar.  Malaysia receives a great deal more sun than the UK, from an annual average value of 1,470 kWh/m² to 1,785 kWh/m² of solar irradiance in Malaysian cities[2] (compare this to the UK annual average of 950 kWh[3]).  As well as the large electricity generating potential, SEDA were also excited about the ability of solar-PV to ‘democratize energy’, as Solar-PV technology gives all homeowners the chance to generate their own electricity.  This means that if/when electricity prices rise, homeowners do not become hostage to energy companies (although there is only one in Malaysia) and they can also decide to reduce their useage to sell their electricity on for a higher price.  In short, the householder becomes a ‘prosumer’ – both a producer and consumer to/from the grid.  Perhaps SEDA are especially keen on this idea because the pre-FiT programme to promote investment in renewable energy was shelved as (so they tell us) the single Malaysian electricity company refused to offer fair prices to potential producers.

I’m signing off now from sunny Malaysia, but I would be interested in hearing what you think of the Malaysian FiT quota?  Should DECC have established an explicit quota rather than disappoint investors when it prematurely lowered the tariff rate for solar?  How do you think it will affect the growth of renewable energy technology in Malaysia?

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[1] SEDA Portal: Quota for 20MW Solar Photovoltaic released by SEDA Malaysia taken up within an hour

[2] (Malaysia) National Renewable Energy Policy & Action Plan, SEDA (2009)

[3] The potential of solar Energy in the UK, Cynthia Sullivan (UEA)  http://www.uea.ac.uk/~e680/energy/Old_modules/env2e02/individual_reports/Group_d/solar.pdf

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Getting FITS XV

– experiences of fitting household solar energy – Getting FITS XV is part of a series of blog posts by Limu on the attempt to install solar power at home with the help of the UK Feed in Tariff.

Its Easter now and its been a very sunny March – great for solar panels. I’ve also had our first electricity bill with the panels operating. Our bill for 3 months in the autumn was £120. You’d expect this to increase for the 3 months of winter due to longer hours of darkness. However, our bill fell to £70! Saving more than £50 – the first bit of payback on our investment.

The next payback will be our first FITS payment. I’ve received confusing information on this from our electricity supplier SSE. The letter confirming we had registered for FITS said they would need the first reading from the 31^st of March. However, a recent letter said it should be for the 31^st May.

The company who installed our panels has given some useful advice. I need to take reading for the 31^st March as the FITS payment rates go up from the 1^st April with inflation. Therefore, I need to take a further reading on 31^st May, and then send in both the March and May readings by 5^th June. So I am now getting 45.4p per kwh generated according to this DECC document (which didn’t get checked for plain English).

On 31^st March the generation meter read 572kw. To repay the loans and investment as planned we’ll need to have generated around 2670kwh by November. That might seem like a long way to go, but the next few months offer much greater generation potential due to the longer daylight hours. Certainly a few more months like March and I think we will reach that target.

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Getting FITS XIV

– experiences of fitting household solar energy – Getting FITS XIV is part of a series of blog posts by Limu on the attempt to install solar power at home with the help of the UK Feed in Tariff.

As the days start to lengthen we can watch the meter go higher each sunny midday peak. The system now runs at about 50% capacity on bright sunny days. Longer daylight hours, the sun higher in the sky and warmer air temperature will all increase generation over the next few months. The generation meter shows we have made over £50 through FITS payments so far.

The controversy about this subsidy continues to rumble on, which means continuing uncertainty in the sector. Friends of the Earth are at loggerheads with the Government. Their disagreement is really about the way policy has been carried out. Most people involved seem to accept that the current subsidies for the energy sector as a whole are all the country can afford, and so reducing the FITS rate seems sensible – too generous a rate leads to inefficient investment.

The Government could still have approached it in a less calamitous way for business confidence. For which high court wrangling is just about the worst process – DECC are now asking the Supreme Court to overrule their unsuccessful High Court appeal about the December 12^th deadline to cut the FITS rate.

Regardless of that process a new policy deadline of 3^rd March has been announced for the FITS rate to be cut. If the Government’s appeal is unsuccessful, this will create a second rush to install (as the 12^th December deadline did). We are still getting flyers in the letter box advertising solar PV installation, and I can see a house over the road having them fitted – maybe the rush has started already?

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Getting FITS XIII

– experiences of fitting household solar energy – Getting FITS XIII is part of a series of blog posts by Limu on the attempt to install solar power at home with the help of the UK Feed in Tariff.

The new PV system had one bit of teething trouble in the first few weeks, as the fuse tripped a couple of times. The installer were quick to come an sort the problem, and on the second time they replaced the relevant part. The smart meter they provided was useful as it showing’0’ was what alerted us to the problem.

This meter runs from a sensor clipped over the wires bringing the electricity generated into the main house electricity system. This transmits wirelessly to a neat white box I’ve put in the hallway, which shows what is being generated.

The system is running smoothly now, with the smart meter ticking over at low levels during the day. Oddly, the system shows a very low level of generation (6 watts) at night, which is apparently due to the electricity flowing into the system to operate the inverter and other kit. I’m looking forward to seeing the generation levels rise through the spring.

We are adjusting to having a different kind of electricity supply. The main change is to try and run large appliances like the washing machine and dishwasher during the day, to take advantage of the free electricity. On the best sunny day in December when two of us are working at home our two computers seemed to be powered mainly by solar energy during the day.

As the generation increases, we can try to transfer more energy use to the middle of the day during the summer. Maybe roasts will have to be at lunchtime and showers taken in the morning rather than late evening. As we watch our smart meters and understand more about our energy use, I’m sure we’ll discover more options.

 

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Getting FITS XII

– experiences of fitting household solar energy – Getting FITS XII is part of a series of blog posts by Limu on the attempt to install solar power at home with the help of the UK Feed in Tariff.

The process of registering for FITS payment has gone smoothly, my energy company seems to have had its administration system well-organised. I’ve received confirmation that my solar PV system is registered and now am making arrangements to receive the FITS payments quarterly.

For those thinking of installing PV in the future, the process was fairly straightforward because my installer was in regular and clear communication. Following installation they provided the FIT application form and other paperwork (receipt which is proof of ownership, and MCS form – see FITS VIII), which I sent recorded delivery to the energy company (and phoned to check it had arrived).

It’s a relief to have met the 12^th December deadline, which caused plenty of controversy that may not be over yet. The High Court ruled in December that the Government’s plans to cut the solar Feed-in Tariff (FiT) were unlawful, but Energy Minister Greg Barker has since said the Government will appeal this decision: http://www.greenwisebusiness.co.uk/news/minister-to-appeal-solar-fit-high-court-ruling-2917.aspx .

The future design of FITS payments is being reviewed by Government, with one option being to lower the per KW tariff as systems get larger. This would spread the subsidy available over more households, but could be less efficient in terms of maximising the renewable capacity supported per pound. Another plan is to build in adjustments in the subsidy level to take into account the costs of panels, which is the major variable in the costs of installation (with labour and scaffolding costs more stable).

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Getting FITS XI

The panels are now installed on our roof, just as the gloom of winter has set in and sunshine seems a distant prospect. It wasn’t a straightforward process. One of the dimensions of the roof hadn’t been taken correctly, which means that the planned arrangement of panels didn’t fit.

This meant a rapid re-arrangement of the instalment plans. Instead of 17 230W Innotech panels, we have 13 230W Siliken panels that are smaller but generate more per area. So the panels we have are 3.25kw instead of 3.91kw. The price has been reduced by the installer accordingly, leaving me with the same rate of return – they agreed to this as it was their error in specifying the system initially. In fact, the price I’ve paid is nearly the same as the quote another company gave me for a 2.25kw system, so it’s possible I’ve got a bargain.

Whether that is actually the case will depend on the quality of panels over their lifetime. An industry magazine, PHOTON, undertake annual independent tests in Germany of 16 manufacturers’ panels under controlled conditions. In 2010, Siliken panels produced the highest power output (as a ratio of installed power), coming top of the test. I hope their longevity is equally top-class.

I had wanted to use the Innotech panels because of their production through re-using components (see FITS III). I’ve lost out on this due to the need to adjust the fit of the system to the actual measurements of the roof. But overall, I’m happy that a PV system has been installed successfully and on time. Now I have to register for the FITS payments before December 12^th.

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Getting FITS X

– experiences of fitting household solar energy – Getting FITS X is part of a series of blog posts by Limu on the attempt to install solar power at home with the help of the UK Feed in Tariff.

It’s happening now. Scaffolding has gone up and the chimney has been lowered. A few of the bricks from the chimney are now propping up a new playhouse in the garden (thanks to my brother in law for his help putting that up). Awaiting installation of the panels next week. I’m on course to beat the cut in subsidy, which has brought plenty of reaction from the sector.

I’m not entirely immune to the policy change. Approval for connecting my system is needed from the electricity company for it to operate at full capacity. This hasn’t been received yet, so the system installed will be adjusted slightly with the use of a different inverter that reduces the maximum generated output slightly – by around 5%. The system will operate at 95% capacity or more rarely (only under ideal conditions of sunlight and temperature). So the total electricity generated will reduce by much less than this, and the payback of the system will only change fractionally.

This issue reveals the core of the objection to the sudden change in FITS – that it is implemented on a timescale that is shorter that those over which relevant work is undertaken. This is why industry feels Government is riding over it roughshod, with few concerns for the consequences.

Installation next week!

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Getting FITS IX

– experiences of fitting household solar energy – Getting FITS IX is part of a series of blog posts by Limu on the attempt to install solar power at home with the help of the UK Feed in Tariff.

A date has been set to install our solar PV panels! The scaffolding will go up next week, and after lowering a chimney to remove its shading (see FITS II), the panels will go on the following week.

All these arrangements are just in time, as the Government has announced earlier this month that the subsidy for solar PV installation will be slashed in half on 12^th December (Link) . Although not an unexpected change, the timing of this policy development is a shock. The subsidies available are now generous (partly because solar panel costs have fallen), and so a cut in the subsidy rate was widely expected. The timing of this was expected to be at the end of the financial year – in the Spring 2012 budget.

The policy change has been brought forward to save money, pushed through on a ‘fast-track’ process, which allows Government to by-pass the usual rules of public consultation. This may seem fair enough if the subsidy is not cost-effective spending, but the short notice given brings problems. Firstly, it undermines a new industry in solar PV installation, which has been generating employment. A period of months rather than weeks would allow the businesses involved in the industry more time to adjust to the changes.

Secondly, and more importantly, such rapid changes to a market-driving subsidy undermines confidence in the Government’s green agenda. Efficient policy solutions to many environmental problems involve correcting externalities by establishing markets for them. These markets (like the EU’s carbon emissions trading scheme) are heavily dependent on the quality of the Government policies on which they are based. If Government is inclined to make surprise short-term changes to those policies, then this can only undermine confidence in all environmental markets.

Therefore, the rapid alteration to FITS policy is not just damaging to the solar PV market, but undermines and contradicts the intention in the Natural Environment White Paper to encourage environmental markets.

Finally, the short-notice of the change may leave some households stranded in the middle of the process to install panels. My process should be complete well-before 12^th December. Others earlier in the process may face an awkward choice, and may question whether a company they employ will still exist under the new subsidy regime. Reassuringly my system comes with a 10 year CPA (consumer protection association) backed insurance.

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Getting FITS VIII

– experiences of fitting household solar energy – Getting FITS VIII is part of a series of blog posts by Limu on the attempt to install solar power at home with the help of the UK Feed in Tariff.

I have now chosen a company to install solar panels! Once I was happy with their credentials – Micro-generation Certification Schemes (MSC) accredited, they have an office address (virtual companies have a higher risk of being cowboys) – the decision came down to the panels they sourced, which being re-conditioned, are both more environmentally friendly and cheaper (see FITS VI).

I had thought earlier about installing both solar PV and solar thermal (water heating). None of the companies seemed to be particularly clued-up about doing this, saying that they had other contractors they work with, but not presenting a particularly integrated service.

This is understandable in some ways, as the products (electricians for PV, plumbing for thermal) are different, and the additional cost of doing both means a lower profitability. However, a large part of the costs of installing each of them is scaffolding/roofing work and installing both could be a good way of managing energy price risks. With systems designed to last 25 years and hopefully longer, the financial attraction is not just the lower energy costs now, but the protection against much higher grid-electricity and gas costs in future.

Installing both solar thermal and PV would give some protection against each of these, and so while giving lower returns, gives greater protection against future risks. Whether the risk-reduction justifies the lower returns is down to the risk-aversion of the individual, but it was something I would have looked into further if a more integrated service had been on offer.

Of course, future energy prices are unpredictable, and most discussion recently is of how far and fast they can rise. However, recent discoveries have suggested UK Shale Gas is set to upset the status quo in the gas market. The UK is said to have discovered vast reserves in Lancashire [1]. Shale Gas will have environmental consequences, so these should be factored into its exploitation through appropriate taxation. Some might argue that cheap energy is what the UK economy needs to kick-start it right now. Its true that the economy needs a boost, but an unsustainable one isn’t in our best interests.

Extracting new fossil fuel supplies as cheaply as possible will encourage less-efficient exploitation of them, meaning that the UK economy doesn’t gain the greatest value from them. For example, if gas prices are suppressed then including solar-thermal in the design of new buildings will become less attractive. However, we should expect these buildings to last a century, over which time gas is unlikely to remain abundant, necessitating expensive retro-fitting. I’m assessing investments in my house over a shorter timescale (the 20 or so years I expect to live there), so new gas supplies that stop prices rising too fast over the coming decades would be good news for me, and mean the decision not to install solar thermal isn’t one I regret.

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[1] BBC News – Shale gas firm finds ‘vast’ gas resources in Lancashire

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Savings or sweeteners: which incentive entices most towards Green Deal?

In investigating FITS I’ve discussed the certification of solar PV installers, and received some useful advice from NAP. Operational since 1992, the NAPIT Group of companies holds and maintains Government approved registers of competent contractors within the electrical, ventilation, plumbing and heating industries inEnglandandWales, so they obviously have a role to play in the standards and skills needed to make theUKa greener place…

Guest moo from NAPIT. 21/10/2011

The forthcoming Governmental Green Deal intends to steer the UK towards a more sustainable energy-driven future and whilst pre-Green Deal research is something of an expected development in the ongoing ‘green’ battle of Britain, some results prove to be nothing short of extraordinary.

The concept for Green Deal is that householders could have an energy-efficiency improvement provided by a Green Deal Provider without directly paying for it. The Green Deal Provider would be paid by a surcharge added to the householders electricity bill, provided that the surcharge was at least offset by the savings made by the improvement (in other words, the overall household utility bill should be no more than before the improvement was made). Proposed measures include replacing heating equipment or controls, using renewable energy, and improving insulation levels.

*Recent research has revealed that when it comes to insulating their homes, UK householders are less attracted toward annual savings of around £400 as they might be to lifestyle-enhancing ‘sweeteners’ such as bus passes or fruitful  incentives towards their 5-a-day.  Whilst that may seem shocking, the actual percentages are even more eye-opening…

• 10% “can’t be bothered” to install cavity wall and loft insulation
• 17% couldn’t afford to further insulate their home.
• 15% are unsure about cavity wall and loft insulation
• 9% have too much clutter in their loft
• 3% don’t have a ladder

An array of incentive schemes are now being introduced across the country, and given the above results, it’s difficult to say which incentives will attract most; savings or suggested sweeteners such as these…

• Government Green Deal– offset initial insulation costs via energy bill increments from the government’s flagship energy-saving plan to transform the country’s building stock and to improve energy efficiency and reduce carbon emissions.
• DECC/B&Q/Sutton Council– the loft clearing service is subsidised and aims to determine how detrimental the ‘hassle’ element is to the uptake of renewable energy technologies such as solar paneling.
• Homebase/Carillion/Local Authorities- the popularity of incentives such as council tax holidays and in-store vouchers will be gauged to assess the appeal of Green Deal and to identify how its future can be furthered.

NAPIT Director of Inspection Services Richard Gould commented on the research…

“In order to successfully progress into a greener country, it’s important to understand the everyday needs of the average householder, as it is to identify potential incentives which appeal to them.  Whilst initially startling, these recent findings might make perfect sense for householders who appreciate the value of green power but shy away from schemes the deem to be involved, awkward or demanding”

NAPIT have been selected onto the Green Deal pilot scheme to act as a Certification Body with the role of ensuring that advisors and installers are competent to carry out safe, effective and compliant work under the Scheme. With over 8000 companies already approved by NAPIT, it will be inviting existing and future members alike to help deliver this key government initiative.

*research individually conducted by EON and The National Resilient Homes Project

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