Solar Photovoltaic Energy, challenges in Malaysia in 2017 This paper - - PDF document

Solar Photovoltaic Energy, challenges in Malaysia in 2017

This paper was compiled by Ana Jovanovic, the COO of SOLS Energy, a Social Enterprise of SOLS 24/7 group, for the purpose of Panel Discussion organized in Melaka Malaysia in July 20th 2017 by World Youth Forum. It showcases the current consequence of the Solar PV tariff change in Malaysia in year 2017. Malaysia started the utilization of the Feed in Tariff for solar PV energy in year 2011, which brought great results in country’s implementation of ratified Kyoto Protocol (entry into force in 2005) and Paris Agreement (entry into force in 2016). FiT enabled Malaysian individuals and business owners to act, as micro power plants and produce the electricity which would be sold to the Government for the period of 21 years. However, year 2017 brought a new tariff, called Net Energy Metering (NEM) which rapidly decreased the interest of Malaysian’s to continue with the Solar Energy

• usage. NEM enables self-consumption of the produced energy, while the energy in

exceed can be sold back to TNB (Tenaga Nasional Berhard) for a certain cost that will be displayed and decreased from the next electricity bill. The return of investment from FiT to NEM increased for 3-5 years per installation (depending on the customer’s electricity usage). The paper is trying to respond what are the possible steps for increasing awareness and embracing the new tariff among Malaysians. In addition the paper tackles the topic of understanding solar energy as the way to save the planet rather than saving the budget. Ana Jovanovic, Environmental Engineer, Kuala Lumpur, Malaysia ancikina@gmail.com +60183555247

• 1. Introduction

Solar energy is created by nuclear fusion that takes place in the Sun. Fusion

• ccurs when protons of hydrogen atoms violently collide in the Sun’s core and fuse to

create a helium atom. This process, known as a PP (proton-proton) chain reaction, emits an enormous amount

• f energy. In its core, the sun fuses about 620 million metric tons of hydrogen every
• second. The PP chain reaction occurs in other stars that are about the size of our Sun,

and provides them with continuous energy and heat. The temperature for these stars is around 4 million degrees on the Kelvin scale (about 4 million degrees Celsius, 7 million degrees Fahrenheit). 1 Solar panels are devices that convert the Sun's light in to usable solar energy using N-type and P-type semiconductor material. When sunlight is absorbed by these materials, the solar energy knocks electrons loose from their atoms, allowing the electrons to flow through the material to produce electricity. This process of converting light (photons) to electricity (voltage) is called the photovoltaic (PV) effect. Currently solar panels convert most of the visible light spectrum and about half of the ultraviolet and infrared light spectrum to usable solar energy. Solar energy technologies use the Sun's energy and light to provide heat, light, hot water, electricity, and even cooling, for homes, businesses, and industry.2 Solar photovoltaic systems are one of the most famous and most efficient energy absorption systems in the world. On global level Solar PV takes one of the highest positions when it comes to renewable energy usage, but its real advantage is definitely shown in equatorial countries such as Malaysia. Geographical areas that are under 365 days of summer, the ones with no snow and unstable weather conditions are the ones that are hosting the most comfortable environment for the Solar PV installations. Solar cells, also called photovoltaic (PV) cells by scientists, convert sunlight directly into electricity. PV gets its name from the process of converting light (photons) to electricity (voltage), which is called the PV effect. The PV effect was discovered in 1954, when scientists at Bell Telephone discovered that silicon (an element found in sand) created an electric charge when exposed to sunlight. Soon solar cells were being used to power space satellites and smaller items like calculators and watches.3 Traditional solar cells are made from silicon, are usually flat-plate, and generally are the most efficient. Second-generation solar cells are called thin-film solar cells because they are made from amorphous silicon or non-silicon materials such as cadmium telluride. Thin film solar cells use layers of semiconductor materials only a few micrometers thick. Because of their flexibility, thin film solar cells can double as rooftop shingles and tiles, building facades, or the glazing for skylights.4

1 www.nationalgeographic.org 2 www.renewableenergyworld.com 3 www.nrel.gov 4 Ibid

• 2. Kyoto protocol and Paris agreement and their

influence on introduction of Solar Energy

2.1 Kyoto protocol

The Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change, which commits its Parties by setting internationally binding emission reduction targets. Recognizing that developed countries are principally responsible for the current high levels of GHG (Green House Gas) emissions in the atmosphere as a result of more than 150 years of industrial activity, the Protocol places a heavier burden on developed nations under the principle of "common but differentiated responsibilities." The Kyoto Protocol was adopted in Kyoto, Japan, on 11th December 1997 and entered into force on 16th February 2005. The detailed rules for the implementation of the Protocol were adopted at COP 7 in Marrakesh, Morocco, in 2001, and are referred to as the "Marrakesh Accords." Its first commitment period started in 2008 and ended in 2012. On 21st December 2012, the amendment was circulated by the Secretary-General of the United Nations, acting in his capacity as Depositary, to all Parties to the Kyoto Protocol in accordance with Articles 20. and 21. of the Protocol. During the first commitment period, 37 industrialized countries and the European Community committed to reduce GHG emissions to an average of five percent against 1990 levels. During the second commitment period, Parties committed to reduce GHG emissions by at least 18 percent below 1990 levels in the eight-year period from 2013 to 2020; however, the composition of Parties in the second commitment period is different from the first.5 As a developing country, Malaysia has no quantitative commitments under the Kyoto Protocol at present. However, together with all other countries, Malaysia is already committed under the UNFCCC to formulate, implement, publish and regularly update national and, where appropriate, regional programmes containing measures to mitigate climate change by addressing anthropogenic emissions by sources and removals by sinks of all greenhouse gases.6 Malaysian government signed and ratified Kyoto protocol in year 2005 and since then it formed several ministries and agencies which are working on the strategy implementation and the promotion of the industries which are leading to decrease of the GHG emissions.

5 unfccc.int/kyoto_protocol/items/2830.php 6 http://ppkas.unimap.edu.my

2.2 Paris Agreement

The Paris Agreement builds upon the Convention and – for the first time – brings all nations into a common cause to undertake ambitious efforts to combat climate change and adapt to its effects, with enhanced support to assist developing countries to do so. As such, it charts a new course in the global climate effort. The Paris Agreement’s central aim is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. Additionally, the agreement aims to strengthen the ability of countries to deal with the impacts of climate change. To reach these ambitious goals, appropriate financial flows, a new technology framework and an enhanced capacity building framework will be put in place, thus supporting action by developing countries and the most vulnerable countries, in line with their own national

• bjectives. The Agreement also provides for enhanced transparency of action and

support through a more robust transparency framework. 7 In 2018, Parties will take stock of the collective efforts in relation to progress towards the goal set in the Paris Agreement and to inform the preparation of NDCs. There will also be a global stock-take every 5 years to assess the collective progress towards achieving the purpose of the Agreement and to inform further individual actions by Parties. 8 Malaysia ratified Paris Agreement in November 2016 and it entered into the force on December same year.9 As a country with many natural energy resources, possibility to develop renewable energy with specific attention to solar energy industry and place it to the market, Malaysia is one of the most attractive countries in the world that is currently third solar panel manufacturer in the world. In past several years, Malaysian government has been investing large effort to support development of renewable energy technology through it official institutions, by delegating Ministry of KETTHA (Ministry of green energy, technology and water) which founded two Agencies SEDA (Sustainable Energy Development Authority, Malaysia) and Green Tech as well as the common standardized Green Mark that is unifying all of the green products available on Malaysian Market under one logo, called MYHijau. Institutionally, Malaysia has done a great job organizing and standardizing development and implementation of green technology (with a specific focus on Solar industry), but somehow, the idea is still not achieving its peak potential. Going further, this paper is trying to analyze challenges and potential solutions for this phenomenon which might contribute to the general understanding of challenges in implementation of the green technology and solar industry in Malaysia.

7 http://unfccc.int/paris_agreement/items/9485.php 8 Ibid 9 Ibid

• 3. European Solar PV Scenario

Since the discovery of Solar cells and PV effect, humanity is trying to find the most convenient, practical and most affordable way to develop and popularize solar industry among countries. The fight between oil and gas and renewable is old as the renewable industry is, but fortunately the new sustainable trends are more and more looking into the green technology as a potential solution to energy supply in the century which is officially the one who will be the last one to remember the exploitation of the fossil fuels. Development of and implementation of Solar technology has been growing rapidly in past 10 years which brought the price of the solar panels down to affordable for an average household income. But how come that many of the European countries are then less and less interested in implementation of solar energy? Let’s try to look into the following graph:

Illustration 1. Global Market Outlook for solar power 2015-2019 (page 19)

It is obvious that countries like Czech Republic, Italy and Spain were at the certain point leaders in implementation of Solar Technology, but the situation rapidly changed just a few years after. The reason for that is actual government incentive system which suddenly changed from Feed in Tariff to Net Energy Metering or in some cases (Spain) to taxation of PV technology installations. If we take into consideration that, for example Spain, is a country with almost 6 hours of PSH daily and one of the potential leaders in Solar Technology in Europe, it is concerning that after year 2008, solar industry is almost non existing in that country. We can’t not start to wonder why is such a great potential, such as Sun energy which is clean and free, not being used in large scale manner, but it has actually been pent-up and disappeared as an energy resource potential.

• 4. Importance of government incentives and support to

development of the solar industry

Looking into the all possible scenarios on a global level, starting from Europe

• ver Asia and USA, we can see a common pattern which is showing the same results in

all of the world’s continents. Renewable energy will not be popularized unless it is supported and advertised through different government’s institutions. Almost all the countries that signed and ratified Kyoto Protocol and Paris Agreement understood the importance of decrease of the CO2 emission, but yet, not all of them are taking serious steps in actually enabling Solar PV market growth. Technology is ready, and the large scale manufacturing is happening on the daily basis if we look only at China which has

• ver 400 companies that are working on solar cells production and panels welding.

Taking into consideration technical expertise, countries around the world started fast education programmes for engineers, wireman and technicians who now know how to install connect and maintain solar systems. The popularization of the technology is on its spot as nowadays almost everyone is aware of what solar panels are and which benefit do they bring, but still… Would it all be possible without the government incentives, and why not? Taking Malaysia as an example, government has launched Feed-in-Tariff in year 2011 where they were paying over RM 1 per produced kilowatt hour (kWh) to the ones who decide to use their roof as a platform for small solar systems installation. The projection and the price of the technology at that point was giving a possibility to people to invest into the small solar farms they would place on their roof tops and count on return of investment in following 4 to 5 years. Everything after that, would generate the pure profit as the Feed-in Contracts last for 21 year. By Malaysian green plan, each year the price per produced kWh would be decreased for 10% where in 2016 the complete system was shut down. At that point the interest for solar industry was almost completely lost as people didn’t see other than financial interest to invest into the solar

• industry. 10

At the beginning of 2017 Malaysian government introduced the Net Energy Metering tariff which is operating on a different principle. House owners are still able to invest in solar systems that they will place on their roof tops, but this time, they will have a chance to use all of the electricity that their micro solar farms would produce. That would give them an opportunity not to be so dependent on the electricity price rise and general grid system in the country. Whatever energy they would over produced, would be sold back to TnB (Tenaga Nasional Berhard) and decreased from their next electricity bill. NEM in that sense sounds like a great opportunity where people could actually use the energy they produce, but unfortunately as the produced kWh price went down from over RM 1 to RM 0.31. The Return of the Investment period went 3 times

10 In this part author is talking just about residential installations. Commercial and Industrial projects are

still implemented through Large Scale Solar tenders, and Feed in Traiff is still there for the community projects (NGO’s, schools and community centres) but under lower payback rates. (auth.rem.)

• up. This is the reason why the interest for solar industry in Malaysia went rapidly down

and is currently very fragile and fighting for its survival. The fear of the increased ROI and lack of interest for the solar industry without a quick payback was the main reason for this phenomenon, without taking into consideration an opportunity that NEM is actually bringing. Current situation is showing that Malaysian society slowly lost interest in implementation of Solar industry as Feed in was marketed as an investment rather than an environmentally responsible technology that is supporting global environmental strategies.

• 5. Importance of raising awareness of global environmental

issues as a method for popularization of Solar Industry.

Human kind has been directly dependent on fossil fuels for over hundred and fifty years and it is difficult to switch quickly from dirty, polluting machinery to clean and renewable energy. In past decades we even witnessed countries getting into wars for

• il and energy resources, trying to get the cheapest and yet most effective price for the

precious barrel. Millions of jobs and global economy are depending on fossil fuel production and there for, it is impossible to shut down everything overnight and start to think green. Switching to renewables is a slow and painful process that each country has to pass itself if they want to contribute to the global problem solution and that is harming emission of Glass House Gasses (GHG). Many reasons drive the global push to "go green". While nature conservation is

• ne of them, ensuring economic and social wellbeing, mental and physical health, and a

sustainable future for humans are some other powerful incentives.11 Awareness of climate change and other environmental concerns has increased in the last few decades, thanks, in part, to documentary movies, celebrity influence and various environmental NGO’s which are fighting daily in order to preserve small oasis

• f nature that are left. However, there is still a lot of work to be done to increase public

awareness, particularly in underdeveloped countries. Malaysians are struggling a lot when it comes to understanding of importance of environmental protection. There is no real knowledge what needs to be done or not to be done, which can be seen if we just observe the state of Malaysian coast. Country that is coming to two oceans is currently struggling with tones of plastic disposed into them

• n daily basis and the scary fact that 95% of the countries’ energy is still coming from

burning of fossil fuels. Even though there are many government initiatives, ministry, the agencies and NGOs who are supporting renewable energy as one of the potential replacements for the fossil fuels, it is still a slow process with a minor positive impact

• n the environment.

On the bright side, Malaysia is the third world manufacturer of solar panels, after China and Taiwan and the government is committed to reduce it’s GHG by 45%

11 http://greenliving.lovetoknow.com/Why_Is_it_Important_to_Go_Green

by 2030.12 As the policies are there and the government is investing a huge impact in

• rder to develop and promote this technology, there is just one last thing to be done

among the Malaysian people: Raising awareness on importance of environmental protection, regardless of the financial benefit. As Malaysia is one of the leaders in manufacturing solar panels and understanding solar industry through its agencies and policies, there are several steps that can be taken in order to support awareness raising programmes.

• 6. Methods for rising awareness on Environmental issues

6.1. Environmental Education

Environmental education is a process that allows individuals to explore environmental issues, engage in problem solving, and take action to improve the

• environment. As a result, individuals develop a deeper understanding of environmental

issues and have the skills to make informed and responsible decisions. The components of environmental education are:

• Awareness and sensitivity to the environment and environmental challenges;
• Knowledge and understanding of the environment and environmental

challenges;

• Attitudes of concern for the environment and motivation to improve or maintain

environmental quality;

• Skills to identify and help resolve environmental challenges;
• Participation in activities that lead to the resolution of environmental challenges.

Environmental education does not advocate a particular viewpoint or course of action. Rather, environmental education teaches individuals how to weigh various sides of an issue through critical thinking and it enhances their own problem-solving and decision- making skills.13

6.2. Activism

Environmental activism encompasses a broad array of individuals and

• rganizations working in scientific, social, conservational, and political fields that

address the concerns of environmentalism. These individuals and organizations are known collectively as part of the environmental movement or green movement. Environmental activists within the green movement do not share a common political affiliation or agenda and seek diverse solutions to environmental problems.14 It is important to distinguish activism from anarchism, as there are many environmental movements which are being aggressive in trying to prove their points and it is not really proven that they are actually contributing to environmental protection.

12 Transitioning the Nation Towards Sustainable Energy Malaysia, Vol1 Issue 1 2017 13 www.epa.gov 14 http://www.encyclopedia.com/environment/energy-government-and-defense-

magazines/environmental-activism

6.3. Cooperation

It appears that everyone is trying to contribute a bit by organizing small personal projects in far apart locations around the world. While governments are signing different agreements concerning, trade, economy, migration there are just few ones that are concerning the environment. Solar industry itself is clean relatively affordable potential that could unite cooperation in between the countries in economical and trading way as it is gathering important industry branches such as manufacturing, trade, import, export and technology R&D. Other than global agreements mentioned in the earlier parts of this Paper, there are just rare bilateral agreements between countries that will join them around a common interest. In the other hand, cooperation between government and nonprofit sector is in many ways crucial in solving the environmental issues. As Renewable Energy technology is getting simplified it is not rare to see an NGO working on establishment

• f solar lights in rural areas with no electricity connection, or seeing micro-hydro plants

popping out all around fresh water areas or even self-organized recycling projects on remote islands around Pacific ocean. Those initiatives should in many ways be supported and recognized by authorities and their agencies as they are playing important role in development and popularization of the solar and other renewable industries.

6.4. Tax incentives and simplification of government regulations.

Malaysia is a great example of how tax exemption can benefit to the popularization of the solar industry. Here we will analyze three types of tax exemption given for the green industry by Malaysian Investment Development Authority (MIDA): A) Tax Incentive for Green Technology Project Investment Tax Allowance (ITA) of 100% of qualifying capital expenditure incurred on a green technology project from the year of assessment 2013 (date on which the first qualifying capital expenditure incurred is not earlier than 25 October 2013) until the year of assessment 2020. The allowance can be offset against 70% of statutory income in the year of assessment. Unutilised allowances can be carried forward until they are fully absorbed. Green technology project related to renewable energy, energy efficiency, green building, green data centre, and waste management can qualify for this tax incentive. 15 B) Tax Incentive for Green Technology Services Income tax exemption of 100% of statutory income from the year of assessment 2013 until the year of assessment 2020. Green technology services related to renewable energy, energy efficiency, electric vehicle (EV), green building, green data centre, green certification and verification, and green township can qualify for this tax incentive.16

15 http://www.mida.gov.my/home/tax-incentives-for-green-industry/posts/ 16 Ibid

C) Tax Incentive for Purchase of Green Technology Assets Investment Tax Allowance (ITA) of 100% of qualifying capital expenditure incurred on green technology asset from the year of assessment 2013 (date on which the first qualifying capital expenditure incurred is not earlier than 25 October 2013) until the year of assessment 2020. The allowance can be offset against 70% of statutory income in the year of assessment. Unutilised allowances can be carried forward until they are fully absorbed. The purchase of green technology assets as listed in MyHijau17 Directory can qualify for this tax incentive. 18

• 7. Conclusion

Even though the countries are trying their best to support development of the Solar Industry, being obliged by ratifying different international agreements, the real change won’t happen until the society accepts the “green idea”. We are living in the period when people do not believe in climate changes and there is no real concern about the situation of the ocean’s floor. Societies are struggling with unequal level of development and it is impossible to compare effords of undeveloped and developed countries when it comes to understanding of environmental

• protection. Everyone has an equal share in this project, every state, every politician,

every individual. It is not a job of a single person or a single agreement to save the plannet from over pollution, but it is a project that requires the whole humanity. Governments can introduce variety of incentives but if the only interest in implementing solar technology is purely financial, we are not doing anything different that Oil and Gas companies. Solar industry is an industry of a heart, industry of hope and industry that should be smarter than all of them before her. It is supposed to save the world, but at the same time, keep economy sustainable and not interfere political or social balance between

• countries. If the Solar industry manages to achieve that, it will be a real planet hero, a

savior and the solution. No man is an island entire of itself; every man is a piece of the continent, a part of the main; if a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as any manner of thy friends or of thine own were; any man's death diminishes me, because I am involved in mankind. And therefore never send to know for whom the bell tolls; it tolls for thee.

• Devotions upon Emergent Occasions-
• John Donne-

17 https://www.myhijau.my/ 18 http://www.mida.gov.my/home/tax-incentives-for-green-industry/posts/