Minister touts lower tariffs, economic benefits for new solar project

The Large-Scale Solar Project Round Three (LSS3) is expected to produce cheaper electricity compared to its previous iteration LSS2, said Energy, Science, Technology, Environment, and Climate Change Minister Yeo Bee Yin.

Whereas electricity tariff for LSS2 is 33.98 sen per kilowatt-hour, she said the government is confident that the LSS3 project would have even cheaper tariff due to several improvements to the bidding specification.

In addition, she said renewable energy such as solar power is not subject to the volatility in fuel prices that affect tariffs for energy from fossil fuel sources. Instead, the tariff is stable throughout a project’s lifetime.

“That is the problem that we face now – our tariff is always dependent on the global fuel prices. With more renewable energy in our system, we will be better off in the long run and not just in terms of the environment.

“Many see what we do as something that is for the environment only, but we look in terms of planning and cost; there would be benefits for Malaysian consumers too,” she told a press conference at her ministry’s headquarters in Putrajaya today.

The Energy Commission had opened bidding for 500 megawatts of solar power quota yesterday, which would continue until the bidding closes on Aug 18.

Yeo said the project is expected to draw RM2 billion in investment and create 10,000 job opportunities.

Among the changes since LSS2, she said each project developer can obtain up to 100 megawatts quota out of the 500 megawatts, which is an increase from the 30-megawatt limit under LSS2. Each project can have a capacity ranging from one megawatt to 100 megawatts, whether from one location or several locations.

Excess energy

In addition, the LSS2 practice of offering quotas based on a proposed project’s capacity range would be abolished to encourage developers to bid for higher capacity solar power plants.

Yeo said the higher quotas compared to LSS2 would allow for larger projects to take place, adding that it was found that larger projects enjoy better financing terms from financial institutions, which would lead to lower tariffs.

In addition, successful bidders for the LSS3 project would be allowed to auction their excess energy in the open market via the New Enhance Dispatch Arrangement (Neda) mechanism, which would help developers generate more income from their excess capacity.

Yeo said the LSS3 project is in line with the government’s goal of increasing renewable energy capacity to 20 percent by 2025.

She said renewable energy is expected to reach grid parity with non-renewable energy by 2030, meaning that it would be cost-competitive with power generated by coal or natural gas plants.

Currently, Malaysia has 988 megawatts in renewable energy that is connected to the national grid, of which 743 megawatts (75 percent)are generated by various solar photovoltaic sources such as feed-in tariffs and previous large-scale solar project, she said.

For the record, the Energy Commission statistics show that Malaysia has 32,872 megawatts in installed capacity as of the end of 2016. At the time, solar power comprises only 273 megawatts (0.8 percent) of the total.

Meanwhile, to help spur economic growth, Yeo said the engineering, construction, and commissioning aspect of the project must be done by local contractors approved by the Construction Industry Development Board (CIDB).

She said there is sufficient local talent to execute the project, but they lack the financial capability to do so. Up to 49 percent of a project developer can be foreign-owned.

As for environmental benefits, Yeo said a one-megawatt solar power plant can reduce carbon dioxide emissions by 1,034 tonnes per year while supplying enough electricity for about 160 houses. The amount of carbon dioxide reduced is the same as that which can be absorbed by a 1,000-acre forest.

Hence, 500 megawatts of solar power can be expected to reduce carbon dioxide emissions by 517 kilotonnes per year, she said. - Mkini