Is the Net Energy Metering 3.0 Program Sufficient?

By Rosey Lim Chu Ai

Malaysia’s latest Renewable Energy capacity target is 31% by 2025 and 40% by 2040[1] whereas the regional goal set under the ASEAN Plan of Action for Energy Cooperation (APAEC) Phase 2 is 35% renewable energy in installed power capacity by 2025[2]. As of 2020, Malaysia has managed to incorporate 23% of the capacity mix from renewable energy.

The Net Energy Metering (“NEM”) program was introduced in 2016 as a solar incentive to boost the uptake of solar adoption in Malaysia but it wasn’t until NEM 2.0 that the program really took off by changing the program’s energy offset ratio to 1:1. This offset ratio made recuperating the heavy expenses on a solar PV system much shorter which in effect made the program wildly popular among home owners and business premise owners alike.

In 2020, the remaining 442MW of the 500MW allocation for NEM 2.0 was snapped up across the residential, commercial, industrial and agriculture sectors. A month after the final allocation of NEM 2.0, the Ministry of Energy and Natural Resources announced NEM 3.0 on 29 December 2020 as a successor to NEM 2.0.

NEM 3.0

To further boost the uptake of solar adoption, NEM 3.0 introduced three new main initiatives (as shown below) which will be available from 2021 till 2023 with a quota of 500MW allocated:-

Initiative 1 – NEM Rakyat Program

As only five (5) percent of applications under NEM 2.0 were domestic users[3], the NEM Rakyat Program was introduced to specifically target domestic users. The energy offset ratio is maintained at a 1:1 offset rate for a period of 10 years and the maximum size of a solar PV system for domestic users is 4kWac and 10kWac for single phase and three phase homes respectively. It is projected that about 10,000 to 25,000 TNB domestic account holders or between 40,000 to 100,000 households in Peninsular Malaysia will enjoy electricity bill reduction under this program[4].

The NEM Rakyat Program has an allocated quota of 100MW and starts 1 February 2021 with a 10-year contract term for successful applicants. After the 10-year term, the energy produced by the domestic user will be strictly for self-consumption and no offset or export of energy will be allowed. The program lasts till the quota has been fully allocated or by 31 December 2023 (whichever comes first).

Initiative 2 – NEM GoMEn (Government Ministries and Entities) Program

Aimed at reducing electricity bills in government buildings through the use of solar PV systems, a quota of 100 MW and about 100 government agencies in Peninsular Malaysia will enjoy a reduction amounting to RM6 million per month[5].

The maximum solar PV system size allowed is 1MWac per account and starts 1 February 2021 with a 10-year contract term for successful applicants. The program lasts till the quota has been fully allocated or by 31 December 2023 (whichever comes first).

Initiative 3 – NOVA (Net Offset Virtual Aggregation) Program

To assist commercial and industrial electricity users affected by the Covid-19 pandemic to reduce their electricity bills thereby reducing the cost of doing business, the NOVA program was introduced with the objective to enable a consumer to install solar PV for self-consumption on its own premises. In order to enhance the cost efficiency of the solar PV installation, any excess energy which is not consumed at the premise where the PV installation is located may be exported back to the grid under one of the following categories[6]:

1. Category A
   1. Any excess energy produced in a month which is not consumed by the consumer may be exported back to the grid.
   2. The value of the exported energy shall be credited to the account of the consumer to be used to offset the bill payment for the next billing period.
   3. The unit price of the energy exported shall be based on the Average System Marginal Price[7].
   4. Only excess energy exported in the month can be used to offset bill payment for the next billing period and any remaining excess energy shall be forfeited.
2. Category B
   1. Any excess energy produced in a month which is not consumed by the consumer may be exported via the grid to up to 3 Designated Premises.
   2. The value of the exported energy shall be credited to the account of such Designated Premise to be used to offset the bill payment for the next billing period.
   3. The unit price of the energy exported shall be based on the Average System Marginal Price.
   4. Only excess energy exported in the month can be used to offset bill payment for the next billing period and any remaining excess energy shall be forfeited.
   5. For the purpose of this category, a Designated Premise includes a premise used or operated by the consumer’s wholly owned subsidiary.

Switching from one category to another category is not allowed unless the NOVA consumer has been on a category for not less than 12 months and provided that the NOVA consumer has applied to the distribution licensee 3 months in advance to switch category.

The NOVA Program has an allocated quota of 300MW and starts 1 April 2021 with a 10-year contract term for successful applicants.  Subsequent to the end of the contract term for NOVA consumers, the NOVA consumer may operate its solar PV installation strictly for self-consumption only and no export of energy will be allowed. The program lasts till the quota has been fully allocated or by 31 December 2023 (whichever comes first).

The quota for the NOVA Program was fully taken up by July 2021. In October 2021, the president of the Malaysian Photovoltaic Industry Association (“MPIA”) called on the government to allocate 3000MW for the NOVA Program under the NEM 3.0 scheme. He highlighted the urgent need for the depleted NOVA quota to be replenished as this will be crucial in driving solar energy adoption among consumers, particularly those in the commercial and industrial sectors[8]. The quick uptake under the NOVA Program also shows that Malaysia is able to consume more solar energy than the capacity allocated and raises the question of why the government should limit the distribution of energy to the rooftop model.

Subsequently, the Energy and Natural Resources Ministry announced that the government had decided to review the Guide for Cross-Border Electricity Sales issued by the Energy Commission to include the guideline that only non-renewable energy is allowed to be exported to Singapore and that power sales through self-developed transmission and interconnection facilities to Singapore will not be allowed. As a result of this decision, the government decided to release an additional 300MW of solar quota under the NEM NOVA program starting from November 15, 2021. The additional NEM NOVA quota is expected to benefit more than 60 to 300 commercial and industrial customers and create new business opportunities for more than 100 local solar players[9].

Conclusion

While the NEM NOVA Program is a step forward towards achieving Malaysia’s renewable energy capacity target and the quick uptake of the NOVA Program quota was very encouraging, more must be done to encourage the citizens to do their part and be involved in the country’s renewable energy agenda. As of December 2021, only 23.65MW out of 100MW allocated for the NEM Rakyat Program and only 20.42MW out of 100MW allocated for the NEM GoMEn Program have been taken up. Government initiatives and awareness campaigns are needed in order to boost the citizens involvement – perhaps there is also an increasing need to look into how solar PV installations can be installed on high rise residential buildings and educational institutions.

[1] https://www.energywatch.com.my/blog/2021/08/20/a-decade-of-renewables-growth-in-malaysia-where-do-we-go-from-here/

[2] Ibid.

[3] https://www.theedgemarkets.com/article/ketsa-introduces-three-initiatives-encourage-use-solar-pv

[4] https://www.thestar.com.my/news/nation/2020/12/29/govt-introduces-programmes-to-encourage-usage-of-pv-solar-systems

[5] https://www.mida.gov.my/mida-news/ketsa-introduces-three-initiatives-to-encourage-use-of-solar-pv/

[6]Guidelines_for_Solar_Photovoltaic_Installation_Under_Net_Offset_Virtual_Aggregations_(NOVA)_Programme_for_Peninsular_Malaysia.pdf

[7] Single Buyer shall publish the Average SMP of the preceding month on its website no later than the 14^th day of every month.

[8] https://www.theedgemarkets.com/article/frankly-speaking-time-revisit-solar-quota-system

[9] No renewable energy to be exported to Singapore — KeTSA | The Edge Markets