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BUDGET 2022

Merit in Malaysia's move to allow only non-renewable energy exports to Singapore

11/11/2021 02:09 PM

By Mikhail Raj Abdullah

KUALA LUMPUR, Nov 11  -- There is merit in the government's decision to allow only non-renewable energy to be exported to Singapore and not allowing private power sales.

Malaysia stands to gain by way of foreign direct investments (FDIs), increased job opportunities, competitive advantages and benefits to local renewable energy (RE) players.

Despite criticisms to the contrary, the decision to export non-RE is both logical and pragmatic as it will ultimately benefit the rakyat in what is surely an environmentally-friendly way of life.

There is no denying that Malaysia's RE is still at the infancy stage, which means it doesn't have excess energy to sell to others. (In 2020, electricity generation in Peninsula Malaysia comprised 4.4 per cent hydroelectricity, 32 per cent gas, coal 61.7 per cent, solar energy 1.1 per cent, biomass 0.5 per cent and biogas 0.3 per cent.)

Malaysia's decision is all the more necessary in view that the development of RE is costly and entails massive investments.

The Energy and Natural Resources Ministry (KeTSA) said in a statement on Oct 22 that the government decided to review the Guide for Cross-Border Electricity Sales issued by the Energy Commission to include the two matters.

The statement said the government has also agreed that the wheeling charges for the sale of electricity to Singapore for the two-year trial period will be US2.28 cents/kWh.

In analysing Malaysia's decision, one must take into account that FDIs are increasingly headed to countries that source energy from green sources.

This being the case, we shouldn't give others the competitive advantage by exporting RE when it is both scarce and expensive.

A major plus point is that the decision will boost the development of local RE players as Malaysia aspires to reach its climate change aspirations.

It will also allow the government to allocate additional solar quota to benefit Malaysian RE players, something which industries are increasingly clamouring for.

It is also in line with Prime Minister Datuk Seri Ismail Sabri Yaakob's commitment for Malaysia to achieve its target of becoming a carbon-neutral nation as early as 2050.

More importantly, the move is set to contribute towards post-COVID-19 pandemic recovery by creating investments to the tune of RM1.2 billion and providing 3,600 job opportunities.

All this clearly points to Malaysia's commitment to fight global warming unabated as evidenced by its emphasis on RE.

If warnings at the COP26 climate summit at Glasgow are anything to go by, countries are running out of time in their fight against global warming and avert a global disaster.

As far as climate change is concerned, RE such as solar and wind are crucial tools to prevent the increase in global warming.

In addition to other conventional sources, adopting RE as a source of electricity is the most practical alternative for achieving this goal.

Based on Malaysia's generation development plan in 2020, the country is set to achieve 31 per cent RE which will be integrated into the system by 2025.

Peninsula Malaysia will contribute 26 per cent of RE.

Therefore, it is only logical that we develop our RE projects and retain them in our own country in achieving what is surely a vision that needs greater acceleration.

In the years to come, the promotion of FDIs in RE will be crucial.

It is reasonable to assume that there will be increased pressure for companies to operate using green energy, for instance in the development of data centres.

As such, we need to preserve our green energy to promote foreign investments for these companies and others.

This is a critical factor in itself since FDIs will bring widespread spillover benefits to the economy, the people and the country.

Another advantage of Malaysia's decision to only export non-RE is that it will enable the development of an effective Renewable Energy Certificate (REC), which is also the focus for the government now as we have our own source of RE.

In planning for the future, the Malaysia Green Attribute Tracking System (MGATS) - a national marketplace for RECs, was established in October 2019.

It is a platform that enables interested buyers to purchase RECs generated in Malaysia, a critical component of RE development whereby the country can be the centre of REC trading.

As for the current REC market in Malaysia, they are sold separately from electricity.

Companies wishing to meet sustainability goals could choose to purchase RECs as part of their RE sourcing portfolio.

No less important is that RE development requires huge land areas in Malaysia, which means each land use will compromise other forms of development.

While locals will benefit from the spinoffs, it is only logical that Malaysians and not others benefit from sacrificing our land for such development, hence the need to retain RE locally.

Besides this, electricity generated from conventional power plants is still available for cross-border trades which will benefit Malaysia.

These plants have been around for a long time and we fully understand their nature and characteristics.

This will put Malaysia in a better position to be a reliable energy supplier to neighbouring countries.

The case for RE being kept within Malaysia is also due to recent spikes in fossil fuel prices and coal power price reforms, which will help boost the competitiveness of RE.

This round of fossil fuel price increases in the market has made the cost advantages of RE even more apparent. In the meantime, the production costs of RE, including wind and solar, have continued to fall in recent years.

Renewables accounted for almost 30 per cent of global electricity output in 2020, according to the International Energy Agency (IEA).

In a nutshell, Malaysia's decision to sell only non-RE demonstrates its perseverance to advance RE in efforts to achieve a sustainable energy mix and do its part for a greener future for all. 

-- BERNAMA

 


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