Easing cost factors
A big boost for solar players also come in the form of easing prices for key components of solar module prices including raw material prices, shipping costs, module technologies, and foreign exchange rates.
Over 2022, these costs escalated, some even to record highs, which had caused delays in projects and dampened solar demand.
“In 2022, the US dollar aggressively strengthened against the ringgit, which caused solar prices to skyrocket and, in turn, postponed installations by C&I clients as well as narrowed margins,” RHB Research noted.
“To safeguard against the diminishing margins, Solarvest and Samaiden began to trade in Chinese yuan, a relatively more stable currency.
Although the US dollar had depreciated since Nov 2022, both companies guided that they are still trading in both currencies, opting for the better quote.”
Moving forward, although it will not be eliminated entirely, the option to trade in CNY will help to mitigate the impact of FX risk for both solar players under RHB Research’s coverage.
Samaiden guided that other items – which account for circa 20 per cent of total costs – such as inverters, and transformers cables are still procured in the US dollar.
The rise in polysilicon prices had the largest impact to material costs in 2021 to 2022, which caused some contracts to be delayed and renegotiated. The hike was attributable to the growth of polysilicon demand surpassing capacity enhancements.
“On the bright side, compared to the recent peak registered in Aug 2022, the average price of the polysilicon has fallen by slightly more than 50 per cent.
“The China Nonferrous Metals Industry Association (CNMIA) attributed the decline to a slight demand reduction as well as the growing capacity of the polysilicon industry. CNMIA estimates that China’s domestic polysilicon capacity has reached 1.2 million metric tonnes by the end of 2022.”
Other factors such as the increase in the price of aluminum, which is used for frames, also contributed to the price hike of photovoltaic (PV) modules. However, Solarvest guided that aluminum prices account for less than five per cent of its module cost. Hence, the rebound in aluminum prices, after it tapered down in late 2022, is of no concern.
“In the longer run, continued technological advancements should stabilise module prices, sequentially creating greater demand for solar installations not only among C&I, but also residential clients. Samaiden and Solarvest expect solar installations to pick up, coming from the softening of solar panel prices.”
Solarvest gearing up for higher demand
SOLARVEST is fast making its mark in Malaysia’s PV scene. According to its executive director and group chief executive officer, Davis Chong Chun Shiong, this comes as Malaysia’s potential for clean energy development is promising, supported by the government’s implementation of favourable initiatives aimed at fostering the growth of the clean energy sector.
The country has set a target to increase its renewable energy capacity by 31 per cent by 2025 and to achieve carbon neutrality by 2050.
Chong lauded the revised Budget 2023’s initiatives for the solar sector.
“Besides, in the recent release of International Renewable Energy Agency’s (IRENA) Malaysia energy transition outlook 2023 report, Malaysia’s final energy consumption will double by 2050 in the Planned Energy Scenario (PES), where energy demand is expected to increase two per cent annually on average, from 2.1 exajoule (EJ) in 2018 to 4.0 EJ by 2050,” Chong told BizHive in an exclusive interview.
“With that, solar PV will play a key role in the energy transition with its total capacity potentially reaching 59GW in the PES, translating into a generation capacity share of 51 per cent.
“Given Malaysia’s potential for its renewable energy generation capacity, the inclusion of Battery Energy Storage System in GITA and GITE’s scope of solar activities announced in the Budget 2023 also marks a great start in strengthening the country’s grid infrastructure.”
As the country progress towards grid modernisation with better voltage stability, we believe efficient integration of clean energy for green electrification can be attained.
Apart from utility-scale solar farm projects, the commercial and industrial (C&I) segment makes up most of Solarvest’s clientele.
Out of our current unbilled orderbook of RM595 million, 30 per cent or RM178.9 million is contributed by the residential and C&I segment, while 70 per cent or RM 417.0 million is taken up by large-scale solar projects.
The uptake of C&I projects can be attributed to the growing awareness of corporate sustainability initiatives, leading up to an increase in interest in clean energy adoption among C&I players.
Malaysian Government’s recent announcement of the Imbalance Cost Pass-Through mechanism for a 20 sen/kilowatt-hour (kWh) surcharge from the previous 3.7 sen/kWh on medium voltage (MV) and high voltage (HV) C&I users also incentivised businesses to transition towards solar energy for cost savings in the long-term.
Looking ahead, the clean energy adoption rate among C&I players is expected to accelerate following the anticipation of carbon pricing mechanisms. To reduce the carbon costs imposed on their operations, businesses are expected to implement green investments to reduce greenhouse gas (GHG) emissions.
This can be observed in the surge of interest in our Powervest solar financing program, in which we have a project pipeline of around 600 megawatt-peak (MWp) for the C&I segment.
East Malaysia’s solar ventures
Following the Sarawak Government’s implementation of the Post Covid-19 Development Strategy 2030 (PCDS2030), it aspires to transform the State into a regional renewable energy powerhouse.
Among the initiatives to promote renewable energy is the development of hydrogen energy, floating solar, mini hydro projects, and EVs.
“As an effort to strengthen our market presence in East Malaysia, we have signed a Memorandum of Understanding (MoU) with the Centre for Technology Excellence Sarawak (CENTEXS) and Huawei Technologies (Malaysia) Sdn Bhd (Huawei Malaysia) to launch a Green Energy Lab in Kuching, Sarawak in January 2023,” Chong said.
“The Lab will provide green energy-related learning programmes involving solar, green mobility, battery storage systems, as well as green hydrogen to spur research and development collaboration and intellectual property creation in clean energy solutions.”
As for Sabah, the introduction of the Sabah Renewable Energy Rural Electrification Roadmap (Sabah RE2 Roadmap) also shows great potential for clean energy development in the state.
With the Sabah RE2 Roadmap, the state targets to introduce micro-grid renewable energy for at least half of the unelectrified remote areas in Sabah by 20276.
“On the corporate front, we are pleased to announce that Solarvest has achieved financial close for our last LSS4 project, namely the 12 megawatts (MW) solar farm in Manjung, Perak. This completes the financial close for all three LSS4 projects, which have a cumulative capacity of 50MW.
“After two of the three LSS4 projects are commissioned by May 2023 as scheduled, we are expecting an increase in net profit of around RM7 million.
“Besides, we are certainly looking forward to the tender submission for the 800MW virtual power purchase agreements (VPPA) quota under the Corporate Green Power Programme (CGPP).
“We intend to leverage this opportunity to replenish our current unbilled order book of RM595 million.”
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