PROSPECTS are looking brighter for solar players in the country – pun intended – as initiatives are being introduced for clean energy and green mobility development.
In the revised Budget 2023, we have seen positive initiatives such as the extension of Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE) incentive period from 3 to 5 years until 31 December 2023.
They also include the provision of RM2 billion financing from Bank Negara Malaysia (BNM) to support green tech start-ups and SMEs to implement low-carbon practices, as well as the implementation of Green Technology Financing Scheme (GTFS) with an increased allocation of RM3 billion until 2025, and the scope of financing to be widened to cover electric vehicles (EVs) with a guaranteed limit of up to 60 per cent.
Additionally, a provision of 100 per cent statutory income tax exemption for manufacturers of EV chargers from 2023 to 2032, and a 100 per cent allowance on investment tax for five years, is yet another example of the push towards cleaner energy in the revised Budget 2023.
Indeed, accelerating momentum and increasing adoption of green energy will continue to drive solar players such as Samaiden Group Bhd (Samaiden) and Solarvest Holdings Berhad (Solarvest) – two of only four listed pure-play solar EPCC players.
Together with surging demand, researchers with RHB Investment Bank Bhd (RHB Research) see further catalysts stemming from the recent tariff hike and decreasing cost pressure from panel prices and material costs.
“Earnings should also scale to new highs, backed by robust orderbook on hand and contribution from own green energy plants,” it commented in a special report on solar sector outlook.
The introduction of the Bursa Malaysia launched its Voluntary Carbon Market (VCM) at the end of last year is said to spur solar interest.Introduced late last year, the exchange will facilitate corporations in trading voluntary carbon credits – putting a value on carbon, which penalises activity that creates carbon emissions and rewards climate-friendly projects and solutions.
“This could spur companies to engage in decarbonisation projects and green investments such as solar adoption, providing better growth for Samaiden’s and Solar’s orderbooks,” RHB Research added.
According to Bursa Malaysia’s press release, any kind of undertaking that results in avoidance, reduction or elimination of GHG emissions is accepted to be traded be it nature-based or technology-based solutions.
Meanwhile, on March 16 this year, Bursa Carbon Exchange (BCX) carried out the nation’s inaugural carbon credit auction with 15 buyers from various industries purchasing a total of 150,000 Verified Carbon Standard (Verra)-registered carbon credits.
In a statement, Bursa said that BCX enables the trading of standardised contracts with underlying carbon credits from climate-friendly projects and solutions, which corporates can use to offset emission footprint and meet climate goals.
“With this key milestone, the auction facilitated the price-discovery of carbon credits from two new products offered by the BCX – the Global Technology-Based Carbon Contract (GTC) and the Global Nature-Based Plus Carbon Contract (GNC+),” Bursa said.
The GTC was oversubscribed and cleared at RM18.50 per contract, which featured carbon credits from the Linshu Biogas Recovery and Power Generation Project in China, which aligns with the United Nations Sustainable Development Goals (UNSDG), namely generating clean energy, providing decent work and addressing climate change by reducing fugitive methane emission leakage to the atmosphere.
Meanwhile, GNC+ fetched a clearing price of RM68 per contract, featuring carbon credits from the Southern Cardamom Project, which is a REDD+ (Reducing Emissions from Deforestation and Forest Degradation) project from Cambodia that comes with climate, community and biodiversity (CCB) standard that provides additional co-benefits, contributing to the livelihoods of local communities and biodiversity conservation in the Indo-Burma Biodiversity Hotspot.
“Both projects were carefully selected and curated to spur local interest in similar carbon offsetting project development.
“There was strong interest and healthy price signal by the domestic corporate sector, notably government-linked companies and financial institutions, which demonstrated their leadership in the budding VCM space in Malaysia,” it said.
Among the successful bidders were AmBank Malaysia, AmBank Islamic, AmInvestment Bank, AU Synergy, CIMB Bank, Maybank, Masteel, MIDF Investment, Permodalan Nasional, Pet Far Eastern Malaysia, Petronas, Press Metal, Telekom Malaysia and Yinson.
Programme opens up parameters
The Energy Commission has confirmed that non-solar renewable energy resource developers may participate in the Corporate Green Power Programme (CGPP).
This follows the government’s recent announcement of an additional quota of 200MW for the CGPP to enable more companies to subscribe to green electricity supply to fulfil environmental social and governance (ESG) commitments, the industry regulator said.
In line with this, applications for the entire quota under the CGPP programme will be open until Dec 31, 2023 or until the quota is fully subscribed, the commission said in a statement on March 14.
Introduced in November last year, the CGPP is aimed at encouraging solar power producers and commercial power consumers to partner up to commission additional solar power generation capacity.
The deadline for interested parties to apply under this programme was initially set for February, and then extended to March, before being further extended to December.
Natural Resources, Environment and Climate Change Minister Nik Nazmi Nik Ahmad announced the additional quota of 200MW for CGPP on March 9. This raised the total CGPP quota to 800MW.
The Energy Commission said that for now, the use of non-solar power plants can still be implemented under the Feed-in Tariff scheme or through the New Enhanced Dispatch Arrangement mechanism.
“In accordance with the announcement and changes, the information guide for the CGPP (for solar PV plants) will be uploaded on the commission’s website by April 2023,” it added.
And looking at large scale solar (LSS) projects here, compared to the previous reverse bidding mechanism for LSS programmes, the CGPA will be an agreement between SPP and corporate consumers.
Under the New Enhanced Dispatch Arrangement (NEDA), the SPP will export the electricity generated to the power grid and the energy will be purchased by the consumer at an agreed-upon price.
If the System Marginal Price (SMP) is higher than the CGPA price, RHB Research noted that the SPP will pay the consumer the difference, and vice versa.
As seen with the previous LSS4, due to competitive tariff bids, some of the projects had to be delayed in account of rising costs.
The LSS4 power purchase agreements (PPA) were also extended by four years. Assuming a contract value of RM2.3 million per MW, the total worth of solar projects under CGPP could fetch RM1.4 billion.
“Both solar players under our coverage have expressed their intention in capitalising on the new programme either as project owner or engineering, procurement, construction and commissioning (EPCC) contractor.
“We believe Solarvest stands a better chance in the tenders given its previous LSS4 participation.”
Looking at LSS billings and potential LSS5, the research house saw that the progress in LSS projects in Malaysia has been rather weak in the past two years no thanks to elevated cost pressure and the movement control order (MCO).
Only 56 per cent or 909MW of the LSS 1-3 capacities are operational as of 4Q21. Beginning 1Q22, the Energy Commission (EC) has included the 830.06MW LSS4 capacities into the database.
Only 45 per cent or 1160.4MW of the total LSS1-4 capacities are operational as of 2Q22. We believe the situation will improve in 2023 as most LSS4 contract winners would have achieved financial closure by end-2022.
“Hence, EPCC contractors are generally still busy, with LSS projects and robust commercial and industrial (C&I) demand. The 1,200MW new quota may provide project sustainability for solar EPCC contractors – even with the absence of LSS5, for now.
“We believe the regulator will want to emphasis on the implementation of the Virtual Power Purchase Agreement (VPPA), probably by this year. That said, with the financial closure and kickstarting of LSS4 contracts, we will not be surprise to see the EC rolling out the next round of LSS bidding in 2H23 if the moderated solar panel prices sustain by then.
“As the government had previously announced an allocation of 1,200MW for solar resources to boost the country’s commitment in the energy transition, it is under the assumption that the remaining 600MW will come under LSS5, which will inject another circa RM1.4 billion worth of contracts. This will provide further upside for both solar players.”
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