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Seda responds to Awer's allegations

This press release is a response to Piarapakaran S, the president of the Association of Water and Energy Research Malaysia (Awer) who submitted a letter to several news publications on 'Parliament must push to close down Sustainable Energy Development Authority (Seda)', published on July 11, 2013.

The following are the issues raised by the writer which Seda Malaysia will respond to:

1. Formula to set feed-in tariff (FiT) unit cost is not made known.

Seda Malaysia assumes the writer is referring to the FiT rates stipulated in the Schedule of the Renewable Energy Act 2011.

In a report on the Assessment of the Proposed Malaysian Feed-In Tariff in Comparison with International Best Practise by Dr David Jacobs (2010), it has been acknowledged that "in line with international best practise, the Malaysian legislator has also used a cost-based tariff calculation methodology" (p 6).

Seda Malaysia adopts the levelised cost of energy (LCOE) methodology which is an international practice and the most commonly prescribed methodology of deriving the FiT rates. Dr Jacob's report is downloadable from Seda's official portal.

The report has been made publicly available since SEDA's portal was first launched on Sept 8, 2011.

Seda Malaysia always engages RE industry players who are well aware of the calculation methodology of the FiT rates since the early days.

The Authority is continuously having stakeholders' engagement and the last workshop was on June 6, 2013 where the degression rates for various RE resources under the FiT were deliberated.

2. Lacking in transparency on reporting the Renewable Energy Fund.

The writer obviously is not aware of the provisions of the RE Act 2011 where Section 26 provides for financial reporting of the RE Fund and Seda Malaysia is required by law (Section 27) to submit the audited accounts of RE Fund to be laid before both Houses of Parliament.

The reporting of the RE Fund is publicly available in Seda Malaysia's annual report via Seda's official portal.

The writer is welcome to provide some constructive feedbacks on other approaches Seda Malaysia can adopt on the financial reporting of the RE Fund to improve its transparency.

3. Current model does not guarantee a sustainable and continuous growth of RE industry [What happens after the ‘lucrative years'? Will the investors continue to invest?].

The FiT and degression rates for renewable resources are designed to provide reasonable profit to the RE investors. This guiding principle is found in Seda's FiT Handbook (p 14 of English version) which is downloadable from Seda's official portal.

For the writer's information, this handbook has been made publicly available since Sept 8, 2011. Seda Malaysia is now in the process of reviewing the book because of the need to update information.

The writer's concern on whether the current model will guarantee a sustainable and continuous growth of RE industry; it is a fact well understood by the RE industry player that the growth of the industry depends on several key factors:

(i) Adopted model - The feed-in tariff mechanism guaranteed the purchase of electricity by the Distribution Licensees as stipulated in Section 12 of the RE Act 2011.

This has been able to provide the conducive environment for the RE developers and bankers to invest in RE.

The FiT mechanism has created a comfortable environment to push for technology and reduction in generation costs because the degression rate, which is an annual tariff reduction, has been embedded in the Schedule of the RE Act 2011.

The purpose of the degression rate is to allow flexibility for the FiT payment to be adjusted for new RE projects to reflect the true life-cycle cost of RE projects.

Hence, before a decision is made on the degression rates, Seda Malaysia together with the Energy, Green Technology and Water Ministry (KeTTHA) will conduct stakeholders engagement workshops with the RE industry to derive degression rates whose objective is to ensure a sustainable growth in the RE industry.

(ii) RE Fund - the Fund is currently collected from 1 percent surcharge on bills to electricity consumers whose bills exceed RM77 or 300kWh a month.

As of 2012, 4.62 million households (domestic customers) or 71 percent of the total TNB domestic customers are not affected or required to contribute to the RE Fund.

The size of the RE Fund will dictate the RE targets for the country and the FiT mechanism will be able to create the sustainable trajectory of RE growth of Malaysia.

The hallmark of a matured country is one whose people appreciate the need to migrate to a situation where reliance on fossil fuel is reduced and greater support for renewable energies in order to achieve energy security and autonomy for the betterment of the nation.

Seda Malaysia is currently engaging partners to generate buy-ins from the public to achieve this paradigm shift in support of green and clean energy.

Ultimately, a country whose economy is decoupled from fossil fuel dependency will weather through the volatility of fossil fuel energy prices determined by unpredictable the market situation of energy sources.

4. On other countries which had not fared so well in their FiT implementation.

Seda Malaysia is very much cognizant of this matter as some countries have not been able to sustain their RE growth. It is for this reason FiT must be designed taking into consideration the local context as emphasised in the FiT Handbook (p 14 of English version).

An example of Malaysia's contextualised FiT design is the capping of the RE quota based on the availability of the RE Fund to ensure illustration as cited by the writer on Germany's case is not replicated in Malaysia.

The writer failed to realise although Malaysia adopted Germany's FiT, our country is wise enough not to adopt the model directly to Malaysia's scenario without refining the model to suit our context.

A lot of due diligence had been done before the government took the important step to implement FiT.

5. Solar PV FiT were monopolised by certain individuals; Seda Malaysia only puts the blame on e-FiT online system.

The government through KeTTHA has decided the implementation of the feed-in tariff (FiT) mechanism will be supported by an intelligent system called the e-FiT Online System.

This is to ensure good governance, transparency and openness of the FiT where the allocations of quotas to the feed-in approval applications are based on a first-come-first-serve basis without any human intervention.

The approval of quota must meet the requirement set in the rules and regulations stipulated under the RE Act 2011.

The e-FiT Online System is an integrated system which includes quota balancing, monitoring and reporting modules to ensure the projects approved as well as FiT payments related to the applications.

Another important feature in the e-FiT Online System allows Seda Malaysia to closely monitor the progress of all approved FiT projects.

Any Feed-in Approval Holders (FiAHs) who fail to meet their milestone target will be queried and when Seda Malaysia determines the FiAHs have not met their commissioning date target, their FIAs will be revoked according to the process and procedure determined.

Seda Malaysia is always reviewing the procedures by imposing more stringent rules in the e-FiT online system on solar PV applications for the FiT and is continuously improving the system and the process of FiT applications without stifling the growth of the RE Industry in the country.

6. Indirect allegation of Seda Malaysia being managed by incompetent and corrupt government officers

Allegations that Seda Malaysia is being managed by incompetent and corrupt government officers are a grave and malicious unfounded accusation by the writerwhich Seda Malaysia takes very seriously.

When Seda Malaysia was first establishedon Sept 1, 2011, the guiding principles were immediately formulated and continuously internalised among the staff members.

The four key core values are accountability, governance, efficiency and competency. These core values can be found in Seda's portal,
Seda Malaysia always lends a listening ear to all stakeholders and endeavours to achieve the duties stipulated under the National RE Policy and Action Act.

To-date, Seda Malaysia has achieved more in RE capacities within 19 months of the FiT implementation than the past Small Renewable Energy Programme (SREP) had been able to do.

As at end of May 2013, a total RE capacity of 465.91 MW has been approved which will come on stream by June 2014 compared to only a capacity of 61.2 MW for a period of 10 years (2001 until 2010) during SREP.

This capacity has been able to facilitate a total investments of more than RM 4 billion and has managed to accelerate the RE industry growth at a very encouraging pace.

This is also set to avoid 2,664,053 tonnes of carbon dioxide which in line with our prime minister's pledge at COP 15 in Copenhagen.

In closing, the success of the FiT programme under Seda Malaysia is still at its early stage.

The FiT cannot be truly successful unless there is a widespread public acceptance of the national direction on renewable resources and energy from various stakeholders is expended in the right channels to promote greater RE growth.