KUCHING: Renewable energy (RE) industry in Malaysia can generate up to RM19 billion worth of loan values for banks and lending institutions by 2020, if they can differentiate the perceived risk of RE from actual risks.
Malaysia adopted a five-fuel policy almost a decade ago to include RE as a key contributor to the national energy mix. However, RE for power generation never really took off due to challenges associated with the financing of projects.
“The only major hurdle for RE projects in Malaysia is a perception of risk by banks and financial institutions. They need to assess RE projects in light of new favourable developments and with a futuristic outlook,” said International investors country publisher Cory D’Abreo.
Recent developments had changed the position of RE from being an option to one of high priority. He pointed out that the increasing demand for gas coupled with declining domestic supply was expected to double the price of gas-based power generation.
Malaysia had to rely on coal imports to meet up to 90 per cent of demand. However, coal exporting countries were likely to divert coal to domestic needs rather than exports, as with the case in China and India.
“Though Malaysia is adding more coal-based power generation capacity, coal may not be the long-term answer for the country’s power needs,” D’Abreo commented.
He further added, “There is a question mark over the immediate fate of nuclear power in Malaysia as the country was in an advanced stage of planning for a nuclear power plant when the Japan incident happened.”
RE in the current situation is an ideal solution to solve the country’s need for long-term energy security as well as meeting environmental commitments.
On top of that, Malaysia had also made a strong environment commitment to reduce greenhouse gases by 40 per cent by 2020 from its 2005 level. This reduction would either come through RE or energy efficiency, both of which had assumed a prominent role in government policy.
In addition, Malaysia has passed the RE act which set a roadmap for RE development, setting aside quotas for different RE technologies and giving a Feed-in-Tariff (FiT) to RE-based power generation.
Moving forward, an initial RE fund of RM189 million has already been set aside for FiT.
“The favourable FiT policies and ongoing development of a strong market infrastructure in both solar and biomass power indicate a strong probability of success for RE power generation in Malaysia.”
“Presence of sufficient RE fund, removal of technical barriers such as grid access by the RE Act, presence of a dedicated agency like The Sustainable Energy Development Act (Seda), a sound track record of Tenaga Nasional Bhd and policy consistency in Malaysia show that RE project developers have little fear on account of revenue assurance risk,” D’Abreo said.