2011 IEEE First Conference on Clean Energy and Technology CET
Solar Energy Policy: Malaysia VS Developed Countries
H. Fayaza, N.A. Rahimb, R. Saidura, K. H. Solangi\ H. Niazc, M.S. Hossaina
aDepartment of Mechanical Engineering
b
Centre of Research UMPEDAC, Level 4, Engineering Tower
Faculty of Engineering, University of Malaya, 50603 Kuala Lumpur, Malaysia
cInstitute of Business and Technology (BIZTEK), City Campus Shahra-e-Faisal, Karachi, Pakistan
Abstract--Countries all over the world is enquiring and taking
"No optimal model has emerged, and probably none will do
efforts
so in the contexts that is shaped by different histories and
to
implement
the
environment
friendly
renewable
energy to mitigate the negative impacts of fossil fuels on the
cultures".
environment and their fast depletion. To reduce the reliance on
fossil fuels and environmental degradation, many countries
industries,
and Malaysia, are discussed as well as the discussion of
policies
in
energy
policy,
there
are
many
it will be very useful for policy makers, energy producing
solar energy policies, implemented in the developed countries
energy
the
policies for 4 countries around the world. It is expected that
increase its share into energy mix. In this paper a review of the
solar
set
However, in this paper authors discuss and compare energy
have focused and formulated solar energy related policies to
successful existing
To
literatures, which target the particular policy for a country.
research
organizations
and
Government
in
Malaysia.
the developed
countries. According to the 2010 BP Statistical Energy Survey,
II.
the world cumulative installed solar energy capacity was
22928.9 MW in 2009, a change of 46.9 % compared to 2008.
UNITED STATES OF AMERICA
According to industry reports, solar energy use increased at
After the review of literature, FiT, RPS and Incentives are
massive scale in 2008 in the USA and rest of the world. The
found to be the most beneficial energy policies implemented by
Solar
the developed countries. These policies create the paths to
Energy
Industries
Association,
"2008
U.S
solar
Industry Year in Review", found that U.S. 17% of solar
promote the development and implementation of renewable
energy technologies. Also, the current policies related to solar
energy capacity increased in 2007, reaching the 8,775
energy
megawatts (MW) total equivalent. Research and publishing
in
Malaysia
are
investigated
and
compared
with
firm, Clean Edge and the nonprofit Co-op America, gave
developed countries.
Keywords:
Malaysia
solar
energy,
developed
countries,
the report that projects about 2% of the nation's electricity
policy,
comes from concentrating solar power systems, while solar
photovoltaic systems will contribute 8% of the nation's
I.
electricity. Those figures correspond to about 50,000 MW
INTRODUCTION
of solar photovoltaic systems and more than 6,600 MW of
Energy policy is a way strategy or manner; in which
government
decides
to
address
the
issues
of
concentrating solar power [5]. United States of America has
energy
put several energy policies related to solar and other forms
development along with the development of the energy
of renewable energy in action described as follows;
industry to sustain its growth; including energy production,
J)
distribution and consumption [1]. The attributes of energy
policy may include legislation, international treaties and
incentives
to
investment,
guidelines
for
28 states of USA have adopted RPS mechanism, by which
energy
maximum production energy is required from renewable
conservation, taxation and other public policy techniques. It
energy such as solar, wind, geothermal and biomass. To
plays a vital role to mitigate the impacts of global warming
help utilities comply with their RE obligations, majority of
and crisis of energy availability [2]. Diverse policies have
the states which have RPS policy, allow the utilities to
been developed and implemented to promote the use of
renewable energy. These policies include
exchange renewable energy credits (RECs) or renewable
feed-in-terrif
energy certificates. There are three assumptions made, for
(FiT), pricing laws, renewable portfolio standard (RPS),
the implementation of RPS policy program. First, an RPS
production incentives, tax credits, trading systems and quota
policy is only considered operational according to the
requirements etc. [3]. Reduction of the reliance on fossil
effective date of policy implementation, not the adoption
fuels, mitigation of environmental impacts of the energy
date. Second, any RPS policy that became effective in either
sector and encouragement of new industrial development,
November or December is not coded as effective until the
are the main objectives of these strategies. Hence, among all
following fiscal year. For instance, if a state effectively
those policies, the most popular are the feed-in-terrif (FiT)
begins a RPS program in November 2003, the value of their
and renewable portfolio standard (RPS). Though, To make a
RPS variable equals zero from 1998 to 2003, and one
choice for suitable policy, there exist a lot of debates
thereafter. Third, they do not code any voluntary or "goal"
regarding their effectiveness. For this, it depends on the
based RPS policies as a mandated standard.
circumstances and objectives of the countries that which RE
policy can be suitable to implement. According to Ekins [4]
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Renewable Portfolio Standard (RPS)
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2011 IEEE First Conference on Clean Energy and Technology CET
2)
III.
The formation Incentives
France
It was first adopted as the Public Utility Regulatory Policies
Globally, the position of France is fifth for production of PV
Act or PURPA in 1978. It was the requirement of the
energy. In 2009, the French electricity giant EDF announced
PURPA for utilities to purchase renewable electricity from
that it will build the country's largest solar manufacturing
qualified independent generators over long-term contracts.
plant with an initial annual capacity of more than
Unlike today's feed-in tariffs, which guarantee a premium
Megawatt Peak (MWp). At the end of last year, France
for the renewable electricity delivered to the grid, PURP A
committed to multiply solar power use by 400 in the coming
100
payments were based upon the avoided cost of generating
12 years. To double the share of renewable energy up to
electricity from conventional sources. Under the PURPA
23% by 2020 is the part of a larger plan for meeting the EU
from 198 1 to 1990, approximately 12,000 Mw of renewable
obligations and to compete with Germany, regarded as EU
energy were installed around the USA.
giant. [8].
For renewable energy technologies, in 1978 first Investment
I)
Tax Credits (ITe) was established. Residential tax credit
France uses FiT as a main measure to adopt PV in the
was created for 30% of the first $2000 invested in a solar or
country, issued in July 2006. In this, an obligation is put on
wind systems and 20% of the next S8000 invested by the
the part of a utility to purchase electricity from renewable
Energy Tax Act of 1978; business tax credits for 15% of
energy producers paying a tarrif set by public authorities
investment in a solar, geothermal and wind systems; and an
and guaranteed for a specific time period. A FiT's value is
excise tax exemption for gasohol, turned into a tax credit for
the
ethanol. Regan Administration encouraged the Congress to
allow the residential solar and wind investment tax credits
an
independent power producer
renewable energy resources, including a premium above or
additional to the market price but excluding tax rebates or
3) Production tax credit
other production subsidies, which government pays. In
Europe and the USA, FiTs mechanism is primarily used to
For small large-scale wind projects a Production Tax Credit
RES development and presently, they are being applied in
(PTe) of 1.5 centlkilowatt-hour (kWh) of electricity was
20 EU member countries.
1992. For small large-scale wind projects a
Production Tax Credit (PTe) of
full price, which
receives for any kWh of electric energy produced from
to run out for the first time in 1995.
created in
Feed-in tariffs (FIT)
Ministry of Industry is the legal framework for this measure
1.5 centlkilowatt-hour
(kWh) of electricity was created in 1992, based on up-front
in France. FITs are composed from a basic tariff, for non
capital costs [6]. From 1986 to 1988, the business ITC for
integrated PV systems (NIPV) and a bonus in the case of
solar was reduced about 10%. Installed PV capacity doubled
building integrated PV systems (BIPV). Table 1 s ummarizes
in the U.S from the result of 30% increase and extension of
the FITs' values for PV installations in 2009.
residential and business ITCs for 3 years in 2005. The
TABLE I. FITS IN 2009 FOR ELECTRICITY GENERATED FROM PV
SYSTEMS IN FRANCE [8]
2007-2008 political seasons capped off the tumultuous 30year ride for these tax credits. For struggling Wall Street
banks after a 2-year political stand-off over extending the
2009
credits before their expiration at the end of 2008, Congress
Overseas
regions
and
Corsica
Continental
France
finally passed a tax-extenders bill in October as part of a
financial bail-out package. Today, the solar industry has an
FIT
extension of 8-years of the ITC. It seems the only thing
consistent about the tax credits has been in consistency,
Granting period
when looking at the brief history of renewable energy
top
Roof
and
ground mounted
incentives in the U.S.
4)
20 years
0.32823
€/kWh
BlPV
Target
Industrial/commer
buildings
cial
application (new
tarift)
Other
information
Solar hot water systems or solar-electric systems are being
enjoyed by millions of Americans. About 83,000 solar
thermal and solar electric systems were installed in U.S in
2007 [7]. 30% of federal ITC has been the most important
component, although state solar programs have played a key
role in driving this growth. In the recent report of the ITC
economic impact, over 6000 MW of annual solar PV and
solar thermal installations by 20 16 could be resulted by and
8 year extension of the residential and business credits.
0.43764
€IkWh
0.60176€1k
Wh
0.45 €/kWh
Tariff
annually
on
revised
inflation for
new
and
existing FIT
contracts
Navigant projected that annual installations would have
Before the revision in the normal review process, these
fallen to about 1500 MW by 20 16; If Congress had failed to
tarrifs will remain valid until 20 12. It is expected that PV
extend the ITC in 2008.
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cumulative installed capacity will increase from 1 100 MW
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2011 IEEE First Conference on Clean Energy and Technology CET
in 2012 to 5400 MW in 2020. Because of the long
scale solar thermal remains an expensive proposItIOn as
administrative procedures, in 2008 only 46 MW were
being a stand-alone technology therefore it limits the
connected to the grid out of 105 MW installed capacity [8].
commercial diffusion to subsidized programs such as the
2)
Solar Flagships program, earmarking AU$I.6 billion over
Incentive
6-years for the support of construction and demonstration of
Tax incentives and green loans are beneficial in credit
large-scale solar power stations, with an ultimate target of
terms, and are the example of other additional supports to
1000 MW [l3].
promote RE. The government grants a 50% tax credit on
3)
material cost at the main residence (maximum €8000 for
Target
Australia is at the cross-roads in terms of how to meet its
singles and €16,000 for couples, valid until the end of 2012)
for the PV systems <3 kWp. Tax credit is not cumulative
future energy requirements in an increasingly
'carbon
with FIT For PV systems >3 kWp. Accelerated investment
constrained'
[14].
depreciation for companies and a reduced VAT of 5.5% (if
shortfall in available electricity is expected with few years
multilateral
policy
environment
A
the equipped host building is more than two years old) are
at the current levels of generation. Due to the Carbon
the other financial incentives.
Pollution Reduction Scheme White Paper, the publication of
IV.
the Garnaut report and announcement of an Emissions
AUSTRALIA
Mandatory Renewable Energy Target
Trading Scheme to commence in 2010 and announcement
[9]
of a national mandatory renewable energy target of 20%
program of
share of electricity supply in Australia by 2020, Federal
2001, aimed at encouraging 9500 GWh of electricity
policy is beginning to change.
generation from RE sources by 2010, is built on by the
Renewable Energy Target, announced in August 2009. In
V.
july 2009, estimated installed PV was 115 MW, which
contributes an estimated 0.1 to 0.2% of total production
despite
the
dry,
sunny
and
hot
climate,
ideal
of
formulated numerous energy-related policies to combat the
its
climate change and ensure the energy security. Pragmatic
utilization. The cost of solar panels is the reason for
energy policies since last three decades have facilitated a
unreached grid parity because of higher cost per kW than
clean energy development path. The five-fuel policy was
h
Malaysian Plan which was extension of
other power sources. FiTs and other mandatory renewable
energy
targets are
designed
to
enhance
introduced in 8t
the
four fuel diversification policy in which renewables as a
commercialization of renewable energy in Australia. [10].
1)
fifth fuel was included. Contribution of 5% of the country
energy mix with RE by year 2005 was targeted with
Feed- in tariffs
mitigation of 70 million tones of CO2 over a time period of
FiTs have been investigated in many territories and states
20 years. Parallel to this, Small Renewable Energy Program
Australia but this time only South Australia and Queensland
have implemented schemes.
(SREP) which was launched in May 2001 under the
Queensland's Solar Bonus
initiative of the Special Committee on Renewable Energy
Scheme pays small electricity customers (defined as
l
customers that consume less thanIOOMWh yr· ) AU$ 0.44
l
kWh· from photovoltaic systems less than10 kVA for
(SCORE) to support the government's strategy to intensify
the development and utilization of RE as the fifth fuel
resource in power generation, which is also stipulated in the
single phase and 30 kVA for 3 phase systems until 2028
objectives of the Third Outline Perspective Plan (OPP) for
[11]. Albeit, small electricity customer must consume less
2001�2010 and the 8thMalaysia Plan (2001�2005) (8MP).
than 160 MWhyr-l Since South Australia has an identical
Facilitation of the expeditious implementation of grid
scheme. In 2008, the Australian Capital Territory passed
connected RE resources-based small power plants is the
FITs legislation. 3.88 times the domestic electricity price is
primary focus of SREP [15]. Further, in the 9th Malaysia
paid by the ACT scheme, which are equal to or less than
plan the utilization of RE resources and efficient use of
10kVA, 3.104 times for systems greater than 10 kVA up to
energy were emphasized.
30kVA, and 2.91 times for systems larger than 30kVA.
There is no FiT implemented in Western Australia to date
The
but newly elected government has shown support for a WA
establishment
of
the
Ministry
of
Energy,
Green
Technology and Water, shows Malaysia's seriousness that
FiTs sheme.
2)
SOLAR ENERGY POLICY OF MALAYSIA
Throughout the years, the government of Malaysia has
'clean and green' is the way forward towards creating an
economy
Subsidies
that
is
based
on
sustainable
solutions.
The
National Green Technology Policy is comprised of four
Solar PV technology is still 3-4 times the cost of gas-fired
pillars � (1) seek to attain energy independence and promote
electricity. Consequently, despite significant government
efficient utilization (2) Conserve and minimize the impact
support
programs,
solar
PV
is
estimated
by
recent
on the environment; (3) Enhance the national economic
projections to grow at an annual rate of 15MW (medium
development
case) up to 2020 [12]. Utility scale thermal technology is
improve the quality of life for all. It will also be the basis for
through
the
use
of
technology;
and
(4)
under development, although lOMW demonstration plant is
all Malaysians to enjoy an improved quality of life, in line
about to be commercialized, planned in Queensland. Large-
with the national policies, including the National Outline
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2011 IEEE First Conference on Clean Energy and Technology CET
Perspective Plan, where the growlh objectives for the nation
1 1,000 jobs. The RE policy provides the rules and funds to
will
make RE an important component of the country's energy
continue
to
be
balanced
with
environmental
consideration. For the decades to come, fossil fuels are
mix,
expected to be the main source of energy, where renewable
market failures, create a level playing field for these
energy sources such as solar, biofuels, biomass, geothermal
technologies and drive down costs. But the role of public
heat and wind are expected to double until 2030. Recently,
th
in 10 Malaysian Plan RE share is set to 5.5%, and is
efforts must be taken by the government to generate public
projected to 5.9% by 2030 [ 16].
will in support of the renewable energy agenda. So far, the
arguments
barriers,
address existing
in
favor
of
supporting
RE
have
Hydropower and solar PV are with highest
The right support mechanisms must be in place to create the
market, for any green technology industry to succeed. One
large rivers suitable for dam projects and its tropical climate
of the key obstacles is the prohibitive pricing of RE that
with plenty of sunlight.
gives households and businesses little incentive to adopt the
TABLE 2. RENEWABLE ENERGY POTENTIAL IN MALAYSIA
technology.
[15]
2)
Incentives for Renewable Energy Investment
Renewable Energy
Potential
(MW)
Malaysia is blessed with multiple RE resources, such as
Hydropower
22,000
biomass, biogas, mini-hydro and solar, that will be
Solar PV
6,500
leveraged to ensure a more sustainable energy supply.
However, despite rigorous initiatives, the renewable target
set out under the Ninth Plan period was not achieved. Under
1,300
Biomass/biogas (oil palm mill
the Tenth Plan, several new initiatives anchored upon the
waste)
Renewable Energy Policy and Action Plan will be
Mini-hydro
500
Municipal solid waste
400
Wind
Low wind
undertaken to achieve a renewable energy target of 985 MW
by 20 15, contributing 5.5% to Malaysia'S total electricity
generation mix. Amongst the measures taken will be:
speed
•
support the development of RE. This mechanism allows
electricity produced from RE to be sold to utilities at a fixed
neighboring countries as Solar is the second renewable
premium price and for a specific duration; and
source after biomass, which gets a big boost. In this case,
•
the policy for developing countries for instance is always
which include solar, apart from the local National Energ
;
Energy Development Authority, under the Ministry of
Energy, Green Technology and Water (KeTTHA) to support
Policy drafted since the Fifth's Malaysia Plan [ 17].
development of RE [ 18].
Energy Research and Development (R&D)
Enhancement
domestic
hot
water
system,
drying
VI.
of
solar
energy.
Malaysia
has
switching to solar energy can be a viable move. It is evident
from the literature that all the countries have specific solar
abundant
energy policies to utilize solar energy for power generation.
sunshine with the average daily solar insolation of 5.5 kW/
m2, which is equivalent to
electricity,
whether
The solar energy policies in developed countries are well
15 MJ/ m2. PV-generated
standalone
or
grid
connected,
CONCLUSIONS
Solar energy is one of the most promising renewable,
of
agricultural produce and water pumping are the main
applications
Establishment of a Renewable Energy Fund from the FiT
to be administered by a special agency, the Sustainable
available as a mechanism to enhance the utilization of RE
present,
Introduction of a Feed-in Tariff (FiT) of 1% that will be
incorporated into the electricity tariffs of consumers to
However, Malaysia is rich in solar power as compared to
J)
been
overwhelmingly environmental [3 and 17].
potential due to Malaysia's geographical terrain with many
At
technological
policy is so important, where it is not defined enough. The
Table 2 shows the rough estimation of the RE potential in
Malaysia.
overcome
designed to enhance electricity generation from solar power
is
significantly. Feed-in Tariff, Tax exemption, renewable
electricity generated at point of use. If generation and
portfolio standards subsidies, formation incentives are the
transmission losses of the conventional system are factored
main policies adopted by developed countries.
in then I MW of PV generated electricity is equivalent in
fuel saving to about 4 MW of conventional electricity. To
Malaysian government has formulated a series of policies
set a target of about 10MW of grid connected photovoltaic
for the promotion and insurance of the rapid, effective and
system for Malaysia may be quite feasible.
smooth development of renewable energy, such as FiTs,
For instance, Monier Malaysia, a local company launched
laws,
last years when oil prices peaked, which specializes in
and
economic
development,
encouragement,
industrialized
technical
support
and
renewable energy model projects, etc.
energy efficient roofing solutions, has got systematic growth
The PV market in Malaysia is still extremely small as
of demand for its solar product. Malaysia managed to invest
compared to other developed countries. Under the Tenth
US $4 over the past three years resulting in creation of
978-1-4577-1354-5/111$26.00 2011 © IEEE
regulations,
research
377
2011 IEEE First Conference on Clean Energy and Technology CET
[17] M.P. Koh,W.K. Hoi, Renewable energy in Malaysia: A Policy
Plan, several new initiatives anchored upon the Renewable
Analysis. Energy for Sustainable Development Volume VI NO. 3: 31-
Energy Policy and Action Plan will be undertaken to
39. 2002.
achieve a renewable energy target of 985 MW by 20 15,
[18] 10th MP, Tenth Malaysia Plan 2011-1015,
contributing 5.5% to Malaysia's total electricity generation
mix. It is found that there are few limitations in Malaysia's
2010.
renewable energy policies, such as less encouragement in
lower level; lack of coordination and consistency in policy
framework; lack of regional policies innovation; inadequate
investment
in
technical
research
and
development;
incomplete and unhealthy financing and investment system
etc. It is forecasted that in near future sustainable energies in
Malaysia will play significant role because country is
struggling to replace fossil fuels with alternative energy
sources which are truly clean, renewable and safer.
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Published by 'The
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