September 20, 2001 — Malaysia’s state-controlled utility Tenaga Nasional Bhd. (TNB) will sign four Power Purchase Agreements (PPAs) with producers of electricity from renewable energy sources, said the deputy minister for energy and multimedia Datuk Tan Chai Hoi during his visit to the POWER-GEN Asia 2001 conference and exhibition on Wednesday.
The PPAs will be the first to be signed since renewable fuel was designated as part of the country’s five-fuel energy policy – the others being gas, coal, oil and hydro – aimed at reducing Malaysia’s dependence on gas for electricity production.
In the deputy minister’s keynote address at POWER-GEN Asia he stated that the country could not afford to risk price instability and had also to address the issue of security of supply. Failure to do so would jeopardise growth.
The four renewable energy projects are expected to provide 23 MW of power to the national grid with the first two likely to be to signed by the end of the month. Tenaga SPL Sdn Bhd, a subsidiary of TND, will generate approximately 2 MW from a landfill site while Bumi Biopower will operate a biomass plant generating 7 MW.
The government is offering developers incentives to build and operate generating facilities using renewable fuels. These consist of 60 per cent capital allowances over a five-year period as well as sales tax exemptions and income tax breaks.
The government hopes this will encourage small renewable energy projects who will need to constitute 5 per cent of Malaysia’s total electricity output by 2005 if the government’s renewables target is to be met.
The deputy minister said that TNB will pay premium rates for electricity from renewable sources of up to 17 sen per kWh but that generators will be responsible for financing their own grid connection. He said that both local and foreign developers would be welcome.
Currently some 600 MW of power is produced using renewable fuel – particularly palm oil which is in plentiful supply.
None of this production is yet linked to the national grid but following an announcement in May, companies are invited to participate in Malaysia’s renewable energy programme, selling up to 10 MW to TNB.