Net Energy Metering 3.0: New Rooftop Solar Initiatives – Lexology

On 30 December 2020, the Ministry of Energy and Natural Resources (‘KETSA’) announced the introduction of the Net Energy Metering 3.0 programme (‘NEM 3.0’). This announcement is pursuant to the 500MW quota under the previous Net Energy Metering programme (‘NEM 2.0’) being fully taken up as of 27 November 2020. NEM 3.0 introduces three new initiatives which are considered below.

  1. NEM Rakyat (Domestic Consumers)

The first initiative is NEM Rakyat, a programme for domestic consumers, which has a total capacity of up to 100MW. Applications for quota allocation under NEM Rakyat may be submitted to the Sustainable Energy Development Authority (‘SEDA’) from 1 February 2021 to 31 December 2023 and are available on a first-come-first-served basis. The application fee will be charged at the rate of RM10.00 for each kW applied for.
 
It is envisaged that Program NEM Rakyat will result in savings on electricity bills for 10,000 to 25,000 domestic account holders with Tenaga Nasional Berhad (‘TNB’) or an estimated 40,000 to 100,000 households in Peninsular Malaysia. KETSA stated that only five percent (5%) of the applications for NEM 2.0 were from domestic consumers. Given the projected savings under NEM 3.0, it is possible we will see an increase in the participation of domestic consumers in these times of the “work from home” culture which would result in increased household electricity consumption.

  1. NEM GoMEn (Government Ministries and Entities)

The second initiative under NEM 3.0 is NEM GoMEn, which is a programme aimed at lowering the electricity bills at government buildings and offices. Applications for quota allocation under Program GoMen may be submitted to SEDA from 1 February 2021 to 31 December 2023 and are available on a first-come-first-served basis. The application fee will be charged at the rate of RM10.00 for each kW applied for.
 
KETSA estimates that, under this programme, approximately one hundred (100) government agencies in Peninsular Malaysia will enjoy a total savings of RM6 million per month on their electricity bills.

 
NEM 3.0 Guidelines for NEM Rakyat and NEM GoMEn
 
The Energy Commission Malaysia (‘EC’) had on 30 January 2021 published the guidelines for the implementation and operation of two of the initiatives under NEM 3.0 (‘NEM 3.0 Guidelines’)1. A summary of the key features and requirements applicable to NEM Rakyat and NEM GoMEn are set out below.
 
Available Quota
 
Both NEM Rakyat and NEM GoMEn have an available quota of 100MW each.
 
Eligibility for Participation
 
In order to be eligible for quota allocation under NEM Rakyat or NEM GoMEn, the applicant must be an owner or occupier of a premise that is supplied with, or will be supplied with, electricity by TNB. This is a requirement that was already imposed under NEM 2.0.
 
However, a new restriction is introduced under the NEM 3.0 Guidelines which stipulates that a person who has installed a solar photovoltaic installation under NEM 2.0 will not be eligible to participate in NEM Rakyat.
 
Type of Installation Allowed
 
The NEM 3.0 Guidelines stipulate that a solar photovoltaic installation under NEM Rakyat or NEM GoMEn must be in the form of photovoltaic panels mounted on the rooftop of the building within the premise supplied with electricity by TNB. Unlike NEM 2.0, installations on car parks and ground-mounted installations will not be allowed or considered.
 
Maximum Capacity of Installation
 
The maximum capacity of installations under NEM Rakyat and NEM GoMEn is capped as follows:

Program NOVA (Net Offset Virtual Aggregation) (Commercial and Industrial Consumers) 
Credits to Electricity Bills by way of Offset
 
The ‘1 to 1 offset’ concept (‘Offset’) offered under NEM 2.0 will be maintained and applies to both NEM Rakyat and NEM GoMEn. This means that any excess electricity generated by the consumer’s installation which is not consumed due to operational constraints or variation in load demands may be exported to the grid. The consumer will then receive credits for the energy that has been exported and may use such credits to offset part of the electricity bill for electricity supplied by TNB during the applicable billing period. Net credits can be rolled over, but only for a maximum of twelve months within the calendar year.
 
It is pertinent to note that the Offset will only be available for the first ten years from the date of commencement of the consumer’s contract with TNB, after which the consumer’s electricity consumption will be converted to self-consumption basis2.
 
Licensing for Installation
 
Pursuant to Section 9 of the Electricity Supply Act 1990, a licence is required for any person to use, work or operate any installation designed for the use and/or supply of electricity (‘Section 9 Licence’). However, for solar photovoltaic installations, obtaining a Section 9 Licence is only necessary if the installation is above 24kWp for a single phase system or above 72kWp for a three-phase system. The requirements for obtaining the said licence shall be as set out in the EC’s Guidelines on Licensing under Section 9 of the above-referred Act.
 
Given that the maximum capacity of an installation under NEM Rakyat will be capped at 4kW for a single phase system and 10kW for a three-phase system, domestic consumers participating in NEM Rakyat will not have to obtain a Section 9 Licence for their respective installation. The Section 9 Licence requirement would however apply to consumers under NEM GoMEn with installations that are above the stipulated capacities.
 
Notwithstanding the above, domestic consumers should take note that they will be required to complete a form for their exemption from the Section 9 Licence requirement and submit the same to the EC no later than 28 days after they are notified of the approval of their application to participate in NEM 3.0.
 
Timeframe for Completion of Installation
 
The NEM 3.0 Guidelines expressly provide that a successful applicant must complete the installation within three months from date on which they are notified by SEDA of the approval of their application. In the event the installation is not completed within the stipulated three-month period, the consumer’s application will be deemed to have been withdrawn and cancelled.

  1. Program NOVA (Net Offset Virtual Aggregation) (Commercial and Industrial Consumers)

The third and perhaps most interesting initiative introduced under NEM 3.0 is Program NOVA, which is targeted towards commercial and industrial consumers affected by the COVID-19 pandemic. Applications for quota allocation under Program NOVA may be submitted to SEDA from 1 April 2021 to 31 December 2023 or until the quota has been fully taken up. At the time of writing, the EC has not released guidelines for Program NOVA.
 
At present, the available information on the elements of Program NOVA are as follows:
 

  • Allocated quota of 300MW.
  • Offset will be based on System Marginal Price3 (‘SMP’) rate rather than the  prevailing tariff. This will be converted to credits that are reflected in the electricity bill for the following month.
  • Option to have virtual aggregation4 of excess electricity generated by the rooftop solar installation for up to three electricity billing accounts under the same owner.
  • Capacity limit will depend on whether the consumer opts for Offset only (1MWac) or whether the consumer opts for Offset and virtual aggregation (5MWac).

From KETSA’s announcement, it would seem that Program NOVA is intended to help entrepreneurs, local companies, and places of worship reduce their electricity bills and operational costs. However, with the application process, the obtaining of financing, and the installation works for the rooftop solar installation, it will take some time before commercial and industrial consumers will benefit from savings on their electricity bills.

New Benefits for NEM 2.0 Consumers
 
Aside from the new initiatives under NEM 3.0, KETSA has also introduced the following benefits for consumers under NEM 2.0:

  1. After the first ten years, the Offset will be at the SMP rate for the subsequent ten 10 years; and
  2. Electricity consumption will be converted to self-consumption basis after the ten years of the SMP rate ends.

The implementation of these new benefits for consumers under NEM 2.0 is pursuant to feedback that KETSA received with respect to consumers’ business models and the return on investment being limited to the initial ten-year period of the Offset.
 
Comments
 
With the introduction of NEM 3.0, it is clear that solar energy generation will continue to be the focus of Malaysia’s renewable energy initiatives. This is a step in the right direction with regards to the future of clean energy in the country. However, what remains to be seen in the short term is whether NEM 3.0 will help consumers with managing their current financial concerns during this COVID-19 pandemic.

Source: https://www.lexology.com/library/detail.aspx?g=6971e33f-c4ad-4e14-aa82-c88db9b1294d

March 3, 2021 susan ward