On Monday, 2nd December 2013, The Ministry of Energy, Green Technology and Water (KeTTHA) has announced the adjustment of the surcharge on electricity bill for the Renewable Energy Fund from 1% to 1.6% starting January 2014. This review of electricity tariffs also affects Sabah consumers for the first time as they are imposed with 1.6% of surcharge in the electricity bills and it becomes shocking to most people out there. However, do all of you realize the rationale behind the review of electricity bills in Malaysia and its importance in the long run? Allow me to explain the small steps that have been taken to ensure a better future for our younger generation in Malaysia.
As we are all aware, 90% of Malaysia’s supply of electricity is generated by fossil fuels such as coal, petroleum and natural gas. At the same time, these sources are also identified as major causes of global warming that changes climate throughout the globe. It causes flood, drought, hurricane and many other natural disasters that threaten the lives of human beings, animals and our mother earth. Besides, the depletion of fossil fuels in many parts of the world causes fuel hike that together constraint the lives of the earth’s citizen day by day. It is time for us to shift to a greener, much more efficient alternative source of energy. The Government of Malaysia has initiated an aggressive implementation of renewable energy resources such as solar, biomass, biogas and small hydro power to generate alternative electricity in Malaysia.
The importance of the renewable energy sector in Malaysia has been recognized since the Eight Malaysia Plan when the Five Fuel Policy was introduced in 2001 to include alternative sources of energy in our daily consumption. The development of renewable energy in Malaysia were a bit slow given the fact that it took so many years before it was actually implemented in the national level. In 2011, Sustainable Energy Development Authority (SEDA) Malaysia is finally formed under the Sustainable Energy Development Authority Act 2011 [Act 726]. SEDA Malaysia becomes the implementer of the Feed-in Tariff program for the development of Renewable Energy in Malaysia.
However, how does the Feed-in Tariff (FiT) system works? For your information, Malaysia’s Feed-in Tariff system requires the Distribution Licensees (DLs) such as Tenaga Nasional Berhad to buy from renewable energy producers the electricity produced by them. FiT rates are set by SEDA Malaysia with approval from KeTTHA to pay for the renewable energy supplied to the electricity grid for a specific duration. By having access to the grid and setting a favourable price per unit of renewable energy, the FiT mechanism also ensures that renewable energy becomes a viable and sound long-term investment for companies industries and individuals. This can happen very easily if consumers are registered under SEDA Malaysia as one of the producers of renewable energy through solar panels, small hydro power, biomass and biogas at their homes or private lands.
The Cabinet has also agreed for the 1% surcharge on consumers’ electricity bills that has been gazetted and collected from consumers. This 1% surcharge is needed to achieve the target capacity of renewable energy in the long run. As of 2013, 1% surcharge is still imposed on all electricity customers and domestic electricity consumers are obliged to contribute to the surcharge only if their monthly electricity consumption exceeds 300 kWh or RM 77 a month. This money is channelled into the Renewable Energy Fund and administered by SEDA Malaysia to pay the premium Feed-in Tariff rate to those producers who generate electricity at homes or in industrial companies. But as of January 2014, this tariff will increase by 0.6% to be 1.6 % for current electricity users. This increase will also affect the consumers in Sabah and Wilayah Persekutuan Labuan as they are charged with 1.6% of their electricity bills for the first time. Please refer to www.seda.gov.my for more news and information.
Why is this increase necessary in the long run for the development of renewable energy sector in Malaysia? The additional 0.6% surcharge imposed for the electricity bills for the renewable energy fund is to ensure energy security and autonomy. In Malaysia, it is not only sufficient to have energy security but it is also essential that the country has its indigenous supply of energy resources that is renewable and sustainable in the long run. The increasing use of renewable resources creates an energy source which is autonomous and in return creates a more resilient economy.
Many people have asked why do we need to revise the tariff of electricity even though Malaysia is a net exporter of gas? Well, a developed nation does not seek dependence on subsidy across the board but embraces subsidy on need basis and is financially responsible for the measures towards achieving energy security and autonomy. This can also help to change the mindset of Malaysians because rationalizing of subsidy is an important step towards motivating consumers to change towards energy efficiency lifestyles and habits.
In Malaysia, under the National Renewable Energy Policy and Action Plan (2010), the country is expected to achieve 73% of renewable energy in the total power generating capacity by 2050. In order to achieve this target, certain assumptions are put in place and one of them is to implement the FiT by 2011. Today, Malaysia is moving towards 1.6% surcharge on electricity bills for the Renewable Energy Fund and this is well below the surcharge implemented in all other countries. It should also be noted that in countries such as China, Germany, Japan and Thailand, the electricity tariff is unsubsidized by the government. Therefore, a 1.6% surcharge imposed on a subsidized electricity tariff is not foreseen to be a huge economic burden to the people.
Alright, I guess that is all for today and I hope that you can consider the rationales behind the increase of electricity surcharge in Malaysia. If you have further questions, please visit www.seda.gov.my for details on the Feed-in Tariff mechanism. You can drop off your comments below and I will try as much as possible to answer your questions based on my basic understanding about SEDA Malaysia and the 1.6% increase of surcharge. Take care and God bless, and please use energy efficiently!