Feed-In-Tariff Investment

Howdy all? How is everyone doing? It's been a rainy holiday season. Usually during the end of the year, it'll be raining for almost everyday. There have also been many bad news to the consumers especially when we know that the Malaysia's power utility, TNB is raising its electricity tariff. This couldn't has come at a better timing,when the economy has slowed down and the ringgit Malaysia has weakened. How much more do Malaysians need to suffer, to be able to feed themselves?

Luckily, at the same time, SEDA (also known as Sustainable Energy Development Authority Malaysia) has opened up the quota for the Feed-In-Tariff programme once again, but the application will be closed by end of December 2015. The reason for this programme is not only reducing the burden to the house owners but also to reduce the grid load of the national electrical power station and also to encourage the use of renewable energy.

What is Feed-In-Tariff?

Feed-in-Tariff is a special tariff rate that TNB would buy electricity from the Solar PV owner. The FIT rate for 2013 is around 4x of TNB residential Tariff rate, this means TNB is buying at a 4x tariff rate compare to the tariff rate that they are selling. The FIT is govern by Sustainable Energy Development Authority Malaysia. (SEDA).

It is a policy or program created to increase investments in renewable energy, which is solar PV panel. FIT provides long term agreement and guaranteed pricing, promotes diversity in renewable energy technologies, while securing producers' return of investment at the same time. Such producers can be some private investors, business owners, house owners or even farmers.

How does it work?

The idea of FiT is to let you earn not only to pay for installation costs, but to make profits as well for making the investment. Its aim is to reward you whenever you generate electricity. If you’re eligible to produce renewable energy, you will be allowed to sell electricity to the national security grid. The government or your electricity supplier will then pay you a certain amount per kWh of electricity you generate. Typically, the rates are high enough to let you regain the money you spent for the technology with guaranteed profits at the same time.

Period of which the renewable electricity could be sold to distribution licensees and paid with the FiT rate. The duration is based on the characteristics of the renewable resources and technologies. The duration is 16 years for biomass and biogas resources, and 21 years for small hydropower and solar photovoltaic technologies.

Return of Investment

The amount that you can earn depends on the type of technology and the size of the system you’re using to generate renewable energy. But in any case, FiT guarantees payment for all electricity that your system has generated (*Generation Tariff*), plus an additional payment for exported unconsumed electricity to the national security grid (*Export Tariff*).

During the installation of the solar panel, an additional PV meter (similar to TNB meter) would be installed to record down the electricity generated by the Solar PV system. TNB would pay the house owners based on the unit (kWH) generated multiply by the Feed in Tariff Rate.

How much would it cost you to install solar panel? A set of home solar PV is expected to cost around RM29,000 to RM 85,000, depending on your roof sizing and the numbers of solar panels that can be installed. It may sound a little expensive, but considering the long-term profit that the FiT can offers, return of investment surely looks favorable. 

Based on studies, a 2-storey residential house with 4kWp Solar PV System (Roof Integrated) installed, which costs estimate about RM30,000 in 2015, is expected to have 15.56% rate of ROI. That only takes a little over 6 years for the payback of the capital investment, assuming that the system yields 5,333 kWh/annum (total system yield). If you’ll manually calculate it, it’ll goes out as: RM0.91 x 5,333kWh = RM4,853.32 per annum. And since it's a 21-years contract with TNB, you are generating a total income of RM101,920 on average.

Where can you find the installer?

There are a few registered PV installers but make sure you are using the registered one because there are many scammers in the market that actually looking for profit only. Alliance Bank is the first financial institution to provide financing option for ordinary Malaysians who plan to install the solar system on their roof.

When viewed as a long term investment, it does sound like a viable proposition worth exploring. But as with all investments, carefully study the plans, do the calculations, obtain all the necessary background information, and consult with homeowners who have already installed the PV system, to get tips on the do’s and don’ts.

If you are interested to invest in this program, or wish to help building a sustainable environment for your future generation, you may email to ukiya75050@yahoo.com for more information. Remember that the quota is only opened up to end of Dec 2015, The quota will be reviewed and could be reopened as early as year 2018.