“A top-down regulatory push will help to address a range of issues, such as getting projects off the ground” – Davis Chong, Managing Director, Solarvest Energy Sdn Bhd.
To what extent has the introduction of Net Energy Metering (NEM) impacted the solar sector and how are market players, both large and small, responding to the scheme?
The response to NEM and distributed generation has been comparably positive in that there have been consistent enquiries from the market regarding solar solutions, in contrast to the past when Solarvest Energy Sdn Bhd (Solarvest) was having to actively approach the market. Thanks to improved awareness about solar following the Feed-in-Tariff (FiT) scheme, the launch of NEM is set to strengthen knowledge further and contribute to an increasingly harmonious ecosystem in which solar can continue to thrive.
Regarding the position of Solarvest within this ecosystem, the company has a healthy flow of incoming activities and business leads worth approximately MYR100 million per quarter. Increasing awareness among facility managers, energy managers and plant factory managers about the potential of solar to generate savings on their operational costs and utility bills has been key to this growth. In fact, solar energy is now being viewed as a genuine value creator, with NEM at the core of this vision.
This increased understanding of solar across different economic sectors is hugely significant. Awareness has built up gradually and companies that offer engineering, procurement and construction (EPC) services have become increasingly active, raising their budgetary allocation and deploying more business development resources towards solar. This move has come about in response to other market players, particularly multinational corporations (MNCs), adopting solar solutions as a result of greater internal understanding of the benefits of solar. Conversely, uptake is less prevalent among smaller companies.
Multiple factors are driving the trend towards solar implementation among larger corporations, including local factories and MNCs. First, these entities consume more energy and have larger electricity bills. Second, they earn greater profits and have larger tax bills. Thus, they are more motivated to seek savings on both the consumption and taxation sides. Third, they operate with both a facilities manager and an energy manager who specifically look into energy savings and are therefore in touch with the latest developments in solar solutions. Consequently, most of our clients fit into this category rather than the SME segment.
Despite its positive impact, certain aspects of NEM could be enhanced, particularly on the technical and engineering sides. For example, there is an opportunity for the utility distributor to expedite NEM installation and implementation processes at the local distribution and utility ends by increasing awareness among relevant technical personnel. Currently, implementation requests are submitted to the authority headquarters, although the implementation process, which is overseen from the respective local office, is usually slow. The implementation period, known as the processing lead time, should take between three and seven days but can sometimes last up to a month. Consequently, the completion time for NEM projects can be up to six months, rather than the standard three or four months. It is important to rectify this situation because lost productivity and time due to scheduling impacts us as a service provider by increasing our customer handover timelines. Moreover, such timeframes are untenable if the distributed generation segment is to fulfil its potential.
What is your view of the Malaysian solar industry from a regional perspective? Is there scope for Solarvest to expand its business into the Southeast Asian market?
The Malaysian solar industry is in a very strong position compared to its regional competitors: the domestic market currently accounts for over 500 megawatts of large scale solar (LSS) and 100 megawatts of NEM rooftop projects a year. And these numbers are rising every year. This growth affords multiple opportunities to market players who, with the right technical know-how, are able to capture significant national market shares. Overall, and despite ongoing challenges including a lack of high-end industry expertise caused by limited international project exposure, Malaysia has provided Solarvest with a solid platform from which the company can now progress to the regional stage.
While Solarvest has benefited from, and indeed contributed to, solar market development in Malaysia, new business opportunities are available abroad. We see huge potential in several emerging regional markets such as Cambodia and Laos. Furthermore, we are currently in the initial stages of conducting feasibility studies regarding a potential move into Vietnam. Nevertheless, the challenges of entering emerging markets are multiple and we are in no rush seeing as the solar industry is still in its infancy in Vietnam where the early priority is LSS. Our project management experience in Malaysia tells us that LSS is a complicated process that involves extensive planning. In the meantime, we will concentrate on strengthening our LSS project experience in Malaysia and reinforce our position in the local market, while keeping an open mind about regional opportunities.
What key factor will boost the solar energy sector and ensure that Malaysia is best placed to fulfill its national and international green goals?
A regulatory push is needed and I am encouraged by the moves being made by the Ministry of Energy, Green Technology and Water (KeTTHA). For example, the proposed drafting of an Energy Efficiency and Conservation Act is critical for generating a sustained demand for energy efficiency. It will certainly make it easier for companies like Solarvest to take existing programmes to the next level in terms of uptake.
A top-down regulatory push will help to address a range of issues, such as getting projects off the ground. Although a number of market players, including Solarvest, are constantly exploring potential solar options, many projects are still facing challenges in terms of execution, particularly when the sense of urgency is absent. Clear regulations, for example that set maximum time periods and deadlines for project implementation, will provide the urgency and boost project implementation. In turn, this will facilitate efforts to meet national and international targets in this segment.
Unlike more advanced markets in Europe or the United States, Malaysia is still a developing country and it is common for senior management of national companies to still emphasise the bottom line rather than the broad range of issues encompassed by sustainability. Changing this mentality is essential and although things are evolving, the process is time-consuming. Collaborative action from the government and the private sector to enforce positive behaviour in relation to sustainability, by implementing clear and concise regulation, will help to catalyse overall efforts and secure Malaysia’s low-carbon future.
Another key factor is to ensure that Malaysia has a robust financing ecosystem which is fully conducive to the emergence of new projects. Part of the solution involves increasing understanding of solar projects in the banking sector. Beyond the banking segment we are actively looking into the options presented by energy investors through the provision of leasing solutions. This is because, if the utility grid price continues to rise at the current rate of about three per cent, there will be increasing numbers of projects that secure financing via leasing.
How is technology set to determine the direction of Solarvest and the wider solar industry in the coming years?
Technologies such as big data and new materials for solar panels are set to be the drivers of the industry. However, adoption and deployment is relative; from our perspective there are two components to this discussion.
First, there are external factors. Advancement in energy storage technology, for instance, will have greater relevance in more advanced nations and storage solutions are rare in Malaysia because of the high costs involved. Similarly, fully integrated smart grids are still a long way off compared to other markets, such as Australia, where progress is more visible. Local players are taking steps that will enable the integration of this technology, but in the short term attention is on encouraging the take-up of other technologies, including distributed solar generation solutions. In terms of the local industry, the fall in the cost of solar installation means that distributed systems will increase in prominence. Overall, the increasing ubiquity of this type of technology is set to rise and this will help to foster industry growth on the external side.
Second, there are internal factors, i.e., the Solarvest perspective on technology. For example, we prioritise the use of technological platforms as the foundation on which to build company growth. On the operations side we are using enterprise resource planning software to manage all solar projects and we are running customer relationship management software to administer all post-project issues including tracking and monitoring. We are also co-working with local IT experts to explore blockchain technology in downstream solar energy distribution and tracking. Indeed, Solarvest firmly believes in energy transaction digitisation and views technology integration as key to improving the company’s competitive edge and its position as a future project developer and deliverer of high-efficiency solar solutions.
Regarding solar technology per se, the company has a design and development team specifically exploring options to adapt and incorporate new and innovative technologies into our system design. For example, we are exploring the optimum integration of monocrystalline silicon panels rather than polycrystalline within our projects since this strategy makes better business sense for both the rooftop and solar farm segments in regards to price and system performance lifetimes.