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Green energy – between investments and returns

Green energy – between investments and returns

29 Nov 2023

The government plays a crucial role in forming clear holistic policies and providing the necessary incentives and subsidies to facilitate greater adoption of green energy in the country.

“It is always about the right balance when it comes to producing green energy.

“Investment that needs to be deployed and the returns need to justify the cost of producing green energy,” Malakoff Corp Bhd head of sustainability, research and investor relations, Saravanan Desigamanie said.

“If you are talking about an internal rate of return (IRR) of mid-single digit, it is deemed as not as exciting as a double-digit IRR that comes from a typical thermal asset. That is something first-generation power plants used to enjoy.

“As we make the transition, we need to really balance this with the right commercial value for green energy, whether this is in the form of feed-in tariff or incentives, or tax rebates.

“There are financing opportunities that the financial institutions are introducing. This would allow companies to carry out green initiatives without being too heavy on the balance sheet,” he said during the MARC Malaysian Bond & Sukuk Conference 2023 yesterday.

Desigamanie pointed out that the energy trilemma comes into the picture in the form of affordability and availability.

He said one way to look at it is to analyse the merit order of the country’s supply generation, whereby the cheapest source of fuel would be at the top of the merit order when it comes to supplying power to the grid.

“But as we move along, as there is higher deployment of renewable energy, higher scalability and better technology, then we would see a reduction in LCOE (levelised cost of energy),” Saravanan added.

Meanwhile, Leader Energy Holding Bhd group chief executive officer Gan Boon Hean said it needs a clear policy from the government on how some of these green initiatives will be carried out.

“A lot of announcements have been made under the National Energy Transition Roadmap but we are still waiting for the details and how these will be implemented.

“A few big companies such as Tenaga Nasional Bhd and Gentari have been mentioned. But this should also extend to all the other players in the market.

“As we have seen in the large-scale solar tender by the Energy Commission, there are more than enough local industry players that are able to participate and contribute to the development of renewable energy,” Gan said.

He added that the country should not look at Malaysia alone when it comes to green energy.

“We should look at the Asean grid, which was an idea mooted way back in the 1980s but until today, has not been really developed as a completely connected Asean grid.

“With this energy exchange and export of energy, as well as importation of renewable energy from Singapore, we should accelerate the completion of the Asean grid,” Gan explained.

He pointed out that there are plenty of renewable energy resources such as hydro in Laos and wind in Vietnam.

“The whole of Asean should look at it as one committee like the European Union, which implemented the whole (green energy) industry as one. This will improve energy efficiency and reduce capital expenditure,” Gan added.

Interconnecting power grids in the region is a key strategy in strengthening South-East Asia’s energy security and transitioning to renewables through efficient resource sharing.

The transmission of renewable energy to Singapore from the Laos via Thailand and Malaysia was a milestone in cross-border electricity trade in Asean.

Source: The Star