Solar power market to see stronger growth
23 Mar 2021
The local solar power market is expected to recover and see stronger growth as significant investor interests and project announcements increase, according to Fitch Solutions Inc.
The research firm revised its forecasts on the sector backed by stronger regulatory support and improved financing for the sector as well as the continued success of solar tenders, further underlining its view of Malaysia being an attractive investment destination for renewables developers.
“While we expect some near-term headwinds to weigh on growth in 2020, stemming from the Covid-19 pandemic and ongoing political uncertainties, we expect the sector to recover from 2021 and to see stronger growth over the coming years. We now expect solar capacity to reach over 4GW by 2030, from an estimated 996MW as of end-2020,” it said in a recent note.
Fitch Solutions said the government’s commitment to the domestic renewables sector has strengthened in recent years and a number of regulations and financing incentives have been put in place to encourage investment into the sector.
“As part of the Budget for 2021, the Green Investment Tax Allowance and Green Income Tax Exemption incentives will be extended to 2025, based on the expanded qualifying list of green assets from last year. Concurrently, the Green Technology Financing Scheme 3.0 will be guaranteed by Danajamin at RM2 billion,” it said.
It added that the government is looking to enhance green energy trading with the private sector and aim to launch a Renewable Energy Transition Roadmap 2035.
In line with its Generation Development Plan 2020-2030, the aim is to boost the country’s share of renewables in the power mix to 20% by 2025.
“We believe that the roadmap will contain provisions and more specific actions to accelerate renewables growth, and may include strategies such as peer-to-peer electricity trading or transitioning towards a mandatory renewable energy certificate market,” it said.
Additionally, Fitch Solutions said the last round of solar auctions in May 2020 attracted interest despite the pandemic, and as of March 2021 the government shortlisted 30 winning bidders with a combined capacity of 823MW.
“These projects are expected to enter into commercial operations in 2022 and 2023. Winning bid prices have also continued to register a slight decline from the previous auction, and ranged from as low as 18.5 sen/kWh for 10-30MW projects and 17.68 sen/kWh to 19.7 sen/kWh for 30-50MW projects,” it said.
Given that these tenders have continued to register ongoing success, Fitch Solutions believe that the government will continue to launch more solar tenders over the coming years, possibly with larger target capacities, particularly as it seeks to revitalise the economy following the effects of the pandemic
Meanwhile, players within the sector saw light after winning bids for the fourth cycle of the large-scale solar programme (LSS4).
Last week, the Energy Commission announced the list of 30 shortlisted bidders of the LSS4, with prices ranging from 17.68 sen/kWh to 24.81 sen/kWh, for a total awarded capacity of 823.06MW out of the 1,000MW offered.
Worth between RM200 million to RM250 million each, Solarvest Holdings Bhd, Samaiden Group Bhd and Sunway Construction Group Bhd (SunCon) became the preferred engineering, procurement, construction and commissioning (EPCC) contractors to build the LSS4 according to Affin Hwang Capital.
It also added that based on the construction cost of RM2.5 million per MW capacity, the total contract would likely be between RM600 million to RM700 million.
Source: The Malaysian Reserve