Electricity (Utilities)
Renewable Energy Sector - Path to Liberalisation
Mon, 23-Sep-2024 06:06 am
by Tan Sue Wen • Apex Research

Sector Update

 

  • CRESS. On 20 Sep 24, the Energy Commission launched the Corporate Renewable Energy Supply Scheme (CRESS) framework, scheduled for implementation later in the same month. The scheme applies to high voltage (HV) and medium voltage (MV) corporate consumers in Peninsular Malaysia, offering access to green energy and promoting sustainability in the country.

 

  • How it works? Under the CRESS framework, there are four key parties: (i) the Renewable Energy (RE) developer, (ii) the Green Consumer (corporate consumer), (iii) the Single Buyer (SB), and (iv) Tenaga Nasional Berhad (TNB).

  1. Green Consumer will pay the RE developer for energy at an agreed price (which includes the RE cost plus the SAC). along with a separate service fee to TNB.

  2. RE developer will dispatch the RE using TNB’s grid and pay the SB the SAC based on the category (either 25 sen/kWh or 45 sen/kWh).

  3. SB is responsible for overseeing dispatch scheduling and managing settlements for the energy produced by the RE developer. This includes passing the SAC to TNB for grid usage.

  4. TNB is primarily responsible for end-user services, including billing, customer support, and grid operation.

  5. RE developer must have at least 51% local ownership and the green energy plant must have an installed capacity of at least 30MW with a direct connection.

 

  • System Access Charge (SAC). CRESS framework offers two SAC rates: (i) 25 sen/kWh for renewable energy (RE) plants with firm output, such as solar plants with an energy storage system storing at least 50% of their capacity, and (ii) 45 sen/kWh for non-firm output. Should a firm-output RE plant fails to meet its required output, it will automatically be charged the non-firm rate of 45 sen/kWh. The framework also includes a market support measure, allowing developers to sell electricity to the SB at 8 sen/kWh for a limited time.

 

  • CRESS vs CGPP. We see the CRESS framework as a variation of CGPP, but with a more liberalised approach. Key differences are: i) CGPP operates via a virtual PPA with the RE developer, while CRESS uses a physical PPA through the grid system, ii) CGPP is based on bidding within a quota of 800MW, whereas CRESS operates on a willing buyer and willing seller basis, iii) CGPP is typically limited to one corporate consumer, while CRESS allows contracts involving multiple corporate consumers, and iv) CGPP is locked into a 21-year PPA, while CRESS is not limited by a fixed agreement term.

 

  • In-house views. We are neutral on this framework as it seems less appealing to users as compared against subscribing to GET. Based on our in-house analysis, GET offers a more attractive rate for MV and HV commercial users compared with CRESS (see Appendix below). However, there could be higher uptake of CRESS if: i) the SAC for non-firm output is reduced to 25 sen/kWh, ii) the cost of BESS becomes more commercially viable, and/or iii) an expectation of much higher electricity from the grid over the medium to long term, which could be attributed to elevated coal or natural gas prices.

 

  • Nonetheless, we maintain an Overweight view on the RE sector, backed by policy supports under the NETR. With solar module prices at a historic low of USD0.10/watt due to oversupply, this is likely to spark even more interest in solar investments. Combined with ongoing RE initiatives driving the transition to low-carbon solutions, this should benefit solar EPCC companies under our coverage, Solarvest (BUY, TP:RM1.94), Samaiden (BUY, TP:RM1.66) and Pekat (BUY, TP:RM1.20).

Recommendation: Overweight
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