SHINING EXAMPLE

Malaysia 2019 | GREEN ECONOMY | VIP INTERVIEW

TBY talks to Yeo Bee Yin, Minister of Energy, Science, Technology, Environment and Climate Change, on moving toward a green economy, competition in the power sector, and a new strategic plan.

How does the Ministry of Energy, Science, Technology, Environment and Climate Change (MESTECC) facilitate Malaysia's transition toward a climate-resilient green economy?

MESTECC increased its 2025 target for the share of renewable energy in the total electricity generation of the country from 2% to 20%, excluding large hydro. In the next seven years, we need to add 3.9GW of installed renewable energy capacity. We announced a new policy on Net Energy Metering to incentivize people with large roofs to install rooftop solar panels. We have 3.2 million residential properties, 450,000 commercial lots, 90,000 terraced factories, and 21,000 factories, which illustrates the great potential for rooftop solar in Malaysia, and we should maximize the unused land first. In addition, MESTECC has liberalized solar leasing, which makes it easier to arrange supply agreements. The asset owner no longer needs to be the building owner, which incentivizes companies. With the National Energy Efficiency Action Plan, we are going into energy efficiency, one of the lowest-hanging fruits to decarbonize the economy as well as save money. With about 5,000 buildings, the government is the largest owner in Malaysia, and many of them are not efficient. Moving forward, we want to close Energy Performance Contract in which companies invest in retrofitting these buildings and share in the savings, so that over a period of time they receive a net positive return on investment. In 2019, we will conduct this method with 50 government buildings as a pilot project. Going into electricity performance contracting will catalyze the energy service industry in Malaysia, while at the same time helping us be more efficient without a big capital investment from the government. We are finalizing a standard template to share, educate, and incentivize the government on all levels to go into energy performance contracts. Another important initiative of MESTECC is the Roadmap Towards Zero Single-Use Plastics, which we launched in October 2018. We do not want to talk merely about reducing and recycling; it is vital to talk about replacing too. We want to incentivize companies to replace hydrocarbon-based single-use plastics by eco-friendly alternatives. In November 2018 the Ministry of Finance announced a tax incentive status for companies that invest in biopolymers or bio-products. We want to create an ecosystem which fosters this green agenda regardless of any government investment. This ecosystem depends on four pillars: talent, technology, the regulatory framework and private capital investment. We are looking into green financing to create a macro-environment that incentivizes green investment in Malaysia. Eventually, we want to see Malaysia as a green economy hub, and as a green financing hub for all green projects around the Southeast Asia region. Green financing is a subset of Islamic financing so we are seeing synergies with some of our banks that have strong capabilities in this area. However, we are not restricting ourselves to Islamic financing and are liaising with stakeholders, the World Bank and the Asian Development Bank to better understand the models we can employ and the support they can provide to help develop Malaysia. If the international development banks are to play a role in Malaysia's green financing road map, it has to serve as a model for other developing countries as well. The eventual goal is indeed to be the model and example of other developing countries.

What are your expectations around the Large Scale Solar 3 (LSS3) scheme?

MESTECC has announced the Large Scale Solar 3 scheme tender for 500MW worth MYR2 billion (USD448.84 million), which will close for submission in August 2019. I expect LSS3 to be even more competitive than LSS2 and LSS1. We have more local players with whom foreign players can start a joint venture. Malaysian regulation requires 51% Malaysian ownership, which is not a restriction for foreign direct investment, as LSS is to a large extent about local land issues. For LSS3, we are mainly looking at competitiveness, while LSS4, which will be announced in 2020, will be more innovative. Projects for LSS3 can be undertaken anywhere, though bonus points will be given for utilizing unusable land. There is also an improvement where any one developer or joint venture can tender up to a maximum of 100MW compared with the previous restriction at 50MW. Apart from environmental motivations, renewable energy is an important driver for job creation, and it even creates more jobs per GWh than conventional energy. Prices for renewable energy, and solar energy in particular, have dropped by 80% since 2009, and grid parity can be achieved soon. Our policies our far from only based on the decarbonization of the economy or meeting our obligations under the Paris Agreement but also take into account the economic feasibility. Renewable energy gives us better tariffs, is more sustainable and generates new investment and job creation.

What are some ways in which the value chain in the power sector can become more competitive?

We aim to reform the sector and open it up to more competition. Investors will see a more comparative electricity power sector in Malaysia, with a more competitive environment. I see the power sector as a nurturing ground for our players to eventually export their services to other Southeast Asian countries. The goal is to make Malaysia a pivotal point for FDI in Southeast Asia. We will be more cost competitive than Singapore, with the same high level of talent, technology, and regulatory framework, and a competitive local market located close to other important Southeast Asian markets.

MESTECC recently launched its 2019 strategic plan called “Own It. Do It. Ace It.” Can you expand on the underlying vision and philosophy of this strategic plan?

There are around 7,000 people across Malaysia working under MESTECC agencies, and we want to drive the machinery of the government to ensure we run at full capacity. People tend to believe the private sector is more competitive; however, imagine a public sector that becomes efficient. There are many benefits that we can generate. We have set out around 20 initiatives each for energy, science, technology, and climate change, which we break down into timelines where KPIs must be met for each quarter. In this way, we systematically track our progress and achievements. We want to instill a new way of thinking in government agencies of being innovative and driven to achieve something bigger than what is deemed possible. The government is the country's biggest consumer in many aspects, such as building electricity use and catering, so how do we use government consumption to incentivize and help our industry to grow? How do we use taxpayers' money to a multiplier for our economy? These are questions we seek to address every day.