Published by Norway-Asia Business Review
Soon there will be three solar parks gleaming in the sun on Peninsular Malaysia. Merchang in the north, Jasin in the south and Gurun in the west are the perfect spots for developing the solar plants, each spanning more than 200 acres.
The project is developed by Norwegian firm Scatec Solar and a local consortium consisting of ItraMAS, Maltech and Cam Lite. Scatec Solar is a solar power producer delivering affordable, rapidly deployable and sustainable sources of clean energy worldwide. Scatec Solar already develops, builds, owns, operates and maintains solar power plants in the Czech Republic, South Africa, Rwanda, Honduras and Jordan. In late 2016 the company also announced projects in Mozambique and Brazil.
ItraMAS is a Malaysian LED lighting, traffic management and construction engineering company, and the lead sponsor of the three solar project. The consortium, led by ItraMAS, has signed three 21-year Power Purchase Agreements (PPAs) with the country’s largest electricity provider, Tenaga Nasional Berhad (TNB). The role of Scatec is explained by Mr Raymond Carlsen, CEO of Scatec Solar: “Scatec Solar will take the leading role for EPC activities during the construction phase for all three projects, as well as operation and maintenance through O&M service contracts.”
Scatec Solar will invest USD 60 million through preference shares, partly convertible to a 49% equity ownership in the projects. Financing of the project is handled by CIMB, Malaysia’s second largest commercial bank. Construction of the plants is scheduled to start after financial close in 2017.
Activities in Asia
“This is a landmark opportunity to bring our wide-ranging expertise to realize the largest solar energy portfolio in South East Asia. For Scatec Solar and our partners, this is a stepping stone to enter one of the most dynamic and fast-growing regions of the world” said Mr Carlsen.
This is the first of Scatec Solar’s activities in Asia, but there are plans to get more projects underway in the future. “We are pursuing a 150 MW project in Pakistan. We have signed a joint development agreement with Nizam Energy for the development of 300 MW solar power plants, and the first 150 MW under this agreement is included in our pipeline. We currently also hold project opportunities with a combined capacity of 2,008 MW across the Americas, Africa and Asia and we are evaluating opportunities in countries like Bangladesh and Myanmar.”
These activities match the mission of Scatec Solar to “bring utility-scale solar to emerging economies” as stated in the introduction video on the company’s website. Mr Carlsen explains the importance of this mission. “Scatec Solar is actively pursuing a growth strategy with a clear-cut focus on developing utility-scale solar plants in emerging markets. We have an ambition to grow our asset base from current 322 MW to 1,300-1,500 MW in operation and under construction by the end of 2018.”
Cutting carbon emissions
For Malaysia, the solar plants are an important contribution to plans for lowering carbon emissions. Economic growth and dependency on non-renewable energy sources created carbon emissions of 8 metric tons per capita in Malaysia in 2013. The global average in that year was almost 5 metric tons per capita. After the Paris Climate Agreement, Malaysia has pledged to cut those emissions 40% by 2020. The three Malaysian solar projects of Scatec Solar are expected to generate 285,000 MW of electricity and avoid 210,000 tons of carbon emissions per year.
The Malaysian government’s plans for cutting carbon emissions are stated in the Eleventh Malaysia Plan. “To achieve the voluntary target of reducing greenhouse gases (GHGs) emission intensity of GDP by up to 40% in the year 2020, compared to 2005 levels, various mitigation measures were undertaken during the Tenth Plan. […] The Renewable Energy Act was enforced in 2011 to accelerate contribution from green energy such as solar photovoltaic (PV), biomass, biogas and mini hydro in Malaysia’s electricity generation mix.” [sic]
Renewable energy (RE) is a significant part of the government’s strategy for reaching these goals. “RE capacity is expected to reach 2,080 MW by 2020, contributing to 7.8% of total installed capacity in Peninsular Malaysia and Sabah. In the Eleventh Plan, focus will be on promoting new RE sources, enhancing capacity of RE personnel and implementing net energy metering to further intensify the development of RE.” The total installed capacity of renewable energy in Malaysia in 2014 was 243 MW, meaning the government plans to increase capacity almost nine-fold by 2020.
Fostering local development
Working together with local companies is important as stated by Mr Choo Boo Lee, CEO of ItraMAS, in a press release by Scatec Solar. “This is a significant achievement for Malaysia and the solar industry in the region as these projects will help develop local supply chains and uplift local communities”. Mr Carlsen agrees: “Scatec Solar strives to use and strengthen local supply chains and entrepreneurs to the extent possible in our local operations. We help develop local supply chains through partnerships and the sharing of knowledge and experience from other markets.
Community relations and social and environmental impacts are managed as an integrated part of our business. We plan and implement community development programmes in all the local areas where we have operations. We want to ensure good relations and cooperation with the communities near our plants and we want to make a positive contribution. Examples of such programmes include initiatives related to health and education; building language centres, developing health programmes, supporting smaller businesses and engaging youths in sports.
We also contribute to job creation by employing local labour as far as possible. This can contribute to reducing unemployment rates and it also provides knowledge transfer to the local communities where we are present. We use local services and skills in all the phases of our projects, with the most intense use of local labour in the construction phase. These construction jobs are often short term, as the labour-intensive construction phase usually lasts 6-14 months. Still, employees learn transferable and valuable skills that can open up opportunities for future employment in any industry.”
This is in line with governmental plans as outlined in the previously-mentioned Eleventh Malaysia Plan.
“The RE industry will diversify Malaysia’s energy mix in a more sustainable manner, create employment, and enhance skills. The industry is expected to create about 15,300 jobs, comprising of skilled and semi-skilled jobs. The Government will provide training to 1,740 personnel through the Sustainable Energy Development Authority (SEDA), creating experts in the field of biomass, biogas, mini hydro and solar PV.”
A move towards renewable energies doesn’t require hindering the economic growth of Malaysia. The Organisation for Economic Co-operation and Development (OECD) used the term ‘green growth’ when referring to a desire to continue economic development while fostering sustainability at the same time. ”Green and growth go very well together. Green growth means we go for growth, we recover GDP… but we preserve and we actually enhance the endowment of natural resources that we were provided with, and which today are sustaining the economic activity on our planet,” stated OECD Secretary-General, Mr Ángel Gurría, on the OECD website.
According to the OECD “[f]ossil fuels will continue to dominate energy supply for some time simply because they are so energy dense, societies and infrastructure have evolved around them, and due to the fact that innovation and change take time. Nevertheless, new sources of energy need to be deployed on a scale equivalent to the industrial revolution. Without decisive action, energy-related emissions of CO₂ will double by 2050.”
Scatec Solar will soon contribute to green growth of Malaysia with the solar projects on Peninsular Malaysia. More countries in the region are expected to follow soon.