On 1 April 2021, the Energy Commission Malaysia (‘Commission’) published the Guidelines for Solar Photovoltaic Installation under Net Offset Virtual Aggregations (NOVA) Programme for Peninsular Malaysia (‘NOVA Guidelines’).¹ The NOVA Guidelines set out the framework and requirements of the Net Offset Virtual Aggregation initiative of Malaysia’s Net Energy Metering 3.0 programme (‘NEM NOVA’). Such details have been eagerly awaited by industry players, with interest having been particularly piqued by its introduction of virtual aggregation.² The release of the NOVA Guidelines also serves to complete the trilogy of initiatives under the NET Energy Metering 3.0 programme that was announced by the Malaysian Government in December 2020.
 
WHAT IS NEM NOVA?
 
NEM NOVA is a solar energy-centric net energy metering initiative for non-domestic consumers of Tenaga Nasional Berhad (‘Distribution Licensee’), the electricity utility company in Peninsular Malaysia. Non-domestic consumers refer to consumers in the commercial, industrial, mining and agriculture industries.
 
Under NEM NOVA, a non-domestic consumer (‘NOVA Consumer’) will install a solar photovoltaic installation in a premise that they use or occupy. Such installation should be designed primarily for self-consumption. However, any excess energy that is not consumed by the NOVA Consumer at their premise due to operational constraints or variation in load demands may be exported to other designated premises (‘Designated Premise’) by way of the Distribution Licensee’s distribution system or the grid owner’s transmission system (‘Supply System’).
 
A total capacity of 300MW is available under NEM NOVA and applications for quota allocation can be made from 1 April 2021 to 31 December 2023.
 
Categories under NEM NOVA
 
While the key aspect of NEM NOVA is the export of excess energy to Designated Premises, it is an option and not a mandatory element of the programme. A NOVA Consumer may choose to only export excess energy to the Distribution Licensee, which is similar to the structure under the NEM Rakyat and NEM GoMEn initiatives.³ This is reflected in the NOVA Guidelines, which divide NEM NOVA into two categories:
 
Category A: Offset only
 
Under Category A, any excess energy generated in a month that is not consumed by the NOVA Consumer may be exported to the Distribution Licensee. The value of energy exported is subsequently credited to the NOVA Consumer’s account with the Distribution Licensee and such credits can be used to offset the bill payment (but not the minimum monthly charge in the tariff schedule) for the next billing period. If the offset is not exercised in the next billing period, the credits shall be forfeited.
 
The unit price of the energy exported shall be based on Average SMP rather than the gazetted tariff. “Average SMP” refers to the monthly average system marginal price⁴ for the daily period between 07:00 and 19:00 hours in the preceding calendar month.
 
Category B: Offset + Virtual Aggregation
 
Under Category B, any excess energy generated in a month that is not consumed by the NOVA Consumer may be exported to a maximum of three Designated Premises. It is pertinent to note that a Designated Premise must either be:
 

The value of energy exported is subsequently credited to the respective Designated Premise’s account with the Distribution Licensee and such credits can be used to offset the bill payment (but not the minimum monthly charge in the tariff schedule). Aggregation of such credits to the Designated Premises’ accounts will be based on a priority to be determined by the NOVA Consumer.
 
As is the case in Category A, the unit price of the energy exported shall be based on Average SMP. For ease of accounting, the premise and Designated Premise(s) shall all have the same billing period.
 
Switching Categories
 
A NOVA Consumer may not switch categories, unless they have been under their present category for a minimum of twelve months and they have applied to the Distribution Licensee for the switch at least three months in advance.
 
REQUIREMENTS OF NEM NOVA
 
The NOVA Guidelines set out the requirements to be met for participation in NEM NOVA and these are considered below.
 
Period of Operation
 
Operation of an installation under NEM NOVA is limited to ten years. After the expiry of the ten-year period, the NOVA Consumer is only allowed to operate the installation for self-consumption.
 
Type of Installation Allowed
 
The solar photovoltaic installation shall comprise solar photovoltaic panels mounted on the rooftop of buildings within the NOVA Consumer’s premise. This is a departure from the previous Net Energy Metering programmes, which allowed for ground-mounted installations.
 
Capacity Limit of Installation
 
The maximum capacity of an installation under NEM NOVA is as follows:
 

Category A	Maximum capacity of 1,000 kW. This is subject to the following conditions:   Maximum capacity of inverter output of installation should not exceed 75% of Maximum Demand of the NOVA Consumer under their contract with the Distribution Licensee in relation to NEM NOVA. For low voltage consumers, maximum capacity is limited to 60% of fuse rating (for direct meters) or 60% of the current transformer rating.
Category B	Maximum capacity of 5,000 kW. This is subject to the following conditions:   Maximum capacity of inverter output of installation should not exceed 100% of Maximum Demand of the NOVA Consumer under their contract with the Distribution Licensee in relation to NEM NOVA. For low voltage consumers, maximum capacity is limited to 60% of fuse rating (for direct meters) or 60% of the current transformer rating.
Note: ‘Maximum Demand’ is defined in the NOVA Guidelines as twice the largest number of kilowatt-hours used during any consecutive thirty (30) minutes in a month. Maximum Demand is based on (i) the average of recorded Maximum Demand of the past twelve months, or (ii) declared Maximum Demand for NOVA Consumers with less than twelve months record.

 
Technical Requirements
 
The NOVA Guidelines contains the Technical Guideline for Connection of Indirect Solar PV Power Generation for Net Energy Metering (NEM 3.0 – NOVA), which sets out specific technical requirements for installations under NEM NOVA. This technical guideline will only apply to connections at medium voltage and low voltage networks.
 
Licensing Requirements
 
Pursuant to Section 9 of the Electricity Supply Act 1990 (‘ESA’), a licence is required for any person to use, work or operate any installation designed for the use and/or supply of electricity (‘Section 9 Licence’). However, a Section 9 Licence is only required for solar photovoltaic installations if the installation is above 24kWp for a single phase system or above 72kWp for a three-phase system.
 
A NOVA Consumer which is exempted from the licensing requirements will be required to submit a Notification of Exemption under Section 54 of the ESA to the Commission no later than 28 days before the commencement of operation of the installation.
 
Comments
 
The concept of virtual aggregation is unique in that it gives non-domestic consumers the opportunity to not only obtain credits for energy generated by their installation, but to also utilise those credits towards the billing accounts for other, non-generating premises. They will potentially be able to cover the electricity usage for more than one premise and lower their operating costs.
 
It is worth noting that there are two key financial considerations in participating in NEM NOVA. First, the virtual aggregation will only apply for the first ten years, after which generation by the installation will be solely for self-consumption. This means that after the ten-year period, only the premise on which the installation is located will reap the benefits of any offset. The Designated Premise(s) will cease to enjoy a reduction in their electricity bills.
 
Second, the offset under NEM NOVA is not on a “one-to-one” basis as is the case for NEM Rakyat and NEM GoMEn initiatives. Instead, the offset will vary depending on the prevailing market price.
 
There is no denying that NEM NOVA is a step forward for Malaysia’s goal to shift consumption towards that of renewable energy. Given that corporations are increasingly placing importance on environmental, social and corporate governance (ESG) goals, it seems likely that, notwithstanding the cost factors outlined above, we will see a positive response from non-domestic consumers to NEM NOVA.
 
For any enquiries, please contact Mr. Richard Khoo (Partner) or Ms. Rachel Chiah (Senior Associate).

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