On 5 February 2024, the Single Buyer
1 announced that applications for participation in the Low Carbon Energy Generation programme (‘
LCEG Programme’) are open.
2 This comes on the heels of the announcement made by Malaysia’s Ministry Energy Transition and Public Utilities on 26 January 2024 with respect to the implementation of four renewable energy (‘
RE’) initiatives, including the LCEG.
3
WHAT IS THE LCEG PROGRAMME?
The LCEG Programme applies to power generation projects that utilise non-solar resources, including wind, small hydro, biomass and hydrogen, and such projects will have to be registered for participation in the New Enhanced Dispatch Arrangement (‘
NEDA’)
4. A total quota of 400MW has been made available under the LCEG Programme on a ‘
first come, first served’ basis.
PARTICIPATION IN NEDA
Category of NEDA Participation
As noted above, projects that are part of the LCEG Programme will need to be participating projects in NEDA. Subject to the capacity of the plant, applicants have the option to participate in either of the following categories:
Bidding and Settlement
Applicants should note that in the event they opt to participate as a Large Merchant Generator, they will be required to submit their bid price for the sale of energy to the Single Buyer. Subsequently, the Single Buyer will schedule the dispatch of energy based on the bid prices received from the relevant NEDA participants. Payment for energy sold to the Single Buyer will be based on the Actual System Marginal Price
5.
In contrast, applicants participating as a Price Taker are not subject to the bidding mechanism. Instead, as Price Takers, they are only required to submit to the Single Buyer their planned generation schedule for the next trading day. The Single Buyer will then purchase the energy generated by the Price Taker’s plant at the Actual System Marginal Price.
Penalty for Shortfall in Output
It is also pertinent to note that any shortfall in the declared output by a Merchant Generator will result in a penalty of RM150 per MW being imposed. In the case of a Price Taker, there will be no penalty for any failure to meet the declared output.
MORE DETAILS TO COME?
At the time of writing, the information that has been provided by the Single Buyer on the LCEG Programme is very brief. Further, the registration form that is available on their website seems to cater more for an expression of interest, rather than an application. It may be that the Single Buyer intends to first assess and pre-qualify the applicants before allowing them to proceed with outlining a detailed proposal. This would help ensure that the applicants have the capability and resources to participate in the LCEG Programme.
It is anticipated that the Single Buyer will release more information on the LCEG Programme, including the criteria for participation and requirements for the applicant’s project. There may be difficulty in garnering interest for the LCEG Programme until such information is available.
Alert by Richard Khoo (Partner) and Rachel Chiah (Senior Associate) of the Energy Practice of Skrine.
1 The Single Buyer is the entity authorised by the Minister of Energy Transition and Public Utilities pursuant to the Electricity Supply Act 1990 to conduct electricity planning and manage electricity procurement services for Peninsular Malaysia.
2 The announcement by Single Buyer is available
here.
3 Our earlier Alert on the initiatives announced by the Ministry of Energy Transition and Public Utilities, which includes the Low Carbon Energy Generation Programme, is available
here.
4 NEDA is a programme under which generators may sell energy generated by their respective plants to the Single Buyer at prices that take into account variable costs such as fuel cost and operations and maintenance cost. More information on NEDA is available
here.
5 Under the NEDA Guidelines, “
Actual System Marginal Price” means the price of the most expensive marginal generator dispatched by the Grid System Operator to meet actual demand in a half-hour period.