Corporate Renewable Energy Supply Scheme (CRESS): Malaysian Government introduces Third Party Access for Electricity Supply

Malaysia’s Ministry of Energy Transition and Water Transformation (‘Ministry’) has announced that the introduction of the Corporate Renewable Energy Supply Scheme (‘CRESS’)1, which will commence in September 2024. This new programme is intended to increase corporate consumers’ access to green electricity by allowing them the opportunity to procure green electricity supply directly from a renewable energy (‘RE’) power producer. What is particularly significant about CRESS, however, is that it is also the introduction of third party access to electricity supply in Peninsular Malaysia2.
 
OVERVIEW
 
Under CRESS, the supply of green electricity will be direct from the RE power producer to the corporate consumer. There are two ways in which such supply can be carried out: 
(1) Agreement between RE power producer and corporate consumer with supply to be made via the existing grid system and subject to payment of a specified system access charge; or 
(2) Participation of RE power producer in New Enhanced Dispatch Arrangement (NEDA) market3
The implementation of CRESS will be under the Energy Commission’s purview by virtue of the Electricity Supply Act 1990. Alongside this, the Single Buyer and the Grid System Operator will play the role of market and system operator, and are responsible for coordinating the access and dispatch aspects of CRESS based on an agreed regulatory framework.
 
GENERAL CONDITIONS FOR PARTICIPATING IN CRESS
 
In order to participate in CRESS, the following general conditions must be fulfilled: 
  • The RE power producer must be connected at high voltage levels. It should be noted that there does not seem to be a restriction on the type of RE source being utilised by the RE power producer.
  • The corporate consumer (either a new consumer or an existing consumer of Tenaga Nasional Berhad) must be from the commercial or industrial categories and with a medium to high voltage level.
  • For purposes of supply, the connection between the RE power producer and corporate consumer shall be a direct connection through the existing grid system.
  • The limit of the direct connection to the grid system will be based on the findings of the relevant Power System Study (PSS).
  • The electricity output by the RE power producer shall be on a firm basis.
  • RE power producers have the option to not produce electricity on a firm basis, but a higher system access charge rate will apply in such a case. 
At this juncture, more information is needed in relation to the criteria and procedure for participation, the establishment of the direct connection and requirements for the use of the grid system. The Ministry has said that the Energy Commission will be conducting a series of clarification sessions on the procedure and guidelines for industry players. It is likely that further details will be made available publicly once these sessions have concluded and as we draw closer to the scheduled month of September.
 
A STEP FORWARD FOR LIBERALISATION OF MALAYSIA’S ELECTRICITY MARKET
 
Aside from being a means through which corporations can obtain green electricity, CRESS also marks Malaysia’s foray into third party access for electricity supply. It is a progressive step away from the Single Buyer model and towards establishing a liberalised electricity market.
 
It is anticipated that CRESS will help reduce the risk and cost of the country’s electricity supply system and provide industry players with the opportunity to compete with one another. Given this, the focus of RE development in the future will transition from a typical power purchase agreement model to a CRESS model.
 
MORE TO COME
 
As part of the Malaysian Government’s GREENS MADANI initiative, the introduction of CRESS is in line with the nation’s aspiration to increase RE installed capacity from the current 26% to 40% by year 2035 and 70% by year 2025. CRESS is a promising effort towards achieving this, with a projected reduction in carbon emissions by 701,000 tCO2, generation of direct investment in the excess of RM10 billion and creation of an estimated 14,000 job opportunities in the RE industry.
 
It will be interesting to see if CRESS achieves its desired dual effect of encouraging RE development in the country as well as opening up the electricity market. If the response is positive, it is likely that the scope of CRESS will be expanded and other, new initiatives will be rolled out in due course.
 
 
For enquiries, please contact Richard Khoo (Partner) and Rachel Chiah (Senior Associate) of the Energy Practice of Skrine.
 
 

1 The Ministry’s media statement on CRESS is available here.
2 It should be noted that CRESS would presently be available only in Peninsular Malaysia. Pursuant to the Suspension of the Operation of the Act (Sarawak) Order 1990 [P.U. (A) 272/1990] and the Electricity Supply (Suspension of Operation of the Act for Sabah) Order 2023 [P.U.(A) 394/2023], the operation of the Electricity Supply Act 1990 was suspended for the States of Sarawak and Sabah respectively. Electricity supply in the States of Sabah and Sarawak is governed at State and not Federal level.
3 NEDA is a programme under which registered power generators are allowed to bid their variable costs (fuel cost and operation and maintenance cost) other than those stated in their power purchase agreements / work order in the sale of electricity to the Single Buyer.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.