On February 15, 2019, Yeo Bee Yin, the Energy, Technology, Science, Climate Change and Environment Minister, has called for bids for an estimated RM2 billion worth of projects under LSS3 scheme to increase the production of electricity from renewable energy.
The competitive bidding process, Yeo said, would open from February to August 2019. By the end of the year, the outcome of the exercise is expected.
Who will win this bidding exercise?
First, this is an open tender free for all. Malaysia government is looking for whichever party that can offer the lowest price for the first 500 megawatts (MW) and pass all the required financial and technical qualifications.
Yeo explained that the contractors for engineering, construction and commissioning must be 100 per cent local and added that the ownership can be up to 49% foreign. She made it a point at the conference that the government is looking for the best price.
To lower electricity tariffs and get better financing rates from financial institutions, the quota offered to each developer will be increased to 100 MW from 30MW for the LSS3 scheme.
Yeo also added that quotas offered to developers will no longer be based on capacity range, to allow them to bid for higher capacities.
The main purpose is that by 2030, or sooner, electricity tariffs can be lowered and become competitive against other forms of energy power such as gas and coal.
Why is this important?
Renewable energy provide tariffs that are more stable because they do not rely on market prices of fuel, and are calculated based on the levelized cost of energy. With LSS2, the solar tariffs can go as low as 33.98 per kilowatt hour, and now with this open tender, it could go lower.
The two cycles of LSS projects had a total installed capacity of 958 MW.
The Malaysia government plans to increase the country’s electricity from 2 per cent from renewable sources to 20 percent in 2025. This means about 3,991 MW of new energy capacity will be needed in addition to the grid. By doing this, it will open more opportunities to incumbents and new entrants. This without a doubt will be more noticeable on the smaller players.
The latest round of LSS projects, as analysts pointed out, would benefit developers and operators of solar parks like Cypark Resources Bhd, Mega First, Malakoff Bhd, YTL International Power Bhd, Tenaga Nasional Bhd and Ranhill Holdings Bhd.
Malaysia government also plans to increase electricity generation by other mechanisms such as feed in tariff sources, biogas, biomass, and geothermal mini hydro while promoting LSS projects.
The LSS3 project is an effort of the Malaysia Government towards the growth of renewable energy in the country. LSS projects produce 958 MW of electricity between the end of 2018 until 2020.
In Malaysia, solar energy accounts for about 67% of renewable energy capacity while biogas and biomass are the second largest with 28%.
It is expected that LLS3 will have the same success of the previous two rounds, the most recent of which saw awards for 563MW in December 2017.
The submission of proposal will close on August 19, 2019, before 5.00pm.