There are still doubts on the values of such technology despite its cost effectiveness in the long term, says minister

By RAHIMI YUNUS / Pic By MUHD AMIN NAHARUL

Environmentally friendly projects — particularly the development of renewable energy (RE) plants — are still facing difficulties in securing fiscal assistance from financial institutions in the country.

Ministry of Energy, Green Technology and Water secretary general Datuk Seri Dr Zaini Ujang said most financial institutions would shy away from green projects due to the uncertainties and risk factors that are involved.

“Financial institutions are still very reluctant to provide big funds for green projects because the risk factor is not yet developed.

“If you have a project that is new and has never been done before, the risk is higher,” Zaini told The Malaysian Reserve recently.

Citing solar projects as an example, Zaini said there are still doubts on the prospects and values of such a technology, despite its long-term cost effectiveness.

“RE technology is getting more advanced, while the price for its implementation is declining.

“A RM1 billion solar project today could be valued at RM700 million in the next three years. Now, can a company survive in that environment?” Zaini said.

Moreover, he said RE projects might receive funds, but with higher interest rates compared to fossil-fuel power plants.

Currently, Zaini said the interest rate for facilities approved for the development of coal or gas plant projects is at around 4.5%, while a large-scale solar power plant has to settle for facilities pegged with interest rates that are as low as 8%.

“A RM6 billion gas plant project has no issue to get funds with a favourable interest rate because the formula and risk factor is already there,” Zaini (picture) said.

He added that the Green Technology Financing Scheme — which offers a rebate of 2% on the interest or profit rate charged by the financial institutions — would be able to alleviate financial obligations that are faced by green projects’ owners.

However, he added that such a scheme could only do so much.

“Take a 21-year loan wing for a RM1 billion solar project as an example. The 6% rate is still considered very high for a company to sustain,” he said.

He said the higher cost would then be translated into tariff, which might have to be absorbed by the consumers.

Malaysia is one of the countries that is committed to achieving up to a 45% reduction in its greenhouse gas emissions intensity of gross domestic product by 2030, relative to the 2005 levels, after signing the Paris Agreement 2015.

Under the Green Technology Master Plan, the country aims to boost the green technology sector to RM180 billion in revenue, while creating more than 200,000 green jobs by 2030.

RE currently makes up 22% of the total power mix in the country, and is targeted to reach 50% of the total contribution by 2050.

Globally, World Energy Outlook 2017 by the International Energy Agency stated that global energy needs will rise by 30% by the year 2040, equivalent of adding another China and India to today’s global demand.

The largest demand growth of almost 30% is recorded by India, which contributes some 11% of the total global energy.

Demand from South-East Asia is projected to grow at twice the pace of China.

The report also revealed that RE will capture two-thirds of global investment in power plants to 2040.

China and India will lead the instalations of solar photovoltaics, making solar the largest source of low-carbon capacity by 2040.

In the European Union, 80% of new capacity will be RE, led by wind power.