SUPPLY AGREEMENT WITH RENEWABLE ENERGY (SARE) – A GAME CHANGER
by Ir. Azean Abu Samad.
Malaysia has set its goal to increase renewable energy to 20% by 2025. We can argue that the fastest way to achieve this is by rolling out utility-scale solar farms. These solar farms, however, use fertile lands that otherwise could be used for growing food or provide green lungs to the nation. That is why we need to tap into thousands of acres of space on building rooftops that are sitting idle.
Solar farms in Malaysia, also known as Large Scale Solar (LSS), are awarded to the lowest offer in bidding exercise under the purview of the government. The winner will sign a 25 year power purchase agreement (PPA) with Tenaga Nasional Berhad (TNB) as the off taker. This makes it exciting for investor to invest in LSS projects as the contract yields attractive returns with low risk on payment. The question is, how do we make growing solar farms on rooftop as exciting as LSS? To make this happen, this is where Supply Agreement with Renewable Energy (SARE) comes in, approved by Energy Commission.
1. What is SARE?
SARE contract adopts the Solar PPA contract, only now it involves three parties. SARE tripartite contract is between Customer as the host, solar investor also known as Asset Owner and TNB as the utility that is responsible for metering, billing and collection to facilitate Solar Energy Purchase (SEP) business model.
Click here to watch video on SARE.
2. How does SARE tripartite contract work?
SARE contract makes Solar Energy Purchase model possible. It clearly defines the roles and responsibilities of every party throughout contract period as shown below.
3. Electricity flow and metering scheme for Solar Energy Purchase
Let’s take you through step by step of the electricity flow and how the electricity is being measured for billing. Recall that you now have 2 sources of electricity flowing into your electricity switch board – grid electricity and solar electricity. We always receive question which electricity flows in first to meet your electricity demand. Well, the simplified answer is solar electricity will get consumed first and if the energy is still not enough, the electricity from the grid will automatically flow in to your premise. OK, now let’s go through the steps.
Your solar photovoltaic system generates electricity in direct current (DC)
Inverter will transform DC to alternating current (AC) to be used by electrical appliances in the premise
The solar electricity will flow through Meter 2, also know as Solar Energy Meter, that will measure solar electricity being produced
The solar electricity flows to your main switch board that will then being distributed to your electrical load
If there is excess solar electricity not consumed, the electricity will be exported to TNB electrical grid and measured by Meter 1. If you opt for Net Energy Metering Scheme (NEM), it is a bi-directional meter that is able to measure electricity flowing in and out. If you do not opt for this scheme, make sure you size up your solar PV system without energy excess as you cannot export the excess energy to the grid
Electricity from TNB grid will be imported to your premise and measured by Meter 1 to meet your electrical loads when the electricity from solar is not enough to cover 100% of your demand, or during night-time when there is no solar energy
4. Benefits of unified electricity bill to customers and asset owners
Notice how in SARE, TNB’s main role has evolved from the main seller of electricity to only metering, billing and collection agency. Utilizing TNB as a common platform to connect solar players and building owners will benefit both customers and solar asset owners In energy and financial transactions.
Benefits of unified electricity bill for both customers and asset owners:
Customers will receive unified bill from TNB that is reliable and easy to track for audit trail purposes.
Unified bill consists of:
Total energy bought from TNB
Total energy sold to TNB (if customer opts for Net Energy Metering to sell excess solar energy)
Total energy generated by solar photovoltaic system
Customers will have the assurance that the Solar Energy Meter, used to meter solar energy generated is certified, and within allowable accuracy limit as set by Energy Commission
Solar Asset Owners do not have to invest in procuring and maintaining billing capability
Asset Owners have the assurance that the Solar Energy Meter installed, is certified and have met Energy Commission guideline
Asset Owners can leverage TNB’s customer interface and mature customer payment channels
Asset Owners can minimize risk of late payment as TNB’s billing system will auto generate payment reminder to customers in the event of late or non-payment
5. Let’s have a closer look at how unified TNB bill looks like.
First page of monthly energy statement that summarizes amount payable and breakdown of electricity purchased from utility and solar energy
1. All energy transactions are under the same account number (easy to track & audit)
2. You will see the summary of payable and due date
3. At a glance, you will see the summary of energy imported and exported to TNB
4. Lastly, you will can see the summary of solar energy generated under Solar Energy Purchase contract
Second page is your normal electricity bill that itemizes the electricity that you import from TNB grid and excess solar electricity that you export to TNB under Net Energy Metering Scheme (NEM). Click here if you need a refresher on NEM.
Your normal electricity bill will specify total energy imported from TNB and excess solar energy exported to TNB under NEM scheme. On the right column of the bill, you can also find your NEM credit that will be rolled over to the next month, as well as the date that your NEM credit will expire.
Third page is your Solar Energy Purchase bill that itemizes solar energy generated by the system installed on your rooftop.
Information on your SEP contract and the solar energy generated for the month