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Climate change may sound like a distant topic but the negative environmental impact experienced is evident as many countries are facing devastating consequences.
The flood that affected 11 Malaysian states in late December 2022 and early January 2023 resulted in overall losses of RM6.1 billion, equivalent to 0.4 per cent of the country’s nominal Gross Domestic Product (GDP).
In a report which was released in April 2022, the United Nations (UN) has warned that “the world is on a fast track to climate disaster” and Malaysia has not been spared from it. At a macro level, the world is also paying the price for climate change. Research by the Swiss Re Institute showed that the world economy will shed 18% of GDP from climate change if no further action is taken.
While most countries are taking their initiatives in reducing greenhouse gas emissions, developed countries are also making initiatives in helping vulnerable countries which are being affected by climate disasters. One such is the breakthrough agreement signed by the participating countries of the United Nations Climate Change Conference COP27.
While Governments and corporations play key roles in driving environmental, social, and governance (ESG) initiatives to improve the environment, there is now increased awareness amongst consumers to take part in environmental preservation and sustainability efforts.
As a clean energy solutionist with 11 years of experience, we have witnessed unprecedented uptake in this industry in the past few years. We foresee the following trends and initiatives that will reinvent the advancement of renewable energy for 2023.
Reinventing Energy with Solar
We observe that there is increasing interest in solar PV systems with its two-pronged approach of cost-saving and sustainability. According to Mordor Intelligence, the solar energy market is expected to grow at a CAGR of 2.5% between 2019 to 2026. In terms of solar PV system adoption, the report also pointed out that Vietnam and Malaysia have the highest number of installations, with 12.2 GW of solar PV projects being installed in 2020.
The newly-minted Natural Resources, Environment, and Climate Change Minister, Nik Nazmi Nik Ahmad is also steering the Ministry to focus on issues related to floods, energy use, climate change, and environmental protection. With this, we believe the country is poised to achieve the net zero target by 2050.
ESG & EV Gains Momentum
Beyond the consumer market, businesses also play a part in promoting the usage of renewable energy.
As the Government has begun implementing targeted subsidies, medium voltage (MV) and high voltage (HV) users will be charged a surcharge of 20 sen per kWh from January 1, 2023. Based on the calculation, this will be an increase from RM0.0037 per kWh, making it an average 40.5% of cost increase to businesses. The rising production cost has escalated the need for business owners to shift to renewable energy solutions, which not only reduces energy cost but also fulfills ESG objectives.
We’ve had notable corporations and SME clients such as BOH Tea, Jooi Brothers (ASADI), LY Furniture, IKEA, and UWC who have embarked on ESG journeys. Overall, a strong ESG proposition helps companies to tap into new markets, attract businesses and consumers and maintain a competitive advantage.
Along with the supportive EV measures many more will be able to enjoy double savings, first from their homes and second from their cars.
There are 23 million vehicles in Malaysia that contribute to carbon dioxide emission, the most common greenhouse gas. Electric vehicles are a major contributor to addressing environmental pollution. With EV gaining traction, I am very excited that many measures are being introduced. One such is the recent announcement that the Government is looking to price EV cars at less than RM100,000 to benefit people as well as incentives to encourage EVs in Budget 2023 and Budget 2024.
Government Incentives Play A Big Role
In promoting corporations to adopt ESG initiatives, the Government plays a crucial role in setting up guidelines and pushing for ESG compliance. To achieve the objective, Malaysia can look towards aligning to international standards such as the Global Reporting Initiative (GRI) Standards, Task Force on Climate-related Financial Disclosures (TCFD), and SASB Standards.
Existing policies such as Net Energy Metering (NEM) 3.0, Smart Automation Grants (SAG), and Green Investment Tax Allowance (GITA) have been effectively promoting the clean energy industry in Malaysia.
The NEM scheme allows electricity bill rebates with solar setups leading to an attractive return on investment offers. The scheme’s quota for businesses, NEM Net Offset Virtual Aggregation, was quickly oversubscribed proving its popularity. The Green Investment Tax Allowance (GITA) and Capital Allowance are great motivators for business owners as they are eligible for these tax incentives of up to 48%.
The Green Investment Tax Allowance and Capital Allowance (CA) also encourage businesses to invest in green solutions. This is financially beneficial given that the 60% GITA for green assets are set off against 70% statutory income – a considerable sum that will entice adopters. It would be beneficial for these incentives to be extended beyond 2023.
We also support the Government in implementing a carbon tax system to further reduce greenhouse gas emissions. This is also a topic that we have been championing as it places Malaysia amongst other best practising countries.
According to the Organisation for Economic Co-operation and Development (OECD), a carbon tax is an excise tax on the producers of raw fossil fuels based on the relative carbon content of those fuels.
The implementation of a carbon tax system will encourage businesses to develop more environmentally friendly production processes or increase their investment in renewable energy such as solar. In addition, a carbon tax policy could also bring in tax revenue to the country, which can be used to develop projects that remove or reduce greenhouse gases from the atmosphere.
There is no quick remedy to cure our mother earth except for all of us to take active action. According to the United Nations, the adoption of renewable energy is one of the most efficient and cost-saving solutions that cuts down carbon emissions and helps to mitigate climate change.
Overall, renewable energy consumption will surge by 11%, with Asia leading the way. Solar and wind capacity addition will remain strong. Prospects for renewable energy (RE) engineering, procurement, construction, and commissioning (EPCC) contractors are also on an uptrend as the Government strives to achieve the target of RE generation capacity to comprise 31 per cent of total electricity generation capacity by 2025.
With the Government taking the lead, this will encourage the adoption of renewable energy at both commercial and consumer levels. Malaysia is certainly on the right track and aligned to other neighbouring countries, as South East Asia collectively plays their part in the energy transition.
By Ko Chuan Zhen
The author is the Group CEO & Co-Founder of the Plus Xnergy