Budget 2021 to Position Malaysia as Sustainable Financial Hub

28 Oct 2020

Sustainable living remains one of the four broad themes of the upcoming Budget 2021, according to recent announcements by the Finance Minister Tengku Zafrul Abdul Aziz. Of this, Environmental, Social and Governance (ESG) are factors of importance, with references to companies that embrace ESG principles performing better. 

As an independent player in clean energy since 2012, we have seen the solar industry grow by leaps and bounds. The Government should be lauded for its eort in creating growth in the clean energy sector with incentives such as the Green Investment Tax Allowance (GITA), Green Income Tax Exemption (GITE) and Net Energy Metering (NEM) scheme. 

In combination with Capital Allowance, qualied business owners who implement a clean energy system can realise a payback period of three years. 

Plus Solar aligns to these goals as we champion the drive and adoption of clean energy. Here are six wishes on what could drive further adoption of clean energy with future allocations from the Budget 2021. 

1) Individual tax exemption for solar investments 

When investing in solar, individuals are not granted the same tax breaks enjoyed by industrial and commercial entities. If the government were to implement a similar benet to individuals, it could compare to the RM2,500 in tax relief for the purchases of books, journals and personal tech devices. 

As those items are considered necessities for an informed life, so would incentivising domestic solar adoption mean a more sustainable one. 

2) Sales tax waiver for imported panels 

Solar setups rely heavily on imported panels. As part of Malaysia’s Import Tari, import of taxable goods is subject to the Sales and Services Tax (SST) at a rate of 5-10 percent depending on the nature of the product. 

Given the high upfront costs of solar setups, these taxes then burden potential adopters, as it is a cost for any solar players in the market. As a long-term strategy, the tax could be waived by the government for imported solar panels to encourage further adoption. 

3) NEM Quota Extension 

Malaysia’s current Net Energy Metering (NEM 2.0 scheme) has allowed excess solar photovoltaic (PV) generated energy to be exported back to the grid on a “one-on-one” oset basis, meaning full returns on every kiloWatt generated. Its quota of 500 MW ends Dec 31 this year, with only 30 percent of the quota remaining for applications. It is highly benecial to end-users operating in industrial, commercial, residential and agricultural sectors as excess solar energy will be directly oset to one’s electricity bill.  

The uptake of NEM has grown steadily resulting in 102 megawatts (MW) generated in 2019, compared to only 27.8MWp produced in 2016 and 2018. An extension of the NEM 1:1 tari quota would be benecial for both the Government and solar adopters alike. 

4) Tax exemption for battery solutions 

Smart grids will form as clean energy continues to be adopted. An energy grid is “smart” when it balances supply and demand on its own, through a combination of sensors and articial intelligence. Together, digital signals would automatically trigger actions with almost no human intervention. 

A challenge in this area is uctuations in energy supply ー o-peak sunshine for example. There, battery energy storage systems will be a key component to these grids being realised. Tax exemptions for these systems would soften the impact of 

their high upfront costs and allow our energy grid to take its next form to be sophisticated enough to recognise various forms of clean energy, which is the future of the energy industry. 

5) Sustainable energy supply to rural areas 

In line with the rst theme of the budget announced, caring for the people, it is our hope that rural and remote areas without access to electricity be outtted with solar solutions to improve their quality of life. 

We propose action here through direct investment by the government towards these previously unpowered areas. As it stands, there are programmes like MySuria, and the Sarawak Alternative Rural Electrication Scheme (SARES), which aims to power 22,360 rural homes in the vast state with solar power. 

6) Carbon tax 

We support a tax on the carbon content of fossil fuels, where its users are charged for the climate damage caused by the release of carbon dioxide into the atmosphere. Upon being taxed, players in traditional energy sources would be inclined to reinvest their considerable assets to renewable energy instead.

Besides its environmental benets, it would bring clean energy sources like solar closer to economic parity with fossil fuels. We motion for the government to introduce it by emulating the success of other countries. In the UK, adoption of the tax has led to a 93 percent drop in coal-red electricity. 

Overall, we hope our government will show increased commitment to renewable energy, to see Malaysia become Southeast Asia’s RE champion.

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