As the Budget 2023 approaches, we shared our wish list items with Bernama that will drive greater adoption of renewable energy (RE) within Malaysia and advance the country to become SEA’s sustainable champion. These wishes were also reported by Astro Awani, TV3, Malay Mail, The Malaysian Reserve, Berita Harian and more.
Find our Budget 2023 wish list below:
Globally, Governments and businesses are pursuing their own paths to achieve their net-zero goals. Many countries aim to reach net zero by 2050, including Malaysia. If all the net-zero pledges of countries are fully implemented, it could potentially reduce the predicted global temperature rise to 2.2°C.
At Plus Xnergy, our budget 2023 wish list is for fiscal policies that will drive RE adoption and propel Malaysia towards these goals for our nation and globally for the environment. Amongst them, they include policies and incentives such as:
Solar setups rely heavily on imported panels and inverters. As part of Malaysia’s Import Tariff, the import of taxable goods is subject to the Sales and Services Tax (SST) at a rate of 10% depending on the nature of the product.
These taxes are passed onto potential adopters which will ultimately contribute to the upfront cost of solar as a long-term strategy, the tax could be waived by the Government for imported solar panels and inverters to encourage further adoption.
Take for example the Biden administration, who has recently waived taxes on imports of solar panels for up to two years from Cambodia, Thailand, Vietnam and our homeland Malaysia.
The two-year period of tariff suspension is meant to serve as a link, ensuring that the US has access to an adequate supply of resources to satisfy its demands for power generation. The sales tax exemption for imported panels and inverters may truly make a difference to give potential American solar players in the market a reason to adopt components and drive growth. Similarly, Malaysia could also emulate such actions to further stimulate the RE industry in Malaysia.
Late last year, the Government had chosen to entirely exempt import duties, excise taxes, and sales taxes for electric vehicles (EVs) in an effort to boost the domestic EV sector.
During the tabling of Budget 2022, finance minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz proposed that EV’s will receive a road tax exemption of up to 100% and an income tax relief of up to RM2,500 on costs associated with installing, renting, or utilizing hire purchase facilities, as well as subscription fees for EV charging facilities.
The desire to retain this specific tax exemption is at an all-time high as incentives for EV ownership will not only promote the growth of the Malaysian EV ecosystem but also generate greater chances for new green investments. The industry has begun to transition toward EVs, and the incentive represents a significant turning point in the local advancement of EV-related technology and commercial endeavors.
Overall there are 4.12 million buildings in the country that are potential solar adopters and significantly bring us closer to sustainability goals. The presence of affordable consumer solar solutions has improved the viability of households adopting renewable energy.
Plus Xnergy has also embarked on a journey to increase residential solar adoption with the country’s first ever residential rent-to-own solar scheme in Malaysia. With a monthly repayment rate beginning from RM398 per month, along with a 5-year repayment plan. The scheme minimizes the monthly electricity bills of a household by up to 90%, resulting in minimal to zero increases in monthly expenses for consumers.
A tax relief or a rebate encouraging individuals to incorporate more green features in an effort to reduce Co2 emissions would help increase the rate of solar adoption.
Malaysia has zeroed into tripling its installed solar capacity by 2025 from 2020, according to the Sustainable Energy Development Authority Malaysia (SEDA). A huge chunk of this capacity will come from rooftop solar installations from commercial and industrial (C&I) buildings.
In Peninsular Malaysia alone, there is enormous market potential, from the approximately 4 million residential buildings, 115,000 industrial buildings and 520,000 commercial buildings. We propose the extension of the Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE) which are set to expire in 2023.
Briefly, GITA is an allowance of 100% of the qualifying capital expenditure incurred on a green technology project for three (3) years from the date of its first qualifying capital expenditure (CAPEX) incurred. The allowance can be offset against 70% of statutory income in the year of assessment and unutilised allowances can be carried forward until they are fully absorbed.
The extension of GITA & GITE beyond 2023 would enable businesses to enjoy the second round of tax allowance for their second phase installations. In addition, businesses that are planning to expand their business and who plan on installing solar PV systems for their businesses after 2023 would also reap from this benefit.
We would also like to seek the inclusion of battery storage under GITA. Solar energy production can be affected by season, time of day and elements such as shadows, rain and dirt. But solar energy systems paired with battery storage—generally called solar-plus-storage systems—provide power regardless of the weather or the time of day without having to rely on backup power from the grid.
Lastly, GITE is a tax exemption of 70% for green services providers on their statutory income for qualifying green services. We would also like to request for an increase in the GITE cap from 30MW to that of 80MW per company as well as to increase the number of companies that can be granted GITE.
Right now, under each PPA investor who has a few companies, only one of these companies under the investor will be granted GITE which chooses to install a cumulative capacity of up to 30MW.
The Sustainable Energy Development Authority’s (SEDA) Net Energy Metering (NEM) 3.0 scheme has seen uptake from both businesses and residential. We suggest that this would be maintained, especially the allocation for both business (called NEM NOVA) and residential use (called NEM Rakyat), to enjoy rebates when they adopt solar.
That being said, for NEM Net Offset Virtual Aggregation (NOVA) for commercial and industrial buildings, it is a system marginal price where the export rate is not as attractive compared to the 1:1 offered by NEM Gomen and NEM Rakyat.
It would have been good to allocate 1:1 or more to encourage the adoption of solar amongst manufacturers and such. Thus far, large portions of their quotas are taken up showing interest from both businesses and residential, and we are keen to play our role in helping both segments to enjoy energy savings and attractive rebates from this scheme.
Overall, we are optimistic towards the rise in solar adoption in both commercial and household solar as the market potential is huge. Asia Pacific is also set to dominate the rooftop solar photovoltaic market by 2030, growing at more than 12% CAGR from 2021-2030. In 2020, the market is worth USD64.3 billion, with key installations in residential, commercial and the industrial sector.
Our nation is headed in the right direction, and we see good progress especially with the recent announcement by our Prime Minister who has approved the allocation and redistribution of a new 1,2000 megawatt (MW) quota for renewable energy.
This is also in line with our Government’s 12MP goal to embrace sustainability and journey to become a carbon neutral nation by 2050, which has strong calls for ESG commitment, where solar is currently the most scalable and viable option.
Media coverage of the wish list was reported by the following media outlets:
Photo Credit: Plus Xnergy
Disclaimer: The contents of the reposted article have been edited to represent Plus Xnergy’s brand and services to its truest nature.