On Friday (20 Sep), the Energy Commission (EC) released official guidelines for the implementation of the Corporate Renewable Energy Supply Scheme (CRESS). The guidelines offer more details on the mechanism, following the initial announcement by the government in July 2024. To recap, CRESS is a route that effectively enables third-party access (TPA) to the national power grid.
Under CRESS, an RE plant must have a minimum 30MW capacity and can contract with more than one green consumer for offtake. According to the guidelines, at least 5 separate contracts will need to be signed. Applications open on 30 Sep 2024F.
A system access charge (SAC) of RM0.25/kwh for firm output and RM0.45/kwh for nonfirm output will be imposed for the usage of the national grid. The SAC will be reviewed every regulatory period (RP), which spans 3-year cycles (RP4: 2025F-2027F). To qualify as firm output, the RE developer will need to provide a battery energy storage (BESS) of at least 50% of its solar plant’s export capacity with 4 hours’ storage.
CGS in its utility sector review said the SAC of 25-45 sen may seem high compared to the 13.75 sen embedded in its current tariff structure, which primarily covers brown energy. The house views these fees as essential in the initial phase of going green, in order to fund infrastructure upgrades (strengthen the grid, integrate intermittent RE, ensure power supply reliability,
etc.) in pursuit of ESG goals. To recap, Tenaga estimates RM35bn worth of infra-related investments will be required for energy transition (ET) in 2025-2030F. That said, as RE adoption increases and green energy volume base widens, the SAC could reduce.
Considering the SAC charge, CGS said it estimates the green electricity tariff under CRESS to be RM0.60-0.65/kWh. Based on this, the house anticipates that the initial target consumers will be new customers in the Commercial segment (e.g. data centres that have signed electricity supply agreements (~4GW) but to whom supply has yet to be given) where the price gap is currently minimal. These users currently pay ~RM0.63/kWh for brown energy and ~RM0.67/kWh for green energy, on average, according to its own estimates.
The implementation of CRESS may also 1) improve project returns for new RE plant-ups by shifting tariff negotiations to a “willing buyer, willing seller” model, unlike previous quota bidding mechanisms that resulted in intense competition and low tariffs, and 2) speed up the country’s RE capacity rollout without the need to wait for quotas.
CGS maintains its Overweight call on the sector as the National Energy Transition Roadmap (NETR) has introduced a structural growth element to a sector that has traditionally been viewed as largely defensive. The timely launch of CRESS reinforces confidence in the government’s commitment to the prompt execution of the NETR.
