Malaysia as a Solar Manufacturing Hub

Malaysia, in less than a few years, has emerged as one of the largest solar panel manufacturing base in the world – overshooting even the U.S. and Japan.

---

Malaysia, in less than a few years, has emerged as one of the largest solar panel manufacturing base in the world – overshooting even the U.S. and Japan.
The move of major solar companies to Malaysia began after the creation of Prime Minister Najib Razak’s new Economic Transformation Programme, which looks upon the photo voltaic industry as a main growth area for the Malaysian economy. The aim is to achieve 5.5 % of the energy required by the country through an energy mix by 2015.  The programme includes:  research and development activities, core components manufacture, assembly of solar components, packaging & testing of photovoltaic, and sales and distribution.

A report titled ‘Global Solar Power Market,’ released by research group Frost and Sullivan, says that the Feed-in-Tariff policy implemented by the government has built the necessary momentum to optimize the solar PV market in Malaysia.
With a goal of becoming the second largest solar manufacturer by 2020, Malaysia already has a conducive market place, allowing it to become the Most Favoured Nation for PV manufacturers. The reasons for Malaysia’s success are numerous, including:
excellent tax breaks (15 years)
supportive banking loans
fair regulation
fabulous infrastructure (Kulim Hi-tech Park is a reputed facility)
competitive cost of labour

Though subsidies were also offered by neighbouring Singapore, Malaysia’s better industrial production scenario and labour density proved to be the ultimate turning point for the country.

Malaysian FiT
Feed-in-Tariff was introduced in Malaysia in Dec 2011 and led to solar photovoltaic projects, expected to last until the middle of 2014, being subscribed entirely. The national electricity company, Tenaga National Bhd, is now levying an additional one percent tax, which began in Dec 2011, to raise $80 million and offer as FiT for renewable energy manufacturers.  The first phase involves 5.76 MW, to which only individuals can subscribe.
The basic FiT for solar PV are US$0.39 -0.27 per KWh, subject to the capacity of the installation. In comparison to other renewable energy options, FiT is in the region of US$0.10 to 0.075, showing a FiT incentive skew in favour of solar PV.
Experts believe that close to 55 % of the FiT budget in Malaysia is being offered to solar PV until 2012. Therefore, the generation capacity has to achieve 42.8- per cent by 2013. This year, with an increase in the number of applicants, the 2012 quota is expected to fall.
From 2013, FiT rates will pass through annual digression, and likely reach 8.0 % of solar PV. However, this rate likely will be slow-paced given the sudden fall in solar module prices in the last year. Hence, digression rates will have to be reviewed more frequently, probably every three years so that rates corrections can be applied.
This led to the arrival of First Solar and was rapidly followed by a host of other solar manufacturers, such as Flextronics, Q-Cells and Sunpower. In fact, Q-Cells has moved its entire production to Malaysia, while REC moved to Singapore in order to remain competitive.

2012: a Year of Rapid Growth
In 2012, Malaysia is expected to see an inflow of investments - US$72million - in solar PV projects, accounting for 194% growth over the previous year. Additionally, 12MW of solar PV generation is expected to be included, showing a year-by-year growth of 242.9%.

International Manufacturers in Malaysia
The photovoltaic industry in Malaysia is very vibrant, and statistics prove it is currently the third largest solar module manufacturing hub in the world.
Several solar panel manufacturers are thriving in the country, such as First Solar, located at Kedah; Q-cells, which has a base in Selangor; AUO and SunPower’s unit, located at Melaka; and MEMC, which operates from Sarawak.
SunPower and AU Optronics have begun the construction of a new solar photo voltaic production facility, which will generate 1,400 MWs. The facility will be completed by 2013 and is located at Melaka, which is the hub of solar energy in Malaysia. Located outside the capital of Kuala Lumpur, the installed capacity will be 28 solar production lines. However, it began production in October 2011 and produced close to 5 MW, showing high conversion efficiency of 22.5 per cent. This facility will be unique, in the sense that it will have a parking area that also hosts solar cells, helping in the production of 2.6MWs of power each year. Additionally, rooftop installations will help in the production of another 10MW every year. 

The latest investor is Panasonic Energy Malaysia Sdn. Bhd., a Japanese electronics giant that has grown significantly as a solar panel manufacturer. The company has announced that it will invest US $580 million to install a production facility for a solar cell plant at Kedah. It is expected to be operational by December of this year. The facility is slated to produce 300MW of PV. The plan includes production of Panasonics’ HIT photo voltaic modules and will look at solar wafers, modules and cell production, while employing close to 1,500 personnel.
Other companies beginning production are IRM Group subsidiary IRM Solar Sdn Bhd, following the Feed-In Approval it received from the Sustainable Energy Development Authority for the installation of 5.0MW capacity at Padang Besar. The FiT for IRM Solar will commence from 9 April 2013, and will be provided for the next 21 years.

Malaysia is very upbeat with the introduction of a new silicon-cell product, which includes a wafer production system that is expected to cut solar cell production by a massive US$0.40 per Watt/W. The company, called Twin Creeks Technologies, has already announced that aside of its Senatobia demo plant in Mississippi, where it is currently manufacturing 25MW; it wants to increase production to 100MW by opting for a joint venture in Malaysia to build production facilities. Twin Creeks has released a new product this week that slices polysilicon with an ion cannon to one-tenth of the thickness of today’s wafers. Looking for sales in Asia, Malaysia has a promise of becoming the Grand Central of solar, second only to China for new and old companies.

Political and Environmental pressures
Though Malaysia has offered the best infrastructure support and appropriate financial support, it is beginning to face pressures from environmentalists and political parties leveraging it for political gain. An illustrative point is the recent uproar over the installation of a production facility at Batu Kawan.
However, a minor political tussle between the present political party, headed by chief minister Lim Guan Eng at Penang, and Kedah Gerakah Youth Chief Tan Keng Liang, has resulted in a war of words. Tan has questioned the installation of a solar panel manufacturing facility in Batu Kawan, following the Chinese example of raising objection to solar panel plant vis-a-vis environmental impact by the government.

The Way Forward for PV in Malaysia
A Dec 2011 blog post on FiT in Malaysia in cleanbizAsia, offers a lot of insight into the solar PV sector, and says that there is increased lobbying by solar industry participants in the country seeking larger returns with larger subsidies. They are asking for an increased pace of digression in solar PV, especially in the scenario of newer projects that are applied for on June 30, 2012. This sentiment has also triggered a rush in applications for the solar PV quota. However, there is a lot at stake for the Malaysian government with respect to FiT. The expectation is to meet 11 % of the electricity required by the nation through renewable energy by 2020. A major percentage of this will be met by solar energy. Therefore, the pace forward for solar projects is to rapidly increase the number of installations such that efficiency is achieved in a short period, thus nullifying the need for subsidies.

A suggestion that is garnering greater support is the removal of the investment cap in the renewable energy sector. Currently any renewable energy project can entertain only 49-percent of foreign investment. By removing this cap, not only can greater foreign investment be entertained, but it will also lower the burden on Malaysian investors, who are already resource-crunched, despite the availability of low-cost loans offered by banks across the country.
The key to Malaysia becoming a successful solar manufacturer will be in its ability to fine- tune its FiT quota system. It has to create value addition. Additionally, FiT rates are better monitored by a third government party, and it should not become a legislative instrument.
Malaysia, with its tropical climate, does have a greater number of cloudy days and technically is not as hot for solar energy production as India and others. However, Malaysia has time and again proven to be an enterprising nation as despite a small foot-print it has successfully retained international and reputed solar manufacturers. Larger and more sophisticated environments in Europe and Japan have failed to meet the great challenges the industry threw up in the past half-decade.
Malaysia, with its proactive government policies, control, price regulation and right manufacturing ecosystem, is all set to become the second largest solar manufacturer in the world.