Malaysia Introduces CRESS: A New Era for Corporate Renewable Energy Procurement

Malaysia has taken a substantial step towards its renewable energy future with the recent introduction of its Corporate Renewable Energy Supply Scheme (CRESS). The Ministry of Energy and Natural Resources launched CRESS on September 20, 2024, allowing companies to purchase renewable energy directly from developers through the national power grid, which is predominantly owned by state-owned utility Tenaga Nasional Berhad (TNB).

CRESS is an innovative program that enhances corporate involvement in green energy procurement by enabling physical power purchase agreements (PPAs), setting it apart from previous initiatives.

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Key Features of CRESS

1. Procurement via Physical PPAs: CRESS empowers companies to enter physical power purchase agreements with renewable energy developers. While transmission must still flow through TNB’s network, CRESS builds on earlier programs like the Corporate Green Power Program (CGPP) which only allowed Virtual PPAs. CRESS expands corporations options in the market. 
2. Third-Party Access (TPA): CRESS introduces Third-Party Access (TPA), granting independent enterprises the legal right to access and use energy network facilities. This is a significant step towards grid liberalization. CRESS is open to renewable energy generators connected to the high voltage (HV) level of the grid. From the demand side, it is open to existing or new TNB users from the commercial and industrial categories seeking additional or new electricity supply demand. Liberalizing the energy market in this way will encourage more players to participate in renewable energy generation and consumption.
3. No Quota Limitations: Operating under a no-quota policy, CRESS opens doors for gigawatt-scale renewable energy projects. Previous programs such as Corporate Green Power Program (CGPP) had a quota allotment of 800 MW.
4. Flexible Agreements: Sellers can serve multiple buyers simultaneously and buyers can source energy from various sellers within capacity limits set by the local utility. This flexibility enhances the program's attractiveness for both generators and consumers.
5. Complementing Existing Options: CRESS works alongside existing renewable energy initiatives like Net Energy Metering (NEM), Renewable Energy Certificates (RECs), and the Green Electricity Tariff (GET), offering corporations multiple avenues to achieve sustainability targets.

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Understanding the Pricing Structure

CRESS's tariff structure involves:

• Generation Tariff: A negotiated rate paid directly to the power plant owner.
• System Access Charge: A fee covering grid operations, including transmission  costs and intermittent electricity balancing, also known as wheeling charges. These system access charges are higher than expected—set at 25 sen per kilowatt-hour (0.19 cents USD/kWh) for firm power supply (e.g., solar farms with battery storage) and 45 sen per kilowatt-hour (0.342 cents USD/kWh) for non-firm (intermittent) supply. 

This wheeling fee makes CRESS prices exceed current retail prices for TNB green tariff surcharge of 20 sen per kilowatt-hour (0.15 cents USD/kWh) or buying renewable energy certificates at about $1.20-5/MWh.

Despite the positive reception of physical PPAs structure under CRESS, local industry developers noted high pricing and expressed concerns about attracting off-takers due to the tariff. Industry participants propose greater transparency in the cost structure. The detailed cost breakdown will be addressed in the upcoming Regulatory Period review in December.

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Benefits and Implications

Despite pricing concerns, CRESS offers significant benefits:

• Enhanced Market Liberalization: Physical PPAs and third-party access reduce risks, promote competition and move away from centralized models.
• Investment and Job Creation: CRESS is expected to attract over RM10 billion in direct investments and create nearly 14,000 new jobs in the sustainable energy sector.
• Carbon Emission Reduction: CRESS aims to increase renewable energy capacity from 26% (10.6GW) to 40% by 2035 and 70% by 2050, reducing carbon emissions by approximately 701,000 tons of CO₂ annually.

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Conclusion

The introduction of CRESS marks a pivotal moment in Malaysia's renewable energy journey. By enabling physical power purchase agreements, companies can have a more direct and tangible role in their green energy procurement, enhancing transparency and potentially accelerating the country's transition to sustainable energy.

The success of CRESS will depend on addressing pricing challenges and ensuring competitiveness with existing green electricity options. Refining the cost structure can unlock CRESS's full potential and contribute significantly to Malaysia's energy transition goals.

Malaysia remains one of the leading countries in Southeast Asia with a wide range of corporate renewable energy procurement options available. The combination of programs like CRESS, NEM, RECs, and GET provides businesses with multiple pathways to achieve their sustainability goals. For companies interested in navigating these opportunities, contact Ren Energy to get more advice on optimizing your renewable energy procurement strategies in Malaysia and beyond.