Introduction
The Net Energy Metering (NEM) program was introduced in Malaysia in 2016 following ASEAN countries’ commitment to increase renewable energy through the ASEAN Plan of Action for Energy Cooperation which was entering the phase 4 for the period between 2016 and 2025 (“APAEC”). Under the APAEC, ASEAN aims to collectively increase its total installed capacity of renewable energy to 23% by the year 2025.
To achieve this goal, each ASEAN member, including Malaysia, has allocated necessary financing to reduce energy consumption and intensity, developed several outcome-based strategies as well as implemented policies to encourage the development of renewable energy and increase energy efficiency. One of the initiatives by Malaysia towards this objective was the introduction of NEM.
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What is NEM?
In the implementation of NEM, the energy produced from the solar PV system installed will be consumed first and any excess energy will be exported to the grid and to be offset against kWh from the energy provided by the distribution licensee (namely Tenaga Nasional Berhad) to the electricity consumer during the applicable billing period. The NEM program has been updated from time to time since its inception where we now have NEM 3.0 which will be operational until 31 December 2024.
The NEM is one of the many initiatives introduced to encourage the adoption of renewable energy, particularly solar power. This article aims to provide an overview of the program and how the program contributes to enhancing environmental, social and governance practices in Malaysia.
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Evolution of NEM
Initially launched in 2016, the scheme has been renewed several times. This evolution reflects Malaysia’s commitment to increasing renewable energy uptake and reducing carbon emissions. From the introduction of NEM 2.0 in 2019 which allowed for a “one-to-one’ offset basis, it was followed by NEM 3.0 with additional quotas and incentives.
Effective 1 January 2019, the NEM 2.0 was improved by adopting the true net energy metering concept and this will allow excess solar PV generated energy to be exported back to the grid on a “one-on-one” offset basis. This means that every 1kWh exported to the grid will be offset against 1kWh consumed from the grid.
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Participating in NEM
The NEM program was executed by the Ministry of Energy and Natural Resources and regulated by the Energy Commission with Sustainable Energy Development Authority (SEDA) Malaysia as the implementing agency.
The NEM 3.0 is in effect from 2021 to 31 December 2024 with total quota allocation up to 1550 MW. The total allocation of 1550 MW is divided within 3 categories of users, namely, 350 MW for the NEM Rakyat program, 100 MW under NEM GoMEn Program for government ministries and agencies and 1100 MW under NOVA program.
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How to Apply for NEM
Applying for NEM involves several steps, which are designed to ensure that the process is accessible and efficient for all potential participants.
The first step is to determine one’s eligibility. The consumer must be a registered TNB consumer or a person applying to be a consumer of TNB and that he/she has never installed solar PV units under the previous NEM initiatives. For the NEM Rakyat category, the consumer must be in occupation of private dwelling premises without carrying out any form of business while consumer under NEM GoMEn must be a government ministry or department or statutory body whether at the federal, state or district level.
The consumer must ascertain his solar PV capacity limit and quota allocation limit to their respective categories. The quota allocation limit for NEM Rakyat program has been increased to 350MW following the Government’s approval of the release of additional 100MW quota for the NEM Rakyat program in line with the introduction of the Solar for Rakyat Incentive Scheme (SOLARIS) by the Ministry of Energy Transition and Water Transformation on 27 March 2024.
After determining one’s eligibility, the consumer is required to appoint a registered solar PV service provider. There is a list of registered solar PV service provider provided in the SEDA website which contains profiles of the service providers.
The consumer will need to submit application for NEM Assessment Study (NEMAS) if the applied capacity limit exceeds 72 kW. Once approval is obtained or where approval is not required, the consumer would need to submit application for the NEM through the online e-NEM portal.
Upon approval of NEM application, the consumer must get the solar PV installed within 3 months from the approval. The existing meter will be changed to bi-directional meter to measure the electricity generated and consumed. During the installation process, there will be testing and commissioning followed by the signing of NEM contract before commencement of billing under the NEM scheme.
The NEM contract is a standard power purchase agreement between the consumer and TNB as the distribution licensee which would include salient terms such as:
- （a）The tenure of the contract is 10 years only and once the tenure is up, the solar PV installation shall be strictly for self-consumption only and no off-set will be allowed for any excess energy exported.
- （b）consumer declaration that the renewable energy system complies technical guidelines and prevailing statutory requirements;
- （c）representations and warranties of the consumers, particularly the warranty by the consumer that he/she will not allocate the excess energy generated by the renewable energy system to other resident;
- （d）termination by the consumer, circumstances at where TNB will not accept the export of the excess energy;
- （e）the obligation to upkeep and maintain the installation, non-transferable and no setting off of credit amount etc.
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Points for Consideration and Suggestions for NEM initiatives
While NEM offers numerous benefits, there are also some areas for further consideration that need to be addressed to ensure its long-term success.
- （i）Costs
The upfront cost of installing solar PV systems can be a barrier for some consumers. A typical solar system for residential use could cost anywhere from RM15,000 onwards, depending on the type of house and roof size, type and material, the size of the solar PV system and the type of solar panels. Although there are incentives and financing options available, the initial investment remains a significant consideration. Therefore, it is always advisable to get few quotations from solar PV service providers in order to get the cost and quality that would meet the consumer’s needs.
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- （ii）Regulatory Challenges
Navigating some of the requirements in the guidelines for NEM installation, one would observe some potential regulatory challenges such as to ensure all installations meet the technical and safety requirements set by the Energy Commission and other relevant authorities. Therefore, potential consumers who intend to participate in the NEM program should have some basic knowledge of the requirements imposed by the Energy Commission and other authorities regarding the application and installation process of the NEM.
For consumers who are regulatory bodies, they are required to obtain all necessary licenses and approvals including a generating license from the Energy Commission for installations exceeding 72 kW. For consumers who are tenants, they would need to obtain a written approval of the landowner of the premises. A clear guideline with simplified regulatory processes can help reduce barriers for potential consumers, coupled with increasing public awareness of the processes would drive greater adoption of the NEM initiative.
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Enhancing ESG Practices through NEM
NEM plays a significant role in enhancing ESG practices in Malaysia by promoting environmental sustainability, social responsibility, and good governance. By reducing reliance on fossil fuels and promoting renewable energy, NEM contributes to environmental sustainability. This aligns with global efforts to combat climate change and reduce carbon footprints. NEM also encourages community participation in renewable energy initiatives where NEM Rakyat empowers residential consumers to contribute to sustainable energy goals. Its implementation too represents a collaboration between government agencies, private sector and consumers, thus promoting good governance and accountability in the energy sector.
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Conclusion
Net Energy Metering is a transformative initiative that supports Malaysia’s transition to sustainable energy. By enhancing and further improvement of the scheme, NEM can play a crucial role in promoting renewable energy, reducing carbon emissions, and enhancing ESG practices. It is encouraging to see increasing number of residential consumers participating in the NEM initiative, judging by the release of additional quotas for 2 times in a row since the beginning of NEM 3.0 in 2021 and with the latest addition of 50 MW in September 2024 and again an addition of 50 MW in November 2024 totaling 450 MW quota currently. Similarly, there is also an additional 300 MW to the quota under NEM Nova totaling 1400 MW quota currently. Malaysia will continue to advance its renewable energy goals. We hope that the NEM initiative will remain a key component of its sustainable energy strategy.
About the author
Tan Poh Yee
Senior Associate
ESG Practice Group
Halim Hong & Quek
pohyee.tan@hhq.com.my
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