Richard Khoo Boo Hin Rachel Chiah May 3 2021 NEM NOVA Programme: virtual meter aggregation commences SKRINE | Energy & Natural Resources - Malaysia Richard Khoo Boo Hin, Rachel Chiah Energy & Natural Resources IntroductionWhat is NEM NOVA?CategoriesRequirementsCommentIntroductionOn 1 April 2021 the Energy Commission published the Guidelines for Solar Photovoltaic Installation Under Net Offset Virtual Aggregations (NOVA) Programme for Peninsular Malaysia (NOVA guidelines). The NOVA guidelines set out the framework and requirements of the NOVA initiative of Malaysia's Net Energy Metering 3.0 Programme (NEM NOVA). Industry players have eagerly awaited such details, particularly following the introduction of virtual aggregation.(1) The release of the NOVA guidelines also serves to complete the trilogy of initiatives under NEM NOVA, which the government announced in December 2020.What is NEM NOVA?NEM NOVA is a solar energy-centric net energy metering initiative for non-domestic consumers of Tenaga Nasional Berhad (distribution licensee), Malaysia's electricity utility company. 'Non-domestic consumers' refers to consumers in the commercial, industrial, mining and agriculture industries.Under NEM NOVA, a non-domestic consumer (NOVA consumer) will install a solar photovoltaic installation in a premise that it uses or occupies. Such installation should be designed primarily for self-consumption. However, any excess energy that is not consumed by the NOVA consumer at its premise due to operational constraints or a variation in load demands may be exported to other designated premises by way of the distribution licensee's distribution system or the grid owner's transmission system ('supply system').A total capacity of 300MW is available under NEM NOVA. Applications for quota allocation can be made from 1 April 2021 until 31 December 2023.CategoriesWhile the key aspect of NEM NOVA is the export of excess energy to designated premises, it is an option and not a mandatory element of the programme. NOVA consumers may choose to export excess energy only to the distribution licencee, which is similar to the structure under the NEM Rakyat and NEM GoMEn initiatives (for further details please see "Net Energy Metering 3.0: new rooftop solar initiatives"). This is reflected in the NOVA guidelines, which divide NEM NOVA into two categories.Category A: offset onlyUnder Category A, any excess energy generated in one month that is not consumed by the NOVA consumer may be exported to the distribution licensee. The value of energy exported is subsequently credited to the NOVA consumer's account with the distribution licensee and such credits can be used to offset the bill payment (but not the minimum monthly charge in the tariff schedule) for the next billing period. If the offset is not exercised in the next billing period, the credits will be forfeited.The unit price of the energy exported will be based on the average system marginal price (SMP) rather than the gazetted tariff. 'Average SMP' refers to the monthly average SMP(2) for the daily period between 7:00am and 7:00pm in the preceding calendar month.Category B: offset plus virtual aggregationUnder Category B, any excess energy generated in one month that is not consumed by the NOVA consumer may be exported to up to three designated premises. A designated premise must either:have an account with the distribution licensee that is under the NOVA consumer's name; orbe a premise used or operated by a wholly owned subsidiary(3) of the NOVA consumer.The value of energy exported is subsequently credited to the respective designated premise's account with the distribution licensee and such credits can be used to offset the bill payment (but not the minimum monthly charge in the tariff schedule). Aggregation of such credits to the designated premises' accounts will be based on an order of priority to be determined by the NOVA consumer.As is the case in Category A, the unit price of the energy exported will be based on the average SMP. For ease of accounting, the premise and designated premises will all have the same billing period.Switching categoriesNOVA consumers cannot switch categories unless they have been under their present category for at least 12 months and apply to the distribution licensee to switch at least three months in advance.RequirementsThe NOVA guidelines set out the requirements which must be met in order to participate in NEM NOVA.Period of operationOperation of an installation under NEM NOVA is limited to 10 years. After the expiry of the 10-year period, the NOVA consumer may operate the installation only for self-consumption.Type of installation allowedThe solar photovoltaic installation must comprise solar photovoltaic panels mounted on the rooftop of buildings within the NOVA consumer's premise. This is a departure from the previous NEM programmes, which allowed for ground-mounted installations.Capacity limit of installationThe maximum capacity of an installation under NEM NOVA is as follows.Category AMaximum capacity of 1,000kW. This is subject to the following conditions:The maximum capacity of the installation's inverter output should not exceed 75% of the NOVA consumer's maximum demand(4) under its contract with the distribution licensee in relation to NEM NOVA.For low-voltage consumers, maximum capacity is limited to 60% of the fuse rating (for direct meters) or 60% of the current transformer rating.Category BMaximum capacity of 5,000kW. This is subject to the following conditions:The maximum capacity of the installation's inverter output should not exceed 100% of the Nova consumer's maximum demand under its contract with the distribution licensee in relation to NEM NOVA.For low-voltage consumers, maximum capacity is limited to 60% of the fuse rating (for direct meters) or 60% of the current transformer rating.Technical requirementsThe NOVA guidelines contain the Technical Guideline for the Connection of Indirect Solar PV Power Generation for Net Energy Metering (NEM 3.0 – NOVA), which sets out specific technical requirements for installations under NEM NOVA. This technical guideline will apply only to connections at medium and low-voltage networks.Licensing requirementsPursuant to Section 9 of the Electricity Supply Act 1990, a licence is required for any person to use, work or operate any installation designed for the use or supply of electricity. However, a Section 9 licence is required for solar photovoltaic installations only if the installation is above 24kWp for a single-phase system or above 72kWp for a three-phase system.A NOVA consumer which is exempted from the licensing requirements will be required to submit a notification of exemption under Section 54 of the Electricity Supply Act to the commission within 28 days of commencing the installation's operation.CommentThe concept of virtual aggregation is unique in that it gives non-domestic consumers the opportunity to not only obtain credits for energy generated by their installation, but also contribute those credits to the billing accounts for other non-generating premises. This may enable them to cover electricity usage for more than one premise and lower their operating costs.There are two key financial considerations for participating in NEM NOVA. First, the virtual aggregation will apply only for the first 10 years, after which generation by the installation will be solely for self-consumption. This means that after the 10-year period, only the premise on which the installation is located will reap the benefits of any offset; designated premises will cease to enjoy a reduction in their electricity bills.Second, the offset under NEM NOVA is not on a one-to-one basis as is the case for the NEM Rakyat and NEM GoMEn initiatives. Instead, the offset will vary depending on the prevailing market price.There is no denying that NEM NOVA is a step forward for Malaysia's goal of shifting consumption towards renewable energy. Given that corporations are increasingly placing importance on environmental, social and corporate governance goals, it seems likely that, notwithstanding the cost factors outlined above, non-domestic consumers will react positively to NEM NOVA.For further information on this topic please contact Richard Khoo Boo Hin or Rachel Chiah at SKRINE by telephone (+60 3 2081 3999) or email ([email protected] or [email protected]). The SKRINE website can be accessed at www.skrine.com.Endnotes(1) Under the concept of virtual aggregation (also referred to as 'virtual meter aggregation' or 'virtual net metering'), credits for excess electricity that is supplied to the grid are not limited to the billing account at the generation site. Rather, such credits can be distributed to billing accounts for other locations or sites.(2) The average SMP of the preceding month will be published by the single buyer (a department within the distribution licensee that is authorised under the Electricity Supply Act to conduct electricity planning and manage electricity procurement for Malaysia) on its website no later than the 14th day of every month.(3) The expression 'wholly owned subsidiary' has the meaning assigned thereto in Section 6 of the Companies Act 2016.(4) 'Maximum demand' is defined in the NOVA guidelines as twice the largest number of kilowatt hours used during any consecutive 30 minutes in one month. Maximum demand is based on:the average of recorded maximum demand for the past 12 months; orthe declared maximum demand for NOVA consumers with less than 12 months of recorded demand.