Malaysia: Virtual Power Purchase Agreements under the Corporate Green Power Programme

01 Nov 2022    2 minute read
Virtual PPA Energy Transition Sustainability

In brief

The Malaysian Government has introduced the Corporate Green Power Programme (CGPP) to encourage the adoption of green electricity amongst corporate companies in Malaysia. This new initiative will be in addition to existing initiatives such as the net energy metering scheme, self-consumption schemes and the green electricity tariff programme to bolster Malaysia's renewable energy agenda and promote carbon reduction.

Contents

Corporate Green Power Programme (CGPP)

  1. The CGPP will utilise virtual power purchase agreements (VPPA) with a quota of 600MW to enable corporate companies operating in Malaysia to achieve their ESG goals.
  2. Solar developers will be able to apply for a part of the 600MW quota and if successful, the solar developer will enter into the electricity market via the New Enhanced Dispatch Arrangement where they will sell the physical electricity into the national grid at the then prevailing system marginal price. Note that successful solar developers will have to ensure that their plants are operational by 2025.
  3. Eligible corporate companies will then be able to execute Corporate Renewable Energy Agreements (CREA) with solar developers for the virtual sale and purchase of electricity. The CREA is a two-way financial hedge instrument that details the price setting mechanism that is agreed between the parties.
  4. Applications for the CGPP will commence from 7 November 2022 until the earlier of 31 December 2023 or until the entire 600MW quota has been taken up. Applications can be made to the Single Buyer via their website (www.singlebuyer.com.my) from 7 November 2022.
  5. The Energy Commission, as the regulator of the CGPP, will issue a guideline on 7 November 2022 which can be downloaded from their website (www.st.gov.my).

Observations

The CGPP is a timely welcome for the renewable and solar industry players who are gearing up for more opportunities to increase Malaysia's chances to meet the renewable energy targets that have been set. There are several concerns in the implementation of the CGPP, including:

  • whether foreign investment will be permitted and if so, will there be any cap on foreign ownership;
  • will parties be free to agree on the contents of the VPPA or will there be a standard form to be adopted; and
  • clarity on the characteristics and framework of the renewable energy certificates.

Potential investors (in particular foreign investors) would hope for some of these issues being addressed in the CGPP guidelines. Notwithstanding, the implementation of the CGPP puts Malaysia on par with its ASEAN neighbours and a step closer to realising its goals towards becoming a low carbon nation.

* * * * *

This client alert was issued by Wong & Partners, a member firm of Baker McKenzie International, a global law firm with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner or equivalent in such a law firm. Similarly, reference to an "office" means an office of any such law firm. This may qualify as "Attorney Advertising" requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.

Contact Information
Mark Lim
Partner
Kuala Lumpur
Read my Bio
Mark.Lim@WongPartners.com
Faez Abdul Razak
Senior Associate
Kuala Lumpur
Faez.AbdulRazak@WongPartners.com

Copyright © 2024 Baker McKenzie. All rights reserved. Ownership: This site (Site) including all documentation and content (Content) is a Copyright © 2022 Baker & McKenzie. All rights reserved. Ownership: This documentation and content (Content) is a proprietary resource owned exclusively by Baker McKenzie (meaning Baker & McKenzie International and its member firms). The Content is protected under international copyright conventions. Use of this Content does not of itself create a contractual relationship, nor any attorney/client relationship, between Baker McKenzie and any person. Non-reliance and exclusion: All Content is for informational purposes only and may not reflect the most current legal and regulatory developments. All summaries of the laws, regulations and practice are subject to change. The Content is not offered as legal or professional advice for any specific matter. It is not intended to be a substitute for reference to (and compliance with) the detailed provisions of applicable laws, rules, regulations or forms. Legal advice should always be sought before taking any action or refraining from taking any action based on any Content. Baker McKenzie and the editors and the contributing authors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The Content may contain links to external websites and external websites may link to the Content. Baker McKenzie is not responsible for the content or operation of any such external sites and disclaims all liability, howsoever occurring, in respect of the content or operation of any such external websites. Attorney Advertising: This Content may qualify as “Attorney Advertising” requiring notice in some jurisdictions. To the extent that this Content may qualify as Attorney Advertising, PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME. Reproduction: Reproduction of reasonable portions of the Content is permitted provided that (i) such reproductions are made available free of charge and for non-commercial purposes, (ii) such reproductions are properly attributed to Baker McKenzie, (iii) the portion of the Content being reproduced is not altered or made available in a manner that modifies the Content or presents the Content being reproduced in a false light and (iv) notice is made to the disclaimers included on the Content. The permission to re-copy does not allow for incorporation of any substantial portion of the Content in any work or publication, whether in hard copy, electronic or any other form or for commercial purposes.