Net Energy Metering: Adding Value To Solar Panel System

Previously, we shared what homeowners need to know prior to setting up a roof solar panel system. This is because a growing number of householders now consider a rooftop solar panel system a basic necessity. The influx of solar panels of various types in the market now ensures that homeowners are spoilt for choice. However, the price of installing a suitable system still remains on the high side. Although the amounts may vary, the cost to hire professionals to set up the system can easily reach up to MYR 20,000 or more. In the long run, it may be necessary to take out a loan to pay for the installation. Nonetheless, wouldn’t it be great if there are ways to reduce our monthly financial commitment? In this article, we will go into detail about Net Energy Metering (NEM) and how it can help reduce the monthly financial load.

Net energy metering can help to utilise excess energy that is sent to the grid to reduce the monthly electricity bill.
Unless the consumer is able to store all the electricity generated through solar panels, he has no choice but to send the excess energy to the utility grid. Under NEM the excess energy is not wasted, in fact, it can be utilised to reduce the monthly electricity bill.
Image courtesy of FAVPNG

What Is Net Energy Metering?

Net Energy Metering (NEM) is a means to promote and improve consumer acceptance and private investment in renewable energy. In short, the concept allows consumers to offset their electricity usage by generating electricity through their solar panel system. The energy generated will be consumed first, which means less energy is drawn from the utility grid. As NEM users only pay for the net energy they obtain from the utility grid, a higher generation rate from the solar panels means lower electricity bills.

At the same time, the system exports excess electricity to the utility grid. This surplus will be credited in the next billing period at an agreed rate. As a result of these two factors, the monthly electricity bills can be reduced significantly.

What Gave Birth To NEM?

The birth of this concept itself stemmed from renewable energy research. It was first introduced in Massachusetts in 1979 during a pilot project involving an apartment complex and a solar test house. The success of the project motivated several other states to accept and pass the net metering law. Minnesota passed the first metering law in 1983. Other states soon followed suit. As of 2013, 43 states in the United States of America have adopted net energy metering. Worldwide, based on the Renewables 2017 Global Status Report, a total of 55 countries have accepted and implemented the system.

Comparison of NEM between Australia, Canada and Cyprus
We can see a comparison of how Australia, Canada and Cyprus implement NEM. Each nation implements its own models based on their own practicality and needs.
Image illustrated by Author, based on a literature review from Pauzi Abdullah et al.

Feed-In Tariff (FIT) In Malaysia

Prior to NEM, Malaysia embraced a different concept, called Feed-In Tariff (FIT). The Malaysian Building Integrated Photovoltaic Project (BMIPV) introduced the concept in 2004 as one of the means to drive the country towards energy independence.

After years of effort, the Malaysian House of Representatives finally created Malaysia’s solar power development framework by passing the Renewable Energy Bill and Sustainable Energy Development Authority (SEDA) bill in 2011. The 2011 National Budget and Economic Transformation Programme also added FIT into their strategic planning.

Both NEM and FIT are similar in concept, with one major difference. NEM gives credit to the electricity bill of the upcoming month based on excess energy generated. FIT, on the other hand, pays a fixed FIT rate for the electricity that the consumers generate, regardless whether they choose to use it or feed it to the grid.

TNB electric bil
If your electricity bill is MYR 492.33, the surcharge under the Renewable Energy Fund (or Kumpulan Wang Tenaga Boleh Baharu, KWTBB in Bahasa Malaysia) is MYR 7.88 (1.6% of the monthly bill). It may not seem much, but for consumers that do not have solar panels installed, this would surely raise eyebrows.
Image of utility bill for electricity from Tenaga Nasional Berhad by Author

However, FIT comes with its own drawback. In order to sustain the scheme, all customers, regardless with or without a solar panel system, need to chip in and fund the scheme. Tenaga Nasional Berhad (TNB) imposes a 1.6% surcharge and collects it through the Renewable Energy Fund charge included in the electricity bill. This applies to all TNB customers except for those with electricity consumption of 300 kWh and below per month.

Net Energy Metering (NEM 2016) To The Rescue

To solve the issue of the surcharge, NEM scheme was introduced in 2016 to replace the FIT scheme. Under this scheme, excess energy to the grid will be paid at a displaced cost of MYR 0.31 per kWh unit. The customer receives the payment in the form of credit in the next billing period.

Unfortunately, NEM 2016 offered low payback rates. Consequently, residential customers under Tariff A (domestic tariff) find the scheme unattractive.

TARIFF A (DOMESTIC)RATE (MYR/kWh)
First 200 kWh (1 – 200kWh)0.218
Next 100 kWh (201 – 300 kWh)0.334
Next 300 kWh (301 – 600 kWh)0.516
Next 300 kWh (601 – 900 kWh)0.546
Next kWh (901 kWh onwards)0.570
Tariff A is applicable to Malaysian domestic consumers, which refers to consumers that occupy a private dwelling which is not used for the purpose of carrying out any form of business, trade, professional activities or services.
Image illustrated by Author based on information obtained from Tenaga Nasional Berhad

For example:

  1. A household that consumes more than 300 kWh per month pays MYR 0.516 per kWh for the 301st kWh consumption onwards. This rate is far higher than the displaced cost of NEM 2016 payment.
    Let’s say they consume 547 kWh a month, the breakdown would be:
    First 200 kWh = MYR 43.60
    Next 100 kWh = MYR 33.40
    Remaining 247 kWh = MYR 127.45
    Total bill = MYR 204.45.

    If the household generates the same amount of electricity, based on the displaced cost, they are only credited MYR 169.57. Thus NEM 2016 does not provide them with much benefits.

  2. A household that consumes less than 200 kWh per month is already paying a low electricity tariff. Hence, cost-effective wise, they have no reason to install solar panels.

Further Improvements Under NEM 2019

To improve the scheme and make it attractive enough for potential consumers, a new scheme came into effect on 1st January 2019. The NEM 2019 scheme introduces two small but significant improvements:

  1. NEM 2016 was eligible for residential, commercial, and industrial consumers. Any surplus will be credited in the next billing period at displaced cost.
  2. NEM 2019 is eligible for residential, commercial, industrial, and agricultural consumers. Any surplus will be credited in the next billing period based on the consumer’s tariff rates.

Comparing Electricity Bill Under NEM 2016 and NEM 2019

Let us assume that a residential customer consumes 500 kWh per month. The consumer has a solar panel system that generates 300 kWh per month.

Under the NEM 2016 scheme, we calculate the total price of consumption by multiplying the total monthly consumption with domestic tariff. In this scenario, it equates to MYR 180.20. Afterwards, we derive the total price of generation by multiplying total energy generation with the displaced cost, which is MYR93.00. The electricity bill is equal to the price difference between the total price of consumption with the total price of generation. Hence, the bill for that month amounts to MYR 87.20.

On the contrary, the calculation for net energy consumption under NEM 2019 is based on the difference between total monthly consumption and total energy generation. In this case, it equals to 200kWh. For the electricity bill, we multiply this number by the domestic tariff. Therefore, the electricity bill amounts to MYR 43.60.

We can clearly see that consumers enjoy lower electricity bill under NEM 2019 as opposed to NEM 2016.

House surrounded by greenery
You do not need to relocate to an area plush of greenery to transform your home to an environmentally friendly dwelling. You can start by practising 3R (Reduce, Reuse, Recycle), switching to appliances with energy-saving features, and of course, utilising solar panels to generate electricity.
Image by Dianne courtesy of Pexels

Am I Eligible For The Net Energy Metering Scheme?

NEM 2019 is only applicable to TNB customers living in Peninsular Malaysia. It caters for consumers who fall under residential, commercial, industrial and agriculture categories.

Consumers who wish to apply for the scheme needs to obtain a permit from SEDA. They are the authorities that are in charge of administering and managing the implementation of the NEM mechanism in Malaysia.

Regardless of payment method, those who wish to participate in this scheme need to purchase or lease the solar panel system through a Registered Solar PV Service Provider (RPVSP). Paying by cash or taking a bank loan may not be favourable to many. Thus, SEDA is helping interested customers to purchase the solar panel system using two alternative methods:

  1. Power Purchase Agreement (PPA)
    The customer pays for the solar energy generated (RM/kWh) from the solar panel system. The system is not owned by the customer, instead, it is owned by the Registered Solar PV Investor (RSPVI).
  2. Solar Leasing
    The customer pays a fixed monthly “rent” in return for the use of the solar panel system. At the end of the lease period, the customer will acquire ownership of the system.

Bringing Benefit Beyond Electricity Bills

Home and business owners that utilise rooftop solar panel system can now lower their utility costs, thanks to NEM. In the long run, independent electricity generation through solar panels would flourish.

The trickle-down effect from this development extends farther than one may see. The increasing popularity for the solar panel would fuel the development of the solar energy market. As a result, more jobs related to the industry will be created.  

The promise of lower electricity bills will attract consumers to consider setting up solar panel systems for their homes. This will reduce our dependency on coal and hydroelectric power sources for our electricity needs. In the end, environmental impacts such as air pollution and deforestation can be reduced to a minimum.

Hoover dam generates hydroelectric energy but also brings negative impact to the environment
Hoover Dam was built in 1931 as a means to generate hydroelectric energy. However, its construction resulted in no water reaching the mouth of the Colorado River. It also devastated the populations of native fish in the river downstream from the dam. Is this the kind of future that we wish to see?
Image by Egor Shitikov from Pixabay

What’s Next For Green Energy?

Even now, there is a continuous effort to further improve the NEM system. For example, there are recommendations to implement a time-of-use (TOU) pricing on NEM scheme. We may even see a new scheme with better benefits to the consumers. All these would lead to a better acceptance in utilising renewable energy by the public.

As consumers, we should be elated that solar panels system is getting more affordable by the day. Those with the means to do so should consider installing their own system soon. Just imagine, if only a third of the nation’s population chose to generate their own electricity through solar panels? Not only we would reduce the burden off the grid, but we would also cut down the amount of pollution from fossil-based sources.

If you are unsure how to start, you can contact SEDA at +603 8870 5800 or email them. They would be able to provide guidance on the planning and set-up of your own solar panel system.

Muhammad REZA

About Muhammad REZA

An avid reader, who enjoys history and personal development. Takes on everyday as a new learning experience. Dreams of opening a sanctuary for strays one day... until life threw him a curveball... fatherhood. Now all leisure is channelled to raising a happy and well learned princess.

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