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The Corporate Renewable Energy Supply Scheme (“CRESS”) is one of Malaysia’s regulatory initiatives aimed at enabling corporate and industrial consumers to directly procure green electricity from Renewable Energy Developers (“RED”) through open access to electricity supply network. It supports the country’s broader commitment to decarbonisation, clean energy adoption and aimed at supporting the goal of energy transition for high priority sectors.

This article provides an overview of the CRESS framework, key contractual structures, eligibility criteria for participation and key potential risks, offering practical insight for stakeholders looking to participate in this scheme.

Objective of CRESS

CRESS offers Green Consumers the opportunity to directly purchase renewable electricity from REDs through open access to electricity supply network. This initiative is one of the key initiatives of Malaysia’s strategy to achieve 70% renewable energy in its capacity mix by 2050, supporting the nation’s commitment to reaching its Net Zero emissions goal.

Key Definitions for Understanding CRESS

To ease understanding of the CRESS framework, here are some of the key terms used:

• Green Consumer: An owner or occupier of a premise eligible to be supplied with electricity by both EUC and RED.
• Renewable Energy Developer (“RED”): The entity that owns and operates the renewable energy power plant.
• Green Energy Plant (“GEP”): The renewable energy generation facility owned by RED under CRESS.
• Electricity Utility Company (“EUC”): A person licensed to distribute and supply electricity under Section 9 of the Electricity Supply Act 1990.

CRESS Framework

Under the CRESS framework, RED is responsible for developing, owning, and operating a GEP with a direct connection to the electricity grid, in accordance with the Grid Code. The electricity generated from the GEP is exported to the electricity supply network and wheeled to the Green Consumer using existing grid infrastructure. This wheeling of energy is subject to a System Access Charge (“SAC”), which is currently set at RM0.25 per kWh. A key feature of the framework is its flexibility where one RED may contract with more than one Green Consumer, and similarly, a Green Consumer may source electricity from multiple REDs.

Contractual Framework

To enable the flow of electricity and ensure proper commercial settlement under the CRESS framework, there are 5 key agreements to be executed among the relevant parties:

• Bilateral Energy Supply Contract (“BESC”) between RED and Green Consumer for the sale and purchase of electricity generated from the GEP.
• Renewable Energy System Access Agreement (“RE SAA”) between RED and the Grid Owner to enable transfer of electricity generated from GEP.
• Corporate Renewable Energy Supply Agreement (“CRESA”) between the Green Consumer and EUC for the wheeling of electricity from GEP to Green Consumer.
• New Enhanced Dispatch Arrangement (“NEDA”) Agreement between RED and Single Buyer for compliance with NEDA guidelines and the invoicing and collecting of SAC.
• Backfeed Agreement between RED and EUC to govern sales and purchase of electricity from EUC.

Eligibility Criteria

To qualify under the CRESS framework, the following requirements must be satisfied:

• Green Consumer must be a registered high-voltage or medium-voltage consumer of the EUC.
• GEP must have a minimum capacity of 30MW and be directly connected to the electricity system.
• RED must have at least 51% local ownership.
• If the GEP cannot fulfil dispatchable energy output commitments, RED must install an energy storage system. This storage must have a minimum capacity equivalent to 50% of the GEP’s registered capacity or tested capacity prior to commercial operations whichever is lower, dispatchable for 4 consecutive hours. In the alternative, a higher SAC may be imposed. 
• In the event of storage unavailability (planned or unplanned), RED will be subject to a non-firm SAC.

The eligibility criteria above are not exhaustive. Kindly refer to the guideline for CRESS here.

Renewable Energy Certificate

The green attributes from the energy generated by the GEP shall belongs to RED. The transfer of Renewable Energy Certificates to the Green Consumer is governed by the terms in the BESC, and redemption of these certificates be done in Malaysia in accordance with international standards.

Key Potential Risks to Consider

• For REDs:
  1. Delayed payments by Green Consumers
     Delayed payments can disrupt cash flow and negatively impact the financial stability of the RED.
  2. Reduced electricity usage by Green Consumers
     A decrease in energy consumption by the Green Consumer could result in energy being deemed as “free” to the system, leading to a loss of expected revenue.
  3. Withdrawal of Green Consumers
     If a Green Consumer withdraws, it could cause the RED to exceed the maximum demand declared. In such cases, RED may only be able to sell the excess energy at a reduced rate of RM0.08/kWh, significantly lower than the contractual rate¹.
  4. Increase in SAC
     Any rise in SAC could increase operational costs for the RED, potentially affecting the project’s profitability.

1. Refer to Frequently Asked Question of CRESS here. ↩︎

• For Green Consumers:
  1. Poor maintenance and underperformance of the system by the RED
     If RED fails to properly maintain or manage the GEP, it could lead to suboptimal performance, potentially preventing the Green Consumer from achieving their sustainability targets.

Conclusion

CRESS offers a valuable opportunity for businesses to meet sustainability targets by directly sourcing renewable energy. However, with the involvement of multiple stakeholders, complex agreements, and technical considerations, it is important for both REDs and Green Consumers to carefully structure their arrangements. Considering the potential risks, such as payment delays, system performance issues, or regulatory changes, seeking legal guidance can help ensure that all parties are adequately protected and that the terms are clear, fair, and aligned with long-term objectives.

This Article is written by Yeo Shu Pin (Partner) of Messrs. Shu Pin & Associates.

Disclaimer: Every attempt to ensure the accuracy and reliability of the information provided in this publication has been made. This publication does not constitute legal advice and is not intended to be used as a substitute for specific legal advice or opinions. Please contact the author(s) for a specific technical or legal advice on the information provided and related topics.