In many countries where the FiT system is implemented, caps on RE installed capacities are highly discouraged as these caps limit RE growth and constrain its impact. The avoidance of such caps is possible in countries where electricity tariff is deregulated. However, in a regulated electricity market such as in Malaysia, the funding source for FiT is limited to a fixed percentage imposed on the utility’s electricity revenue. Therefore, caps are essential to ensure that there will be adequate funds to make the FiT payments to RE generators. Once the electricity market in Malaysia is deregulated, or when FiT has been operating for a considerable period of time, then removal of the caps may be possible.

Capping is achieved by putting a capacity limit or quota for new feed-in approvals in respect of each renewable resource for 6-month windows over the next 3 years. The reason for the 6-month window frame is to limit the waiting period for the next available set of quotas to a maximum of 6 months.