August 4, 2017 | Author: Siva Shali | Category: Renewable Energy, Biomass, Photovoltaics, Photovoltaic System, Cogeneration
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Overview of Policy Instruments for the Promotion of Renewable Energy and Energy Efficiency in Malaysia



Malaysia Energy Sector: An Overview......................................................................... 4 Status of Renewable Energy Utilization ....................................................................... 7 2.1 Biomass energy ................................................................................................... 8 2.2 Biogas energy .................................................................................................... 12 2.3 Hydropower........................................................................................................ 14 2.4 Solar energy....................................................................................................... 15 2.5 Wind energy ....................................................................................................... 18 2.6 Geothermal energy ............................................................................................ 19 3. Renewable Energy and Energy Efficiency Policy and Programs ............................... 19 3.1 Malaysia’s energy policies ................................................................................. 19 3.2 Policy initiatives and programs........................................................................... 22 3.3 Key players ........................................................................................................ 24 4. Renewable Energy and Energy Efficiency Activities.................................................. 25 4.1 Renewable energy activities .............................................................................. 25 4.2 Energy efficiency activities ................................................................................. 26 5. Potential for Renewable Energy and Energy Efficiency in Malaysia .......................... 30 5.1 Biomass energy potential................................................................................... 30 5.2 Solar energy potential ........................................................................................ 31 5.3 Wind energy potential ........................................................................................ 33 5.4 Small hydropower potential................................................................................ 33 5.5 Geothermal energy potential.............................................................................. 34 6. Current Gap/Constraints and Market Barriers or RE and EE..................................... 37 6.1 Biomass energy ................................................................................................. 37 6.2 Solar energy....................................................................................................... 39 6.3 Wind energy ....................................................................................................... 40 6.4 Small hydropower .............................................................................................. 41 References ........................................................................................................................ 42

LIST OF FIGURES Figure 1: Malaysia’s electricity generation mix (1990-2003)................................................ 6 Figure 2: Malaysia’s electricity generation mix (2003)......................................................... 6 Figure 3: Malaysian renewable energy sources. ................................................................. 7 Figure 4: Malaysia renewable energy values. ..................................................................... 7 Figure 5: Potential power generation from wood residues. ............................................... 11 Figure 6: Composition of municipal solid waste in Malaysia.............................................. 12 Figure 7: TNB Jana Landfill Biogas Project in Malaysia (2 MW). ...................................... 13 Figure 8: Solar irradiance map of Malaysia. ...................................................................... 16 Figure 9: Cumulative BIPV Installed Capacity in Malaysia ................................................ 17 Figure 10: Examples of grid-connected PV installations in Malaysia. ............................... 17 Figure 11: Communities, sectors and clusters that belong to MIEEIP............................... 27 Figure 12: Basic guideline in energy benchmarking. ......................................................... 29 Figure 13: ‘Energy Use Index’ method of calculation. ....................................................... 29 Figure 14: Interactive e–benchmarking. ............................................................................ 29 Figure 15: Distribution of thermal springs in Peninsular of Malaysia. ................................ 34 Figure 16: Distribution of thermal springs in Sabah........................................................... 35 Figure 17: Distribution of thermal springs in Sarawak. ...................................................... 36


LIST OF TABLES Table 1: Gross national product (at current price) (2004).................................................... 4 Table 2: Total primary energy supply (ktoe) ........................................................................ 4 Table 3: Total primary energy supply (2003) ....................................................................... 4 Table 4: Final commercial energy consumption .................................................................. 5 Table 5: Final commercial energy consumption (2003)....................................................... 5 Table 6: Major electricity producers in Malaysia.................................................................. 5 Table 7: Status of SREP projects approved by SCORE (August 2004) .............................. 8 Table 8: Residue product ratio and potential power generation from palm oil mill residues ................................................................................................................................... 10 Table 9: Solid residue resulted from processing FFB........................................................ 10 Table 10: Residue product ratio and potential power generation from rice mill residues (2000).........................................................................................................................11 Table 11: Characteristics of the biogas captured. ............................................................. 13 Table 12: Target BPIV ‘Suria 1000’ program..................................................................... 18 Table 13: RE System at Samusan, Tanjung Datu and Pulau Talang-talang National Parks ................................................................................................................................... 19 Table 14: History of main energy policy and events in Malaysia ....................................... 19 Table 15: List of approved SREP projects (December 2004)............................................ 25 Table 16: Different sector and projects under CDM. ......................................................... 28 Table 17: Summary of main elements in energy efficiency policies .................................. 28 Table 18: Biomass resource potential (1999). ................................................................... 30 Table 19: Monthly average daily global solar radiation in selected cities (Whr/m2). ......... 31 Table 20: Estimated market solar hot water system in Malaysia in 2020. ......................... 31



Malaysia Energy Sector: An Overview

Malaysia is divided into two major parts, i.e. the Peninsular Malaysia (which is surrounded by the South China Sea and the Strait of Malacca) in the west and the Malaysian part of the island of Borneo in the east. These two parts are separated by 640 km of sea. The East Malaysia consists of the states of Sabah and Sarawak. The total land area is around 330,200 km2, with Peninsular Malaysia accounting 40% of the total. Table 1: Gross national product (at current price) (2004) Economic Indicator Value (US$) million Sectoral GDP Components (estimated) GNP growth (%) Inflation CPI (%) Exports (US$ million) Current account balance (US$ million)

Amount 31,085 5.6 2.4 19,896 3,404

Source: RE in ASEAN website: (December 2005)

Malaysia is a net energy exporter until today. It is predicted that this beneficial situation remains only until 2010 due to the limitation of the resources like coal and gas (Jaafar, 2005). In 2002, the primary energy supply was 52,995 ktoe (Table 2) or approximately five times larger than in 1980. Compared to the supply in 1980, the crude oil contribution to the total supply is significantly declining while the natural gas and coal are increasing. Shown in Table 3 is the total primary energy supply in year 2003. Table 2: Total primary energy supply (ktoe) Primary Energy Supply Indigenous Production Import Export Stock Change TOTAL PES * Coal * Crude oil & Petroleum * Natural Gas * Hydro Power

1998 73,655 13,060 -43,714 -648 41,905 1,660 20,727 19,101 417

1999 72,439 13,122 -41,829 -1,427 41,893 1,376 18,364 21,506 647

2000 79,473 16,271 -43,637 -396 51,492 2,308 22,215 26,370 599

2001 77,264 18,692 -44,766 183 51,220 2,911 22,054 25,648 607

2002 80,519 17,979 -45,199 -214 52,995 4,133 22,308 26,101 456

Source: Energy Data and Modeling Center, IEEJ (2004)

Table 3: Total primary energy supply (2003) Primary Energy Supply Crude oil (ktoe) Natural gas (ktoe) Coal & coke (ktoe) Electricity (GWh) GDP energy intensity (TOE/ US$'000) Domestic energy conversion losses (%)

Amount 25,344 20,878 5,316 83,300 0.88 36.1

Source: RE in ASEAN website: (December 2005)

The final commercial energy demand in 2002 was 30,775 ktoe, the main contribution came from the industrial and transportation sector and the remaining is shared by the residential and agricultural sector (Table 4). The same trend can be observed in year 2003; further, energy consumption indicators are also shown (Table 5). 4

Table 4: Final commercial energy consumption Final Energy Consumption Agricultural Sector Industrial Sector Residential and Commercial Sector Transportation Sector TOTAL FEC * Coal Products and Coal * Petroleum Products and Crude Oil * Gas * Electricity

1998 307 10,122 3,313 9,793 23,535 767 17,488 2,726 4,577

1999 106 10,239 3,653 11,393 25,391 608 18,782 3,023 4,815

2000 104 11,401 3,867 12,070 27,442 991 19,581 3,862 5,263

2001 98 11,853 4,047 13,138 29,136 977 20,324 4,621 5,594

2002 95 12,853 4,386 13,441 30,775 1,086 20,638 5,643 5,922

Source: Energy Data and Modeling Center, IEEJ (2004)

Table 5: Final commercial energy consumption (2003) Final Energy Consumption (ktoe) Petroleum products Natural gas Coal & lignite Electricity Net Domestic Consumption Per Sector (ktoe) Industry Residential/commercial Transport Non-energy and others Energy Consumption Indicators Per capita final energy consumption (TOE) Per capita electricity consumption (kWh) Electrification of households (%)

Amount 21,175 5,887 1,212 6,313 13,472 4,399 14,271 2,345 1.381 2,840 83.3

Source: RE in ASEAN website: (December 2005)

The electricity generation is dominated by three integrated utilities, i.e., Tenaga Nasional Berhad (TNB) for Peninsular Malaysia, Sabah Electricity Sdn. Bhd (SESB) for Sabah area and Sarawak Electricity Supply Corp (SESCo) for Sarawak area. Other power generators are the Northern Utility Resource (NUR), Independent Power Producer (IPPs) and cogenerators. Table 6: Major electricity producers in Malaysia Major Power Producers

Electricity Generation (GWh)


Installed Capacity (MW)


Tenaga Nasional Berhad (TNB )





Independent Power Producer (IPP) (Peninsular)










Sarawak Electricity Supply Company (SESCO)















Sabah Electricity Sdn Bhd (SESB)













Private Generation TOTAL Source: EC-ASEAN COGEN III (December 2004)


In 2003, the total electricity generated in the country was 83,300 GWh of which 72.8% was contributed by gas, 16.3% coal, 6.2% hydropower, 4.0% oil products and 0.7% by biomass and other fuels (Figure 2). Out of the 78,900 GWh produced by the utilities and IPPs, 45,450 GWh or 57.6% was contributed by IPPs (Statistic of Electricity Supply Industry in Malaysia, 2004). At the end of 2003, the total installed generation capacity of the utilities and IPPs in the country was 18,800 MW with a plant mix of 58.2% gas turbine and combined cycle, 19.3% coal, 11.3% hydropower, 7.5% oil, 3.4% diesel and the remaining others. The total capacity of cogeneration in operation was 800 MW producing 3,500 GWh of electricity. The country’s electricity generation mix from 1990 to 2003 is shown in Figure 1. Figure 1: Malaysia’s electricity generation mix (1990-2003).

Power Generation Mix (%) 100%

80% Coal 60%

Hydro Natural Gas


Fuel Oil Diesel


0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Source: Pusat Tenaga Malaysia (7 Sept 2005)

Figure 2: Malaysia’s electricity generation mix (2003). Coal, 16.3% Hydro, 6.2% Oil, 4.0% Biomass & Others, 0.7%

Gas, 72.8% Coal



Biomass & Others


Source: Statistic of Electricity Supply Industry in Malaysia (2004)

The Malaysian government expects that investment of $9.7 billion will be required in the power utility sector through 2010 dominated by coal-fired plants shifting away from the natural gas resources. It is also estimated that the total final energy demand will grow in the range of 5% to 7.9% per year for the next 20 years. As a comparison in the period from 1980 until 1998, it was in the average of 3.6% to 10%. A total of 9,570 MW of new electricity generation capacity will be planted between 2002 and 2007 in the Peninsular Malaysia to meet future electricity demand (Shigeoka, 2005).



Status of Renewable Energy Utilization

RE resources available in Malaysia are biomass, solar, mini-hydropower, municipal waste and biogas. Almost 60% of the land area of the country is dominated by natural forest and 15% is shared by agricultural cultivation which means that there is a great potential the development of biomass energy. The Ministry of Energy, Water and Communications (MECW) stated that the most important renewable energy sources in Malaysia are biomass and solar. The overall available renewable energy sources in Malaysia can be seen in Figure 3 while the estimation of the annual renewable energy value in Malaysia is depicted in Figure 4. Figure 3: Malaysian renewable energy sources.

Renewable Energy Sources Biomass Palm Oil



M unicipal





Rice Husk



Landfil Gas


Hydro Small Hydro

Shell POM E Trunks/Frond s Source: Pusat Tenaga Malaysia (2003)

Figure 4: Malaysia renewable energy values.

Source: Pusat Tenaga Malaysia (2003)


Solar Thermal PV

The 8th Malaysia Plan is a period to test, demonstrate and even commercialize several initiatives arising from a number of RE feasibility studies and awareness programs undertaken in the last three years. The launch of the Small Renewable Energy Power Program (SREP) in May 2001 is another manifestation of the government to achieve the Eight Malaysia Plan objectives in enhancing the utilization of renewable energy resources for power generation. SREP's primary objective is to facilitate the expeditious implementation of grid-connected renewable energy resource-based small power plants. This program particularly focuses on biomass wastes as the key renewable energy resources, especially biomass residues from oil palm industries as Malaysia produces huge amount of wastes from the palm oil industries, being world's biggest exporter of oil palm products. Small power generation plants which utilize RE can apply to sell electricity to the Utility through the Distribution Grid System. Under this Small Renewable Energy Power Program, the utilization of all types of Renewable Energy, including biomass, biogas, municipal waste, solar, mini-hydropower and wind, are allowed. Maximum capacity of small RE plant designed for sale of power to the grid must be 10 MW. A Special Committee on Renewable Energy (SCORE) has been set up under the then Ministry of Energy, Communications and Multimedia to coordinate the program and a secretariat functioning as a One-Stop Center at the Energy Commission facilitates industry participation in the program. The status of the SREP projects approved by SCORE, as of August 2004, is given in Table 7. Table 7: Status of SREP projects approved by SCORE (August 2004) No.




2 3 4

Landfill Gas Mini-hydropower Wind and Solar Total

Energy Resource Empty Fruit Bunches Wood Residues Rice Husk Municipal Solid Waste Mix Fuels

Approved Application

Generation Capacity (MW)

22 1 2 1 3 5 26 0 60

200.5 6.6 12.0 5.0 19.2 10.2 99.2 0 352.70

Grid Connected Capacity MW) 165.9 6.6 12.0 5.0 19.2 10.0 97.4 0.0 316.1

Source: RE in ASEAN website: (December 2005)

To date, 60 SREP projects have been approved. Out of these approved projects, 29 projects use biomass as the fuel source, of which 22 of them use palm oil wastes and the other seven projects use rice husk, wood waste, municipal waste and bagasse. In addition to the above biomass-fuelled projects, there are five landfill gas projects and 26 minihydropower projects. However, due to the lack of financial support and other difficulties, only six SREP developers have requested for and given licenses to proceed with the implementation of their projects.


Biomass energy

A large portion of renewable resources are contributed by biomass, namely oil palm waste and wood waste, which are used to produce steam for processing activities and also for generating electricity. Biomass fuels contribute to about 16 percent of the energy consumption in the country, out of which 51 percent comes from palm oil biomass waste 8

and 27 percent, wood waste (Pusat Tenaga Malaysia, 2002). The resource is widely used in Malaysia for heat and power generation through combustion process. The excess power from this combined and heat power plant can be connected to the national grid system. Currently, the total generation capacity from oil palm residues for internal consumption is about 211 MW. This fuel is not easy to handle due to low calorific value, low density, inconsistence quality, and seasonal supply. A simple pre-treatment of biomass is required for the effective use of biomass such as shredding machine to reduce the size and dryer to reduce the moisture content. The utilization should be improved through an efficient biomass technology. To further catalyse the development of the SREP programs the government had implemented a national project called the “Biomass-based Power Generation and Cogeneration in the Malaysian Palm Oil Industry” (BIOGEN) project in 2001. This project will facilitate the maximum utilization of the excess wastes from palm oil mills for power generation in reducing the Greenhouse Gas emissions in Malaysia. For the year 2003, the project has prepared the groundwork to develop the first Full Scale Model (FSM) project. The project was expected to launch its first FSM and three more are expected during the Second Phase of the project (2005-2008). A Renewable Energy Business Facility (REBF), which will serve as the financial support mechanism for the FSM's development, has been set up. The strategy involves the implementation of barrier-removal activities, including the implementation of biomass-based grid connected power generation and CHP in Malaysia. The BIOGEN Project, which will be carried out over a five year period, represents collaborative efforts of the global community in the form of United Nations Development Program (UNDP) and Global Environment Facility (GEF) together with the Malaysian Government and private organisations. This 5-year project consists of 2-phases, the first phase being a 2-year project with 2003 as the start of the first year. Phase 1 will begin with activities that are considered technical assistance focusing on the removal of primary barriers that hinder the widespread application of biomass-based power generation and cogeneration using both biomass and biogas generated from biomass resources. Phase2, a three-year activity, will involve the implementation of an innovative loan/grant mechanism that will be worked through the Malaysian banking sector. However, the approval of the phase 2 depends on availability of resources from financing sources and successful implementation of Phase 1. Other biomass energy contributors are from plant cultivations, animal and urban wastes. There are currently more than 300 palm oil mills in operation, which self generates electricity from oil palm wastes not only for their internal consumption but also for surrounding remote areas. Studies also found that 75.5 percent of the potential biomass that can be harnessed in Malaysia is not utilized and wasted and according to studies conducted by BIOGEN (2001), the total potential of biomass-based power generation can be in excess about 2000 MW. The value of biomass in Malaysia is estimated to be more than RM 500 billions over the next 20 years (based on oil price RM 95/barrel). Under the EC-ASEAN COGEN Program Phase III, there are eight ongoing Full Scale Demonstration Projects (FSDPs) implemented the biomass fuel systems which are in the areas of rice husk, wood waste, palm oil waste and rubber waste located in ASEAN countries. Three of these are in Malaysia, two are using palm oil waste as a fuel while the other one is using rice-husk. Oil palm residues The palm oil industry has been operating biomass cogeneration systems for more than 40 years, especially using palm waste. The oil palm industry generates residues during the harvesting, replanting and milling processes. The residue that comes from the milling 9

processes are fruit fibres, shell and empty fruit bunches which are all have great potential energy resources. Other residues include trunks and fronds are available at the plantation area. Palm oil mill effluent (POME) from the wastewater discharged from the sterilization process is another potential fuel sources. This abundant supply of oil palm waste provides the strong reason for selecting biomass as the first of the renewable energy sources to be developed for large-scale application. Table 8: Residue product ratio and potential power generation from palm oil mill residues Production (‘000 Ton) 59,800

Residue EFB at 65%MC Fibre Shell

Residue Product Ratio (%) 21.14

Residue Generated (‘000 Ton) 12,641.7

12.72 5.67

7,606.6 3,390.7 16,670.6 38,870

Total Solid POME(3.5m3/ton of CPO/65% of FFB)

Potential Energy (PJ) 57

Potential Electricity Generation ( MW) 521

108 55 220

1,032 545 2,098 320

Source: RE in ASEAN website: (December 2005)

Wastes and residues from palm oil mills which can be used for heat and power generation are in the forms of empty fruit bunches (EFB), fibres, shells, palm trunks and fronds. In 2001, 360 palm oil mills processing 63 million tons of fresh fruit bunches (FFB) and producing 11.8 million tons of Crude Palm Oil (CPO) generate waste residues as follows: 14 million tons of EFB, 8.5 million tons of fibre and 4.3 million of shell (Bumibiopower, August 2003). These residues caused many environmental problems as they were burned through incinerator/ open-burning system, put as landfills, or rot as massive piles. One ton of EFB has an economical value of only RM14.40 as mulch, while as fuel, it has a value of as much as RM 49.81. Using palm oil residues for power generation is more beneficial in terms of financial gain and reducing the dependency on conventional energy resources. The Malaysian government has given a high priority for further development of the current application and utilization of biomass renewable energy sources due to the annually abundant supply, clean technology utilization and many domestic practical experiences especially in cogeneration utilization. The solid residue resulting from further processing of FFB is given in Table 9. Table 9: Solid residue resulted from processing FFB Residue from Processing FFB Mesocarp Fiber Empty Fruit Bunches Shells

Percentage (%) 15 23 7

Source: Malaysia Palm Oil Board (2004)

TSH Bio-Energy (TSHRB) is the first local company to sell renewable energy from oil palm waste to Sabah Electricity Sdn Bhd (SESB), which is 80% owned by TNB. TSHRB expects its 14 MWe renewable energy biomass power plant at Kunak, Sabah to be commissioned in October 2004 to generate an annual profit of 8-10 millions RM (Euro 1.75 – 2.2 millions) through the sales of power to SESB. This company will sell up to 10MWe at 21.25 RM cents (Euro cents 4.66) per KWh through a 21 years renewable energy power purchase agreement (REPPA) to SESB. This plant will use the palm oil residues such as Empty Fruit Bunches (EFB), Fibers/Shell which provide an effective avenue to dispose the processing residues from palm oil milling activities while generating


additional income. This project is the first Palm-EFB-Fired Grid Connected Cogeneration Plant with a high-pressure modern boiler of 80 ton/hour, 66.5 bar (g) and 402oC in the world. It is also the first EFB-Fired Boiler employing the Well-Proven Vibrating Membrane Grate in South East Asia. Paddy residues Rice, being the staple food for Malaysians, produces abundant residues potential for energy generation. The total paddy planted areas for Malaysia in the year 2000 was about 600,287 hectares and producing 2,050,306 tons of paddy. Paddy straws and rice husks are the main residues from rice paddy cultivation, generated during the harvesting and milling processes. Although the potential is relatively high, the current utilization still limited due to the difficulty in handling the paddy wastes. Currently only a small quantity of rice husk is used for energy generation and other application such as silica production and composting. In all, it is assumed that only 2% of the rice husk is used for energy production as the balance is deposited in landfill. Table 10: Residue product ratio and potential power generation from rice mill residues (2000) Production (‘000 Ton) 2,140

Residue Rice Husk Paddy Straw

Residue product Ratio (%) 22 40


Residue Generated (‘000 Ton) 471 856 1,327

Potential Energy (PJ) 7.536 8.769 16.305

Potential Power (MW) 72.07 83.86 155.93

Source: RE in ASEAN website: (December 2005)

Wood residues Figure 5: Potential power generation from wood residues.

Source: RE in ASEAN website: (December 2005)

Total forest areas in Malaysia are about 5.9 million hectares. Only 1.29% of the total area is allowed for logging industry due to concerns for environmental conservation. Wood industries are mainly referred to the logging industry, saw milling industry, the panel product industry (plywood, veneer, particleboard, and medium density fibreboard), the moulding industry and the furniture industry. These industries generate different type of biomass residues namely sawdust, off-cuts and wood barks. The residues such as offcuts from the sawmills are used as fuel for the kiln drying or sold as boiler fuels. The middle portions of the log from the plywood and veneer mills are used as boiler fuels. The


remaining wastes are mainly the bark and the sawdust. In the isolated areas they are burned in the incinerator or boiler to produce heat. The generation of biomass residues from the wood-based industry has declined due to limited supply of logs and maximization of residues into value added product. The biomass from the processing plants is used as fuel for their CHP plant or sell to the potential users such as brick manufactures. The following figure show the estimated potential energy and electricity from the waste generated from sawmills, plywood and moulding plants. Natural tropical forests cover about 19.54 million hectares or 59.5% of the country’s total land area which, off course, are the main assets for biomass-wood based energy. Biomass energy sources can be converted into modern energy through power generation and cogeneration which several of them are available in Malaysia. These are installed in integrated wood complexes and generate heat and power from various types of wood waste. Pyrolysis and gasification technologies are still at the experimental stage (RWEDP No.36, 1997). 2.2 Biogas energy With a population growth of 2.4 % per annum or about 600,000 per annum since 1994 and current total population of 26 million, the municipal solid waste (MSW) generation also increases, which makes MSW management crucial. Currently, the MSW is managed mainly through open landfill. However, due to rapid development and lack of new space for it, the big cities and islands are considering incineration to tackle this problem. The composition of MSW in Malaysia is shown in Figure 6. Figure 6: Composition of municipal solid waste in Malaysia.

Source: RE in ASEAN website: (December 2005)

It is estimated that the amount of solid MSW by the year 2020 is about 9 million tons per year. From that figure, the average amount of solid MSW generated per day is 24,650 tons. Thus, the potential amount of energy to be generated using the backpressure turbine system is about 500 MW. The latest development concerning the waste management in Malaysia is the plan to build a multi-billion Ringgit incinerator in Broga, Selangor, which has a capacity to treat 1,500 tons of solid waste a day completed with recovery energy system. Malaysia has successfully implemented a project in which biogas derived from Palm Oil Mill Effluent (POME) is used for heat and electricity generation. There are a lot of resources and potential for generating power with this technology. Unfortunately, only few applications of anaerobic technologies could be identified in Malaysia. So far, there is only


one plant for biogas capture and recovery operating in a palm oil mill6. In 1996, there were four biogas plants built in Sibu – Sarawak which is funded by the German Appropriate Technology Exchange (GATE) involved technical expertise from Sri Lanka and Chinese design. However, the price of the generated energy is not competitive with the conventional fossil fuel which makes the implementation is still limited until today. The first grid connected Renewable Energy project implemented in Malaysia with a total generation capacity of 2 MW, using municipal waste, was the Landfill Gas (LFG) Power Generation Project located at Air Hitam Sanitary Landfill, Puchong. This plant was constructed in November 2003. The power plant has two gas engines rated at the capacity of 1048 kW. Among the benefits gained from this project are the reduction in odour level to the surrounding area and mitigation of green house gasses emission. These benefits are also shared by the surrounding community, whereby previously they have to face the higher level of odour problem everyday. The concession period for this power plant is 15 years. JLSB extracted biogas from the wells, which were built at the landfill site. Each well can produce biogas for 20 years. The characteristics of the captured biogas are given in Table 11. Table 11: Characteristics of the biogas captured. Fuel Composition Moisture Level of the Biogas Temperature Calorific Value Biogas Production Rate Biogas Feeding System Monitored emission

More than 55% are methane gas Maximum at 80% moisture level 240C 3 5.32 kWh / m 3 40m / hr Direct extraction from gas field. NOx < 500 mg / m3

Source: RE in ASEAN website: (December 2005)

The total investment costs amount to Euro 9 millions, excluding civil works and building foundations. The expected pay back period is 4 years after commissioning. Figure 7 shows the location of the power plant. Figure 7: TNB Jana Landfill Biogas Project in Malaysia (2 MW).

Source: Malaysia Energy Center (2005)


2.3 Hydropower Hydropower has been utilized for electricity generation since 1900s. It is recorded that the first hydroelectric plant was constructed on Sempam River near Raub, Pahang in 1900 by the Raub-Australian mining company. This plant is still operating until today (Windows to Malaysia, 2005). This source of energy has been utilized as on grid power generation by Tenaga National Berhad (TNB) which accounts for 20% from its total generation capacity. By the end of 2001, there were 12 large-scale hydropower stations (10 plants in the Peninsular Malaysia, 1 plant in Sabah and 1 plant in Sarawak) and 50 mini-scale hydropower stations (36 in Peninsular, 5 in Sabah and 9 in Sarawak). Bakun project is one example of large-scale hydropower projects in Malaysia with a total generating capacity of 2.4GW. However, it has social and environment impacts due to the flooding of large area (RESLAB, 2005). Malaysia's hydropower capacity is estimated at 25 GW with a total electricity output of 107 TWH/year. There are currently 50 mini-hydropower plants with installed capacities ranging from 200 kW to 2.2 MW with a total installed capacity of 38.85 MW in operation. Most of the mini-hydropower systems that are in operation are public-funded under Malaysia's rural electrification program. These are mini-hydropower schemes which are based on run-of-river systems ranging from 500 kW to 1000 kW capacity. Currently, thirty-nine units with a total generating capacity of 16.185 MW have been commissioned in Peninsular Malaysia. Seven units with a total capacity of 2.35 MW have been commissioned in Sarawak. In Sabah, five units with a total capacity of 5 MW have been commissioned. In peninsular Malaysia, these units are owned by the power utility company, Tenaga Nasional Berhad (TNB). The situation in the states of Sabah and Sarawak (northern Borneo) offers better opportunities for the application of renewable energy since electrification level is relatively low. It is estimated that Malaysia has 28,500 MW source of energy from hydropower (Asian and Pacific Development Center, 1985). Mini-hydropower in Malaysia was built in the 80's as part of the government's Rural Electrification Program. A total of 42 mini-hydropower schemes were implemented and their capacity range from 50kW to 2 MW and the total installed capacity was 17 MW. As the country progressed, the mini-hydropower schemes were redundant as the rural areas were provided with electricity by the national grid systems. The plants were neglected and by 1994, only 9 out of 42 were in operational. A feasibility study conducted by Projass Engineering Sdn Bhd in 1991 found that seven schemes were not viable to operate and the remaining 35 have potential to generate double their current generating capacity. In 1994, the main utility, TNB awarded a contract to Projass for a period of “10+10” years for rehabilitation, operation and maintenance of 35 mini-hydropower in Peninsular Malaysia. The responsibilities covered the operation and maintenance of the intake structure, water conveyance systems, electromechanical equipment and the transmission lines up to the transfer point. The mini-hydropower potential of the country has been assessed and viable sites have been identified. Some of these sites have been implemented with government funding under rural electrification program. These are based on run-of-the-river systems ranging from 500kW to 1000kW capacity. Currently, there are thirty nine units with total capacity of 16.185 MW in Peninsular Malaysia, seven units of total capacity of 2.35MW in Sabah and five units of total capacity 5MW in Sarawak.


The mini-hydropower department of TNB was adhered to several guidelines to implement the projects: • Schemes are run-off the river type with capacities ranging between 25kW5000kW. They could be either isolated or connected to the grid system. • Implementation of the project is to be done in the most economical approach where the methodologies adopted are cost saving oriented. Usage and development of local resources and technology are to be maximized. • Standards and quality are not to be jeopardized in order to safeguard reliability of the mini-hydropower stations and the safety of its operation. 2.4 Solar energy The whole of Peninsular Malaysia has been provided with electricity through the grid. As a result, the application of photovoltaics (PV) power supply is focused to some special applications, such as remote telecommunications (relays), lighthouses or sea buoys. The application of solar PV technology is currently focused in east Malaysia namely, the states of Sabah and Sarawak. About 2,000 SHSs had been installed in Malaysia by the year 2000. Altogether, over 2.1 MWp of PV systems have been installed (for buoys, beacons, lighthouses, remote villages, repeater stations etc.) with the largest proportion, (i.e. around 320 kWp) for rural telecommunications. For Sabah and Sarawak (east Malaysia), further electrification by conventional grid extension will remain problematic, no matter how much (centralised) power plant capacity is made available. The dispersed human settlement pattern results in extremely low load densities. Examples are present in Sabah where, with total disregard for the costs associated with the grid extension, the monthly returns of the end-users do not even cover the operational costs. Because of the status of rural electrification in east Malaysia, solar home system for Malaysia will mainly focus on Sabah and Sarawak. The Klang Valley (Kuala Lumpur, Petaling Jaya) has the lowest irradiance value, whereas around Penang (Georgetown, north-west coast) and Kota Kinabalu (East Malaysia) have the highest values measured. A solar PV installation in Malaysia would produce energy of about 900 to 1400 kWh/kWp per year depending on the locations. Areas located at the northern and middle part of the Peninsula and the coastal part of Sabah and Sarawak would yield higher performance. An installation in Kuala Lumpur would yield around 1000 1200 kWh/kWp per year (Figure 8).


Figure 8: Solar irradiance map of Malaysia.

Source: RE in ASEAN website: (December 2005)

The favourable environment for rural PV application in Malaysia has prompted the giant PV manufacturer BP Solar (49% ownership) together with Projass Sdn Bhd (51% ownership) to set up PV module fabrication plant in this country. The plant, which was launched in April 2000, is capable of producing 5 MWp per year when operating at full capacity. In the past 3 years, the annual production of the plant was approximately 500 kWp. Malaysia is located entirely at the equatorial region with an average daily solar radiation of 4,500 kWh/m2, with sunshine duration of about 12 hours. Ambient temperature remains uniformly high throughout the year with the average ranges between 27 to 33°C. Most locations have a relative humidity of 80 – 88%, rising to nearly 90% in the highland areas and never falling below 60% (UNDP, 2004). Despite the abundant resource, solar PV applications in Malaysia are limited to mainly stand-alone PV systems, especially for rural electrification where the technology costs are highly subsidized. Hybrid systems based on PV and diesel generators have been used for the electrification of remote islands where grid connection is a costly option. Rural electrification projects particularly in Sabah and Sarawak have also incorporated PV systems in places where supply from the grid may not be possible for sometime to come. Other minor applications being promoted include telecommunication, street and garden lighting and recently, for powering parking ticket dispensing machines. Only recently, Malaysia demonstrated several pilot grid-connected solar PV technologies. The TNB started the use of PV system in rural area in early 1980s as a pioneer project -installation of stand-alone PV systems for houses (37 houses in Langkawi, 70 houses in Tembeling, and 50 houses in Pulau Sibu). After that, two rural pilot projects (10 kW and 100 kW) were implemented in Sabah with the support from the NEDO, Japan. It is estimated that the total capacity for stand-alone systems in Malaysia, including Sabah and


Sarawak, in the year 2000 was 1.5 MW (some are dismantled). The effect of gridconnected PV can be seen in Figure 9. The establishment of Technology Park Malaysia with a generating capacity of 362 kW considerably increased the total installed capacity in 2001. Another implementation is the Grid-connected Rooftop Solar Photovoltaic Systemexperimental project cosponsored by the Malaysian Electricity Supply Industry Trust Account (MESITA) and TNB Research (Figure 10). Figure 9: Cumulative BIPV Installed Capacity in Malaysia

Source: UNDP, MBIPV (2004)

Figure 10: Examples of grid-connected PV installations in Malaysia.

Source: RE in ASEAN website: (December 2005)

Malaysia is moving forward to promote solar energy so that a small group of homeowners will get the rare opportunity to have PV systems installed in their homes at reduced costs. Under the Suria 1000 component of the five-year Malaysian Building Integrated Photovoltaic (BIPV) project which will kick off soon this year, homeowners could bid to have PV systems installed in their homes. The bidding will start at a quarter of the current cost of a 4kWp PV system typically needed for a house. Such an installation now costs about RM 100,000 or US$ 40,000. National BIPV program ‘Suria 1000’ which targets the residential (500 kW) and commercial sector (500 kW) has an opportunity to establish new BIPV market and provide direct opportunities to the public and industry to be involved in renewable energy initiatives


and environmental protection. It is expected that PV players will finally offer BIPV system prices equivalent to Europe and Japan. Today, the cost of a 5kW BIPV turn-key roof-top system in Malaysia is about RM25/W (less than USD7/W). Through this program, it is expected than the BIPV cost will be reduced in each subsequent year (Pusat Tenaga Malaysia, “Suria 1000”, 2003). Table 12: Target BPIV ‘Suria 1000’ program Years Year 1 Year 2 Year 3 Year 4 TOTAL

Target BIPV Capacity 100 kWp 300 kWp 300 kWp 300 kWp 1,000 kWp

Min Target Cost Reduction 5% 5% 5% 5% 20%

Reserve Bidding Price 25% 35% 40% 50%

Co-financiers (RM) Total Cost = RM27.5 Million • Min 40% by public • Max 50% by ST • 10% by industry

Source: Pusat Tenaga Malaysia “Suria 1000” (2005)

2.5 Wind energy The current utilization of wind energy sources is still limited due to low average wind velocity in the whole country. The first wind energy facility in Malaysia is located in Pulau Layang-Layang, Sabah. A Wind Turbine Generator (WTG) hybrid system has been installed and constructed in November 1995 by TNB Research Sdn. Bhd., a TNB subsidiary (Renewable Energy in Malaysia, 2003). There are some facilities in this island such as airstrip, chalets (with 80 rooms), jetty station, fresh water supply and security. Total population at one time is about 80-120. It can be concluded that wind energy utilization is still at a pilot project stage and more studies are needed to establish the wind speed, wind flow patterns and seasonal variation and provide a basis for the selection of sites for successful installation of commercial scale wind projects. Studies thus far conducted have found that there is positive potential for harnessing wind for energy especially for areas at the east coast since these areas can experience rather strong winds of between 3.5-4 m/s due to the Northeast monsoon. The current wind energy potential of Malaysia is estimated between 350 and 500 PJ. In 1994, the wind energy used was only 1260 MJ. A number of feasibility study had been done by researchers on the potential of wind energy in Malaysia. Through a more detail study conducted by Universiti Teknologi Malaysia (UTM) researchers in 1989, it was found that Malaysia experiences a great amount of wind throughout the year, i.e., more than 75% of the year time with wind blows of 2.5 m/s and above. After completing the feasibility study, a new goal in research was set up to develop low wind speed wind turbine (LWSWT) for electricity generation from wind energy in Malaysia. By end of the year 1995, the 1st UTM's LWSWT had been fabricated and installed. In 1997, a project had taken off the ground and composed 2 main parts i.e. the technology development and the implementation. The technology development had been done in UTM while the implementation was in Pulau Tioman. The technology development encompassed of four parts i.e. the wind conditions monitoring, blade design and manufacturing, tower design and fabrication and electricity generation and storage system determination. Meanwhile, the utilization of RE in Sarawak national parks were to reduce the environmental impacts to the protected surrounding and to overcome fuel transportation problem, as most national parks in Sarawak are not viable for the state electricity grid 18

connection. The Sarawak state government had introduced RE power systems to this area in order to address the issue. All these national parks are isolated and accessible primarily by an hour boat ride from Sematan. The description of the system installation at all 3 national parks is given in Table 13. Table 13: RE System at Samusan, Tanjung Datu and Pulau Talang-talang National Parks Latitude Longitude Photovoltaic Type Peak watt Total Peak Watt Quantity Orientation (Facing) Tilted Angle Wind Turbine Output Min Wind Speed Generator Type Output (kW)

Samusan 1° 56' N 109° 37' E

Tanjung Datu 2° 05' N 109° 38' E

Pulau Talang-talang 2° 03' N 109° 50' E

Polycrystalline 77 2078 27 North 45°

Polycrystalline 77 1308 16 North 25°

Single Crystalline 40 768 32 South 18°

20 kWh/day 4.5 m/s

5 kWh/day 4.5 m/s


Diesel 20kW

Diesel 10 kW and 7 kW


Source: RE in ASEAN website: (December 2005)

2.6 Geothermal energy Hot springs, one of the most common manifestations of geothermal activities, occur in abundance in Malaysia and to date, there are 79 reported localities. In Peninsular Malaysia thermal springs are mainly found along the eastern part of the Main Range batholith though some are found scattered in other areas while in Sabah high concentration are found within young volcanics area of the Semporna Peninsular. In Sarawak , few occurrences of thermal springs have been recorded, which are constricted at the most westernmost area of the state. The potential of these geothermal resources is yet to be investigated and assessed in detail. At present, thermal areas are being preserved in their natural state for the purposes of recreational activities. A number of these hot springs are already developed into public baths with complete facilities.


Renewable Energy and Energy Efficiency Policy and Programs


Malaysia’s energy policies

The history of main energy policy and events in Malaysia can be seen in the following Table 14. Table 14: History of main energy policy and events in Malaysia Year 1949

Events CEB was formed


The Petroleum Development Act


The National Petroleum Policy

Description Central Electricity Board (CEB) is the government body which changed its name to National Electricity Board (NEB) in 1965. PETRONAS, served as a state-owned enterprise, given exclusive rights of ownership, exploration and production was created under this Petroleum Development Act The policy aims at regulating the oil and gas industry to achieve the country's




1979 1980

The National Energy Policy The National Depletion Policy


The Four-Fuel Diversification Strategy Electricity Supply Act TNB is established

1990 1999 1999 2001 2002

Pusat Tenaga Malaysia was launched The Five-Fuel Diversification Strategy Small Renewable Energy Program (SREP) was launched Dept of Electricity and Gas Supply (JBEG) was transformed into the Energy Commission (EC)

Description economic development needs is set Supply, Utilization and Environment Objectives were set The strategy is incorporated into the National Petroleum Policy. The objective is to extend the life of domestic depletable energy resources. The strategy aims for a supply mix of four fuels, i.e. oil, gas, hydropower and coal in energy use TNB was established through a corporatization and privatization exercise by the NEB. TNB is the Malaysia's national electricity utility company. The role of PTM in the Development of Energy Efficiency & Renewable Energy in Malaysia Renewable Energy was recognized as the fifth fuel in the energy supply mix. The aim is to encourage and intensify the utilization of Renewable Energy in power generation. EC is a regulatory agency responsible for energy matters

Source: Shigeoka, Hitoshi (2005)

National Energy Policy The national energy policy under Eighth Malaysia Plan (2001-2005) focuses on: sustainable development of energy resources, greater utilization and adequate electricity generating capacity of gas and renewable energy and supporting industries that produce energy related products and services. The Four-Fuel Diversification Policy and the Fifth-Fuel Policy During the Eighth Malaysia Plan, Malaysian Government officially announced the Development of a Strategy for Renewable Energy as the Fifth Fuel project to assess the use of indigenous renewable energy (RE) potential in Malaysia. This policy supersedes the Four-Fuel Diversification Policy, replacing fossil fuel with renewable energy which will contribute to preservation of the environment. Under the current Eight Malaysia Plan (2001-2005) and the Third Outline Perspective Plan (2001-2010), the Government has adopted the following as part of Malaysia energy policy (ASEAN RE-SSN and UNEP. 2004): • Greater utilization of natural gas in power and non-power sectors • The development of renewable energy as the fifth fuel, particularly in the power generation • Efficient utilization of energy through the introduction of new regulations and amendments to present laws • Adequacy of electricity generating capacity. This project is taken to consider the legal, regulatory and financial framework of renewable energy in order to encourage the utilization of renewable resources. Renewable energy database has been established at the PTM. The Center of Education and Training in Renewable Energy and Energy Efficiency (CETREEE) was established at the Universiti Sains, to increase the public awareness on RE and EE measures. CETREEE conducts training and dissemination activities, which include designing of RE and EE modules for secondary schools, universities, energy professional and general public. The use of RE sources especially oil palm residues and other agricultural wastes is strongly


recommended by the government, as they are abundant in the country. The RE database has been established at the PTM. Greenhouse Gas Mitigation Policy In addition to the Eighth Malaysian plan, the government has ratified the Kyoto Protocol in September 2002. As a non-Annex 1 country, Malaysia is able to utilize the Clean Development Mechanism (CDM) as a means to reduce domestic CO2 emissions as well as for technology transfer from developed countries. This will create investment opportunities in the greenhouse gas emission reduction projects. The Technical Committee for Energy, chaired by the Ministry of Energy, Communications and Multimedia appointed Pusat Tenaga Malaysia as the Secretariat to the Committee on 12 September 2002. The main tasks of this Committee are assisting CDM proposal, providing advisory services of potential CDM project developers and conducting outreach activities targeting energy stakeholders. A number of outreach activities have also been conducted with the funding from the DANIDA. Code of Practice on Energy Efficiency and Use of Renewable Energy for Nonresidential Buildings As a new Malaysian standard, Code of Practice on Energy Efficiency and Use of Renewable Energy for Nonresidential Buildings, MS 1525:2001 has been introduced and approved on 14 August 2001 which includes architectural and passive design, building envelope, lighting illumination control, electric power and distribution, air conditioning and mechanical ventilation and energy management system (Malaysian Standard, 2005). There are no regulatory frameworks used for on grid RE utilization which are globally known as are feed-in / pricing law and quota system. The price is not fixed and it determined based on the agreement between the utility (e.g.: TNB) and the developers (ex.: REPPA). In term of quota system, the government has set up a minimum RE share of 5% by the end of 2005 and 20% by 2010 as depicted in the Eight Malaysian Plan. However, the Ministry of Energy admitted that this target still is too optimistic hence it is still in the voluntary stage. The Eighth Malaysia Plan (2001-2005) The strategies to intensify the development of renewable energy as stipulated in the Eighth Malaysia Plan (2001-2005) are as follows: • Utilization of RE as the fifth fuel will be intensified during the Plan period to supplement the supply from conventional energy sources. RE sources that will be promoted in terms of priority, are biomass, biogas, municipal waste, solar and mini-hydro. Of these, biomass resources, such as oil palm and work residues as well as rice husks, will be used on a wider basis for the purpose of heat and electricity generation • Biomass-based cogeneration system for the production of electricity and usable energy will be encouraged. In this respect, the generation of energy mainly for in-house consumption will be promoted. The supply of excess energy generated by the biomass-based generating system to the local community and to the grid will be considered, depending on its technical and commercial viability. • In promoting greater utilization of RE, initiatives that will be considered include demonstration projects and commercialization of research findings as well as extension of financial and fiscal incentives for RE-related activities. • Cooperation between government agencies and private institutions in the development of RE resources will also be promoted.


The Third Outline Perspective Plan (OPP3) for 2001-2010 In the Third Outline Perspective Plan (OPP3) covering the period 2001-2010, the emphasis on the development of renewable energy resources are as stated below: • Sustainable development of the energy sector is important in ensuring the competitiveness of the economy, particularly the industrial, transportation and commercial sectors. Efforts will continue to be undertaken to manage both depletable and renewable energy resources to cater for the demands of a rapidly growing economy. The main thrust will be to ensure adequate, secure, quality and cost-effective supply of energy, promote its efficient utilization and minimise the negative impact on the environment. • To supplement the conventional supply of energy, new sources such as renewable energy will be encouraged. In this regard, the fuel diversification policy which comprises oil, gas, hydro and coal will be extended to include renewable energy as the fifth fuel, particularly biomass, biogas, municipal waste, solar and mini-hydro. Of these, biomass resources such as oil palm and wood waste as well as rice husks will be used on a wider basis mainly for electricity generation. Other potential sources of energy will include palm diesel and hydrogen fuel. • The OPP3 states that Malaysia may become an oil importer by the year 2008. Therefore, the Government's “Five Fuel” policy, comprising oil, gas, hydro, coal, and renewable energy (particularly biomass, biogas, municipal waste, solar and mini-hydro) is not only necessary, but timely as well. 3.2

Policy initiatives and programs

Small Renewable Energy Power (SREP) Program In 2001, taking on the cue of the government's fifth fuel policy, MEWC has instituted an administrative policy target of 5% of grid-connected electricity generation or 500 MW from RE by the end year 2005. As part of the effort to realize the target of 500 MW of installed RE capacity, the government of Malaysia has launched the Small Renewable Energy Power (SREP) Program to encourage and intensify the utilization of renewable energy (oil palm wastes, wood residues and rice husks) for grid-connected electricity. SREP projects are defined as power generating projects that are capable of converting renewable energy resources into electricity. Via this program, the small power generators connection are allowed to sell to the grid at selling rates defined by the Renewable Energy Power Purchase Agreement (REPPA). Selling price is capped at a ceiling of RM 0.17 sen/kWh (USD 0.045 cent/kWh). However, since the program was launched 4 years ago, the achievement is rather disappointing where less than 4 % now has been captured where various issues such as fuel supply, high financing cost and tariff has been identified as major stumbling blocks for development. Hence, the 5 year Biomass-based Power Generation for the Malaysian Palm Oil Industry project funded by GEF-UNDP which is expected to end by end of the year could do their bit in realizing the target. The project strategy involves the implementation of barrier-removal activities (2002-2004) and the implementation of innovative loan/grant mechanism (2005-2008). Fiscal Incentives In order to encourage energy generation using biomass, the Government has implemented the tax and duty exemptions aimed at increasing use of RE. The Budget for 2001 & 2003 outlined the following incentives for SREP project proponents: • Pioneer status with income tax exemption of 70 percent on statuary income for 5 years or an Investment Tax Allowance of 60 percent of capital expenditure incurred within a period of 5 years and to be utilized against 70 percent of the statuary income; and


Import duty and sales tax exemption on machinery and equipment that are not produced locally. Sales tax exemptions are given for machinery and equipment that are produced locally. These fiscal incentives elevate RE initiatives to the status of other promoted sectors in the country such as IT and High Technology industries. The Government also through the Malaysia Electricity Supply Industry Trust Account (MESITA), has been providing financial assistance to renewable energy projects. Under this fund, IPPs and TNB Generation voluntarily contribute 1% of their annual audited revenue to the trust account. Projects funded by MESITA include grid-connected electricity generation from landfill gas, photovoltaic systems and palm oil residues. In addition, to coordinate the implementation of the Government's strategy to intensify the development of RE as the fifth fuel resource, a Special Committee on Renewable Energy (SCORE) was set up under MEWC. Financial incentives The main financial incentives in Malaysia are in terms of tax exemption, rebates-payment, long term low-interest loans and loan guarantees and reduction of subsidies for conventional energy (Shigeoka, 2005). Tax exemption was introduced in 2001 to encourage the use of renewable energy and energy efficiency measures. It covers accelerated capital allowance, investment tax allowance and import-sales tax exemption. In the area of power generation using RE (biomass, hydro and solar) which does not exceed 10 MW, companies undertaking such activities are eligible for Pioneer Status (PA) or Income Tax Allowance (ITA), which make them be eligible for higher exemptions mentioned below. For the purpose of this incentive, 'biomass sources' refer to palm oil mill/estate waste, rice mill waste, sugar cane mill waste, timber/sawmill waste, paper recycling mill waste, municipal waste and biogas (from landfill, palm oil mill effluent (POME), animal waste and others), while energy forms refer to electricity, steam, chilled water and heat. Companies must implement their projects within one year from the date of approval (ASEAN-India Business Portal, 2004). As mentioned above, these financial incentives were revised in 2004. The changes are as follows: 1. Enhancing incentives for companies producing goods using oil palm biomass as follows: • Increasing the rate of income tax exemption under Pioneer Status from 70% for 5 years to 100% for 10 years. • Increasing the rate of Investment Tax Allowance from 60% to 100% for 5 years. 2. Providing existing companies using oil palm biomass with the following incentives: • Pioneer Status with tax exemption of 100% for 10 years on the increased income from reinvestment. • Investment Tax Allowance of 100% for 5 years on additional investment. 3. Improving tax incentives for companies in Sabah, Sarawak and the eastern corridor of Peninsular Malaysia as follows: • Increasing the rate of income tax exemption under the Pioneer Status from 85% to 100%. • Increasing the rate of Investment Tax Allowance from 80% to 100%. This allowance can be fully deducted and not limited to 85% of the statutory income. • Exempting tax on income remitted from abroad by individuals, as presently enjoyed by companies.


3.3 Key players A number of government organizations have input into energy planning and supply in Malaysia including: 1.

Ministry of Energy, Water and Communication (MEWC) The Ministry of Energy, Water and Communications (MEWC) which is formerly known as Ministry of Energy, Communications and Multimedia (MECM), is the responsible agency for implementing energy policy. The Ministry launched the Small Renewable Energy Power (SREP) Program in May 2001 to encourage and intensify the utilization of renewable energy (oil palm wastes, wood residues and rice husks) for grid-connected electricity. SREP projects are defined as power generating projects that are capable of converting renewable energy resources into electricity. This program is part of the Government's effort to promote distributed power generating plant as well as energy efficiency.


Pusat Tenaga Malaysia (PTM) PTM is the responsible agency for the promotion of RE & EE in Malaysia. PTM was registered on 12th May 1998 as a not-for-profit company and administered by MEWC, Malaysia. The rationale behind PTM's establishment is to fulfill the need for a national energy research center that will co-ordinate various activities, specifically energy planning and research, energy efficiency, and technological research, development and demonstration (R, D&D) undertaken in the energy sector due to the long lead time for energy projects to come on stream. PTM will eventually become a one-stop focal point for linkages with the universities, research institutions, industries and other various national and international organisations on energy matters.


Economic Planning Unit (EPU) EPU is the agency responsible for policy design for the government. Its major impact with respect to the energy sector is the introduction of the Fifth Fuel Policy that superseded the previous Four Fuel Policy. Together with the MEWC, among the outcomes of their efforts are the incorporation of renewable energy in both the Eight Malaysia Plan and the Third Outline Perspective Plan.


Energy Commission (EC) The Energy Commission was set up in May 2001 as a regulatory body for both gas and electricity supply. It was formally a department under MEWC. Its main responsibility is to act as the regulatory body for the energy sector. The EC is also responsible for issuing licenses to prospective renewable energy producers under the SREP program. To date, it has issued 3 licenses under that program.


Tenaga Nasional Berhad Tenaga Nasional Berhad is the major power generator (60 percent of generation) in Peninsular Malaysia and has a monopoly on the transmission and distribution of electricity.


Petroleum Nasional Berhad (PETRONAS) PETRONAS is a government controlled company with a mandate to manage the oil and gas resources in Malaysia.



Renewable Energy and Energy Efficiency Activities


Renewable energy activities

SREP The Small Renewable Electricity Plants or SREP will provide valuable experience that can be utilized to develop and fine-tune RE strategies to achieve a significant share of RE in the fuel mix of the power generation industry in the long-term. SREP's primary focus will be to facilitate the expeditious implementation of grid-connected renewable energy resource-based small power plants. Table 15 shows the approved SREP projects as of December 2004. Table 15: List of approved SREP projects (December 2004) Energy Source

Biomass: i) Oil Palm Residue ii) Wood Waste iii) Rice Husk iv) Municipal Waste v) Combination Landfill gas Mini-hydropower Wind & Solar TOTAL

Applications Approved 27 1 2 1 3 5 26 0 65

Generation Capacity (MW) 214.7 6.6 12.0 5.0 19.2 10.2 101.2 0 368.90

Grid Connected Capacity (MW) 175.6 6.6 12.0 5.0 19.2 10.0 97.4 0 325.8


53.9 2.0 3.7 1.5 5.9 3.1 29.9 0 100

Source: Suruhanjaya Tenaga (2005)

BIOGEN Project The BIOGEN Project was introduced on 18 October 2002 with the main objective to reduce the growth rate of GHG emissions from fossil fuel fired combustion processes and to develop and exploit the energy potentials of biomass waste and realised through the successful implementation of component programs. This project is jointly funded by the Government of Malaysia, United Nation Development Program (UNDP), Global Environment Facility (GEF) and the Malaysian private sector (PTM, COGEN, 2004). At the end of phase 1, fifty palm oil mills (15% of palm oil mills) have initiated plans to implement biomass power generation and cogeneration. At the end of phase 2, GHG emissions from power generation in Malaysia are reduced by 3.8% by the end of the fifth year. Basically, the BIOGEN program was introduced as a compliment to SREP in terms of awareness enhancement, policy studies, financial assistance, demonstration schemes and technology development and the SREP programs are involved in the awareness and knowledge, policy issues, financial issues and fuel issues (PTM, 2003). CETREE Center for Education and Training in Renewable Energy and Energy Efficiency (CETREE) under University of Science Malaysia was established for training, educating and creating awareness in RE and EE activities. The Electricity Supply Industry Trust Fund The Electricity Supply Industry Trust Fund was officially launched in July 1997. The contributors to the fund are the power generating companies TNB and the IPPs in Peninsular Malaysia by voluntarily contributing 1% of their electricity sales to the Peninsular Grid or the transmission network to the fund. A special committee called the


Electricity Supply Industries Trust Account Committee (Jawatankuasa Akaun Amanah Industri Bekalan Elektrik - JAAIBE) manages this trust account (KTMK, 2005). 4.2 Energy efficiency activities Historically, the energy efficiency activities in Malaysia has started around 1970s during the oil crisis by the use of more efficient lamps and air-conditioning plants in public building. However, these programs were not implemented effectively. The promotion of the Energy Efficiency was renewed around 1990s by the Electricity and Gas Supply Department (now undertaken by the Energy Commission) and the Ministry of Energy. In that period, regulations were drafted, but they were not implemented due to legal issue. For promoting EE activities, the Energy Efficiency Unit was established in late 1990s within the Electricity and Gas Supply Department (Suruhanjaya Tenaga, 2005). Until recently, many energy efficiency programs have been implemented to moderate the increasing energy intensity trend, reduce impacts to the environment and avoid wasteful energy usage. In the Eighth Plan period (2001-2005), energy efficiency measures have been carried out including energy audits in selected industries and commercial complexes as well as the utilization of more energy efficient processes and technologies. A project on the Development of an Energy Efficiency Strategy was carried out to evaluate the legal, regulatory and financial framework with the aim of promoting the efficient utilization of energy. In addition, an industrial energy efficiency improvement program was implemented to encourage EE measures in eight manufacturing sub-sectors, namely wood, pulp and paper, iron and steel, cement, rubber, glass, ceramic and food. MIEEIP The Malaysian Industrial Energy Efficiency Improvement Project or MIEEIP was launched on 30 July 1999. This project aims to reduce the barriers and encourage implementation of EE improvements in the 8 energy intensive manufacturing sectors: cement, ceramic, iron & steel, food, glass, wood, pulp & paper and rubber. So far, 48 companies have been audited and demonstration projects have been identified such as: • Fuel replacement using wood waste (ESCO-EPC) • Boiler heat recovery for food industry • Gob image analyzer / forming machine for glass industry • Tunnel kiln upgrading for ceramic industry • Establish e-benchmarking facility for any industry An indication of successful implementation of this project is the 10% reduction in: energy consumption, energy intensity and GHG emissions. The community, sectors and clusters which belong to this program is outlined in Figure 11. Around 60 Companies from different sectors have participated.


Figure 11: Communities, sectors and clusters that belong to MIEEIP.





Pulp & Paper


Iron & Steel



Clusters -Plyboard, -Chipboard -Medium Density Fibreboard

-Tyres -Gloves

-Cocoa Sauce -Food Oil

-Paper box -Specialty -Paper board -Sheet -Newsprint -Container

-Billets -Tiles & -Bars & Rods Bricks -Iron Casting -Sanitary ware -Clay Pipes

-Integrated plant

Source: PTM (September 2005)

EE/DSM in Capacity Building Project The Energy Efficiency and Demand Side Management or EE/DSM in Capacity Building Project has an objective to enhance the existing capacity of commission in managing and coordinating initiatives in order to achieve the energy efficiency target by cooperation among government institutions and implementing agencies. The example of this implementation program is the comparative and endorsement of energy labeling No.5. PARM The Policy Analysis and Research Management (PARM) Division of PTM was involved in a regional training in the use of a computer tool by IAEA and Energy and Power Evaluation Program (ENPEP) in order to conduct greenhouse gases (GHGs) mitigation analyses in June 2001. The study included examining cogeneration from RE resources for power generation, increased industrial efficiency and fuel switching from natural gas to coal. ENPEP-BALANCE is one of the useful planning tools that could be used to evaluate the evolution of the energy supply/demand balance as well as the GHGs mitigation option in the energy sector. ZEO building concept Zero Energy Office (ZEO) Building concept which means that buildings must not consume more electricity than what can be produced in the building using renewable energy sources (PTM, 2005). The Low Energy Office (LEO) building for the Ministry of Energy, Communications and Multimedia (MECM) in Putrajaya is able to save of up to 50% of energy consumption compared to other office buildings. In the future, the target of this program is zero energy status through the use of RE. With Malaysia’s participation in the Clean Development Mechanism, three conditional letters of approval from the DNA have been issued in September 2003 two are for on gridconnected biomass combined heat and power plant (CHP) projects and one for on off-grid biomass CHP project. The total power generated is 27 MWe. A list of possible types of projects from different sectors is shown in Table 16. A summary of main elements in energy efficiency policies in Malaysia is shown in Table 17.


Table 16: Different sector and projects under CDM.

Source: PTM (2005)

Table 17: Summary of main elements in energy efficiency policies EFFICIENCY MEASURES ON THE DEMAND SIDE Types of measures : • Reduction in unnecessary consumption • (i.e. turn off airconditioner when the room is not occupied) • Insulation • Efficient appliances Types of policies • Awareness raising • Labeling of energy consumption • Standards for energy consumption • Economic Incentives Including taxes

EFFICIENCY MEASURES ON THE SUPPLY SIDE Types of measures : • Combined generation of electricity and heat/cooling • Increase conversion efficiency of power production • Reduce transmission and distribution losses Types of policies • Performance standards • (Best Available Technology) • Economic incentives including taxes

Source: Energy Smart (September 2003)

Energy benchmarking Benchmarking is a systematic and continuous process of searching, learning, adapting and implementing the best practices from within own organization or from other organizations towards attaining superior performance. Note that ccompetitiveness is a very crucial factor that must be addressed in this scenario. Energy use benchmarking is one option to facilitate our industry to improve by reducing energy cost factor.Figure 12 presents the basic guidelines in doing about energy benchmarking. Figure 13 shows the Energy Use Index method of calculation. Figure 14 is flowchart for the interactive ebenchmarking.


Figure 12: Basic guideline in energy benchmarking.

Energy Use Index (EUI) GJ/t



35.84 Benchmark





¾ Where are you now? ¾ How good are you?


25.00 20.00


¾ Why are you at this position Vs others? ¾ How good can you be?


¾ What can be improved? ¾ How do you get better?


15.00 10.00 5.00 0.00

Campany A

Campany B


Campany C Campany D

Source: PTM (2005)

Figure 13: ‘Energy Use Index’ method of calculation. Electricity Index

1,824 kWh/t @ 6.6 GJ/t


10,000,000 kWh

Fuel Index


5,000,000 l

Production Process

Raw Material

Good Product

5,484 t

Energy Use Index (Overall)

6,000 t

39.5 GJ/t Source: PTM (2005)

Figure 14: Interactive e–benchmarking.

Source: PTM (2005)


912 l/t @ 32.9 GJ/t


Potential for Renewable Energy and Energy Efficiency in Malaysia

5.1 Biomass energy potential As stated before, Malaysia has an abundant biomass sources which are mainly from palm oil mill residues. Oil palm from a little over 2.1 million ha, rubber on 1.75 million ha and cocoa over 0.45 million ha are the primary export earners. About two-thirds of the 4,000,000 ha of rice in Peninsular Malaysia are irrigated and double-cropped. Not much of the 50,000 ha in Sabah are fully irrigated; most of the 1500000 ha in Sarawak are rain fed and upland (BERNAS, 2002). The overall biomass potential is depicted in the following Table 18.

Table 18: Biomass resource potential (1999). Sector Rice Mills Wood Industries Palm Oil Mills Bagasse POME Total

Quantity kton / year 424 2,177 17,980 300 31,500 72,962

Potential Annual Generation (GWh) 263 598 3,197 218 1,587 5863

Potential Capacity (MW) 30 68 365 25 177 665

Source: PTM, BIOGEN (2005)

Forests cover about 60% of the country’s total land area which are significant not only for their contribution of revenue from the exploitation of timber, but also because of their important non-timber forest products. Forests also provide valuable ecological services such as flood control, catchment protection and carbon storage (MST, 2004). As energy sources, the main wood based biomass energy potential comes from wood residues which have no other commercial values, i.e.: logging residues, saw milling residues, plywood and veneer residues and secondary processing residues. According to the national statistics, Malaysia generates 2,177,000 tons of wood waste per year, with the potential to generate 598 GWh, with a total installed capacity of 68 MW. Rubber cultivation based biomass energy potential is extracted from wastes and residues. As the first source, it may come from fallen leaves, branches, twigs and rubber seeds. It is estimated that there are an available of 6.5 dry tons of wood and leaves and 0.036 dry tons of seed per ha per year. The total energy potential available is 20.67 boe. Second, it may come from effluents produced after processing latex which by utilizing biogas technology, the available energy potential is about 210,000 boe per year. Alternatively, it may come also from the rubber wood from replanting activities. It is estimated that the amount of dry rubber wood available from 1999 until 2007 is in an average of 3.3 million dry tons annually. Out of these 1.47 million dry tons is used as fuel which has an energy content of 4.967 mboe per year (Renewable Energy in Malaysia, 2003). Waste from coconut cultivation can be divided into three main categories, i.e.: fronds and debris that are shed throughout the year which is estimated (based on 1995 data) to be 0.583 million tons of fronds with a potential energy of 1.747 mboe is produced annually. About 0.528 million tons of these are being used for fuel in rural villages, Shell, husk and copra waste is generated from the processing and consumption of coconut fruits which is approximated that 0.747 million tons of shells and 0.374 million tons of husks were produced annually (approx. equal to 1.994 mboe and 1.122 mboe respectively). The copra produced was 0.35 million tons annually with an energy potential of 1.18 mboe which has an estimated potential energy of 207.6 boe per ha (extracted from the leaves and trunks). 30

5.2 Solar energy potential Located at the equator, Malaysia has an approximate of 4,000-5,000 Whr/m2 of solar radiation and a daily sunshine duration are ranging from 4-8 hours. The average daily global solar radiation in selected cities can be seen in Table 19. Table 19: Monthly average daily global solar radiation in selected cities (Whr/m2). Month Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec


Kota Kinabalu

3,337.7 3,708.0 4,276.0 3,630.5 3,727.7 4,521.3 4,603.5 4,206.7 4,386.3 4,230.3 4,145.0 3,490.0

4,920.4 5,378.3 5,823.9 6,011.9 5,599.1 5,307.4 5,392.1 5,398.9 5,055.9 5,335.9 5,021.5 5,000.4

Kota Bahru


Bayan Lepas

Kuala Lumpur

Petaling Jaya

4,516.5 4,912.3 5,478.7 5,484.5 5,063.5 4,749.2 4,768.5 4,838.9 5.033.4 4,748.6 3.690.1 3,374.9

4,188.8 5,570.3 4,665.5 4,749.4 4,386.2 4,461.2 4,144.8 4,210.6 4,340.4 4,284.8 4,248.8 4,416.8

5,305.6 5,432.7 5,571.6 5,270.9 4,862.8 4,815.4 4,796.9 4,663.6 4,628.7 4,525.5 4,730.2 4,885.9

4,288.7 4,692.4 4,794.6 4,919.9 4,479.7 4,419.1 4,407.4 4,416.9 4,453.1 4,395.5 3,990.0 4,035.2

4,244.0 4,718.2 4,363.4 4,634.0 4,398.5 4,434.1 4,483.2 4,442.3 4,466.9 4,507.6 4,047.6 4,037.8

Bandar Baru Bangi 3,657.6 4,441.0 4,124.7 4,464.7 4,401.0 4,299.7 4,656.5 4,024.6 3,994.3 3,943.0 3,409.8 3,516.5

Source: PTM (205)

Solar heating technology has been widely used by residential and industrial sectors. The prediction of the potential estimated market solar heating system in 2020 is depicted in the following table. Table 20: Estimated market solar hot water system in Malaysia in 2020. Type of Establishment

Number of Establishments

Recreational Center & Restaurants Food & Food Products Hotels Animal Food Household (Medium & Upper)

553 175 250 43 500,000

Source: Renewable Energy in Malaysia (2003)

As one among the world’s main producer of computer chips, Malaysia has a big potential for PV cells chips production through its silicon wafers technology. In addition, the PV-grid inverter has been locally produced which is cheap and easy to purchase in the local market. Therefore, it is predicted that the application of PV on grid potential system will be a new business opportunity in Malaysia (TNB, 2002). One of the most attractive applications of PV technology is the use of PV in buildings or commonly known as Building Integrated Photovoltaic or BIPV. With this, the scope of PV applications is expected to increase in the country in the near future especially with the implementation of the Malaysian Building Integrated Photovoltaic or MBIPV Project. This project which will be executed by the Ministry of Energy, Water and Communications is co-funded by the UNDP and the GEF. The primary objective of the MBIPV project is to create the enabling environment that will lead to a sustainable BIPV market in the country and technology cost reduction. 31

A PV system, either a stand-alone or a grid-connected, is classified as a BIPV system whenever the PV is aesthetically integrated into the building architecture and envelope. Most of the BIPV applications are grid-connected systems that are applied in urban areas. The utilization of solar energy through PV has a huge potential, offering several advantages. When integrated into the fabric of a building, it can displace other material and replace conventionally building material, thus off-setting the PV cost. A variety of roof tiles and sheet materials are also available in the international market, and there are purpose-designed mounting and integration systems available to improve appearance and weather proofing, as well as making the installation process easier. BIPV needs no extra land, and it generates electricity at the point of use, thus reducing electricity transmission losses. When BIPV capacity is appropriately sized, it can displace purchase of electricity, with possibility to export the surplus to the grid. The technical potentials of BIPV in the residential and commercial sectors are huge. Considering only the lower PV capacity value of 1 kWp for every 10 m2 of available building roof surfaces in these sectors, the technical potential is around 11,000 MWp or 11 GWp, which could provide more than 12,000 GWh solar-generated electricity. Today, this would cover 20% of the national energy demand. The climate for business opportunities in the field of PV is encouraging. Malaysia is currently promoting the continued diversification of industrial base towards high-end manufacturing and the development of the value-added services sector as part of the move towards a knowledge-based economy. In the Malaysian Investments Act 1986, alternative energy sources like the development and production of fuel cells, polymer batteries, PV components and solar cells are specifically mentioned. Tax reductions for new companies provide attractive incentives for start-up. Nevertheless, the incentives have to be reviewed when considering a local production of either PV inverters or modules. Malaysia is now encouraging high-tech electronic products for which attractive incentives are being offered to promote investments and reinvestments in technology and capital intensive projects. The electronics cluster would be built around the semiconductor sector (cell production) and the industrial equipment sector (module and inverter manufacturing). The local PV manufacturing facilities can benefit from the existing infrastructure and well established manufacturing sector in Malaysia such as the precision machining and the production of electronic assemblies and sub-assemblies, components, moulds, tools and dies, metals and plastics, and automated machinery and equipment. Supply for the mounting structure or any metal part is readily available. The industry is well established and produces high quality materials. Custom-made products can be ordered without problems. Thus, frames for the modules made of extruded aluminum can be easily produced. The well-established local electronic industry can supply components to the inverter manufacturers. State-of-the-art materials are available without inherent restriction to the supply chain. Thus, in short to mid-term, a local production of inverter is possible. Possible suitable partners for joint venture on inverter manufacturing can be from Europe. Companies, like SMA, or Sputnik cover the worldwide market with approximately 50% of all sales and can be very strong partners for the local industry. In addition to providing technical and business know-how to the Malaysian venture, they are interested to expand their businesses in the Asia region and hence, joint ventures may be possible. A solar PV module manufacturing unit can be established with an investment of around US$ 40 million for a 25 MWp output. If a market is established or the forecast is positive, then potential investors will be able to establish a manufacturing line within 4 years. A 32

significant manufacturer, RWE Schott is currently reviewing its strategy, which may include a stronger presence and involvement in the ASEAN market. Other potential investors are from Japan (e.g. Sharp) or Germany (e.g. IBC Solar). These companies are closely watching the policy direction of the government in BIPV and are expected to review their strategy in tandem with developing the BIPV sector. To establish and operate a solar PV module manufacturing unit economically (where wafers are imported) requires a long-term market perspective of about 6 MWp per year. 5.3 Wind energy potential The climate of Malaysia is dictated by the Northeast and Southwest Monsoon. As its location is at the equator, the wind speed over the region is generally low. It is observed that the strongest wind occurs on the East Coast of Peninsular Malaysia during the Northeast Monsoon. There was a wind feasibility assessment program in Malaysia and ten sites had been chosen to study wind energy potential. The sites are located at Mersing, Kuala Trengganu, Alor Star, Petaling Jaya, Cameron Highlands, Kota Kinabalu, Melaka, Tawau, Labuan and Kuching. The data has been collected from the Malaysian Meteorological Services stations located at these cities. The study concluded that Mersing and Kuala Trengganu have the greatest wind power potential in Malaysia. Preliminary analysis indicated that applications involving small wind machines could be used to provide electricity (Renewable Energy in Malaysia, 2003). 5.4 Small hydropower potential As the government provided bulk finance allocation for the implementation of small hydropower development below 3 MW, TNB submitted its working papers to the government to seek concurrence for the development of the selected projects. Detailed site surveys were then carried out after the various Ministries committed to provide financial allocation. The site data obtained were then fitted into the various standard designs that the Implementing Agency had prepared. The following steps of action were taken prior to the design works: • The approximate capacity of the plant to be installed was carefully selected. The installed capacity should be sufficient to meet the power demand in the affected area for the next 5 years. • The State Government Area Development committee was informed about the possibility, viability and the benefits of the proposed projects. The current program provides significant information on the future economy of minihydropower development and the possible introduction of further low cost techniques. However, this is greatly dependent on efforts made by both TNB and government to harvest energy for both the grid and rural sector. Indigenous methodology and construction methods together with local manufacture would contribute to minihydropower being a viable and economic solution to low cost rural energy supply. Loans from International Banks should not impose conditions that restrict the use of local materials. The usual condition of the bank requiring the implementing agency to engage overseas Consultant may also result in a high cost of mini-hydropower program. The Government and TNB should encourage the development of local expertise in the field of construction and local manufacture. There is a need to establish regional centers in the country to implement mini-hydropower since its potential in the country is large. The energy available from such small streams has been proven to provide considerable contribution to the supply of electricity both in the rural and urban areas.



Geothermal energy potential

Peninsular Malaysia Thermal springs in the Peninsular of Malaysia are known to be related to the major tectonic trend of North-Northwest – South-Southeast. As shown in Figure 15, most of the springs are located along the Main Range Granite batholiths especially within major fault and shear zones. Others are found within the sedimentary rocks which are also in close contact with the granite intrusions. A number of thermal springs have been partially or fully developed with hot water and spa bathing facilities. One location in Kelantan is in the process of being gazetted as Geotourism Site by the State Authorities. Figure 15: Distribution of thermal springs in Peninsular of Malaysia.

Source: RE in ASEAN website: (December 2005)

There are 3 out of 61 thermal springs in Peninsular Malaysia were found to be discharging brackish to saline water. The rest yielded water with low to moderate dissolved mineral contents. Discharge rate are mostly 0, which indicate mixing with younger or shallower waters. The Poring hot springs are situated within the Sabah National Park. The site has been developed into a tourist destination equipped with bathing and spa facilities. Figure 16: Distribution of thermal springs in Sabah.

Source: RE in ASEAN website: (December 2005)


Sarawak Very little information is known about the existence of thermal springs in the Sarawak. So far, their presence has been reported at only one area in the western-most part of the state near Kuching. Eight thermal springs were accessible by road, footpath and boat. Discharge is from < 1-26.7 l/sec. Water temperatures at the surface range from 32-69ºC. The springs emerged at a relatively low elevation and are found in the Mesozoic sedimentary sequence adjacent to igneous rocks. They are also closely associated with faults and folds of the Mesozoic rocks. The chemical compositions of the spring reflect to a considerable extent, their association with the country rocks. The waters are of calciumbicarbonate, sodium-chloride and sodium-bicarbonate types. The thermal springs’ locations are shown in Figure 17. Due to the limited available chemical analysis results, estimation for subsurface temperature of the thermal waters in Sarawak was not done. Figure 17: Distribution of thermal springs in Sarawak.

Source: RE in ASEAN website: (December 2005)

Further assessments of the promising areas are required to evaluate the potential either for electric power generation or heating and its possible impact, if any, of the geothermal development to the local environment. In line with the identification of geothermal as a potential alternative source of renewable energy, MGD is taking the every step to enhance its capacity in terms of co-ordination, knowledge and expertise in this particular field. MGD, which also housed an accredited geochemical laboratory, collaborates aggressively with MINT in using nuclear techniques in the field of environmental and hydrological studies. The fact that geothermal resource is clean and cost effective, it is hoped that the aspiration of utilizing geothermal as one of the sources of RE could be realized.



Current Gap/Constraints and Market Barriers or RE and EE

The general constraints of the application of RE and EE are (UNDP, 2004):


Absence of an effective government policy on renewable energy.

Some issues exist regarding legislation enabling the connection of renewable energy generated electricity to the national grid such as: 17 cents/kWh power purchase rate in Peninsular Malaysia is too low for many projects; power purchase price does not take into account of inflation and the limitation of 10MW.

Investment problem because the banks have no experience of providing loan to small and medium sized renewable energy projects in Malaysia. This is exacerbated by a restriction on foreign companies owning a maximum of 30% of any Malaysian company. While SREP and the Clean Development Mechanism (CDM) offer significant levels of financial support, these are relatively recent initiatives and in the case of the CDM national procedures are not yet in place.

Absence of an established and well funded institutional framework for promoting renewable energy.

Biomass energy

Fuel security One of the major challenges to the success in the development of the RE projects in Malaysia is the lack of financial support. Financial problem becomes the major barrier since financial institutions in Malaysia are not comfortable with the fuel security of the projects. The reliability of fuel supply is an issue since the fuel suppliers are not committed to have a long term agreement with the RE projects developers. This happened due to the reliability of the fuel is dependent on the mills capacity and operation. Among the reasons cited for this concern are the uncertainty in the actual volume and quality of the waste/EFBs from the nearby mills, seasonal nature of the palm oil mill operations and absence of the standard contract procedures concerning the supply and pricing of waste/EFB. The suppliers also have the “wait and see” attitude to get better financial gains. This is due to the other non-energy uses of the palm oil residues. At the moment, there is a competitive use of biomass for the products and processes such as pulp and paper, medium density fiberboard (MDF), composting for fertilizer and mulching, and etc. Such competitive utilization may not be healthy for developers of power generation as it creates uncertainty in the supply of the fuel resources. Electricity sales price Another issue that makes the RE developers not interested to invest in the RE power projects is the sales price of RE electricity. In Malaysia, to determine the sales price for RE generated electricity involves a bargain between potential investors in RE power plants, who are looking for acceptable level of profit, and the national utility that is concerned with the magnitude of subsidy it has to burden in order to support the Government's fuel diversification policy. The present recommended sales price of RE electricity at 17 cent per kWh that is based on a study done by DANIDA is obviously unacceptable to investors. As indicated in the study, pegging the sales price at 17 cents per kWh is close or below the unit cost of production, besides assuming, unrealistically, static costs of production over the long-term of the sales contract. REPPA In Malaysia, the Renewable Energy Power Purchase Agreement or REPPA which is between the national utility and the RE project developers also plays a significant effect to 37

the RE project developers. At the moment, it becomes a hindrance to their initiative due to the difficulty in getting financing as REPPA does not provide a robust cash flow for Bankers to be comfortable with. Furthermore, some of the conditions imposed do not provide the confidence for the Bankers to make a needed investment. Some of the obvious conditions are “take and pay” payment structure, the non-inflatory fixed tariff for the concession period. They're maybe other “non-bankable” conditions that will not permit the project to secure the funding from the Banks. Another REPPA barrier is the long negotiation period before the sign-up of the agreement. The developers of the RE projects are generally from small companies with limited resources. The enthusiasm for the projects is based on the capability to fund the development at the minimal cost compared to the gigantic IPP projects. Nonetheless, the transaction of an RE projects is not any different from the IPPs with the similar processes involved to arrive at a “bankable” project. Therefore, the longer the transaction takes place the more cost the development will occur. If such company does not have the staying power, it will simply abandon their initiative. Financial barrier In Malaysia, it is difficult to obtain financing for biomass-based power generation/CHP projects in Malaysia. This is further aggravated by the fact that financial/banking institutions in the country are not familiar with the financing of such business ventures. Due to the perceived high risks, these institutions are cautious in providing financial assistance for such kind of projects. Only a few of the existing technology financing schemes in the country include renewable energy in their portfolios. Based on past experience, such schemes usually require a long application and approval process. Even though, biomass-based power generation/CHP in the palm oil industry has long been practiced but power sales to the grid has not been done due to poor economics arising mainly from the inability to sell to the grid and to sell at favorable rates. Unless a “level playing field” price is mutually arrived at between the relevant stakeholders (including Energy Service Industries (ESIs)), aside from the pertinent government support policies and regulations, biomass-based power generation/CHP will not be an attractive business venture. Negotiations have been ongoing amongst concerned stakeholders to arrive at a final level playing field. Lack of information There is a general misconception that biomass-based grid connected power generation and CHP is an unproven technology and business venture, and that the use of biomass fuels goes against the industrialization goals of the country. With reference to the palm oil industry, while it accounts for the biggest potential for biomass-based power generation/CHP, there is the common notion that the industry lacks the technical capability and experience in this particular field of biomass energy technology. The potential biomass energy project developers do not know where to obtain sufficient information as well as competent advise in matters related to the choice of technology, legal issues, preparation of agreements/contracts, financing, and etc. Since biomassbased power generation and sales is new to, and not within, the core business of the palm oil industry, the palm oil mills and potential investors usually do not have enough information related to the implementation of such kind of projects. Conventional versus RE power plant Generally, the Banks are more than willing to finance the conventional power stations as they are proven to be successful. The RE power plants are not proven yet. In the case of IPPs, they are guaranteed payment irrespective of the demand for power. But in the case of RE developers, there are no such favours. The conventional power plants have no difficulty in sourcing fuel and its fuel is usually subsidized by the Government, whereas sourcing fuel for RE has many constraints like 38

fuel supply agreement, which is difficult to secure. Biomass has multiple uses and as such the suppliers are not willing to commit long term contractual agreement. The conventional power stations can be located in the most suitable site, where sea or river water supply is easily available for condenser cooling. In the case of RE power plant, its location is in isolated places. Shortage of water could force the project to fail. The RE fuel needs pre-treatment as biomass like EFB contains more than 65% moisture. Pre-treatment needs energy and in the small RE plants the high intake of energy for auxiliaries will deprive the power plant much of the energy they produce for sale. Subsidy for conventional energy system Every type of energy has benefited from assistance in its start-up phase, and renewable energy should be no exception. There is still massive support to conventional energy sources, which is in the forms of subsidies and export credits. If renewable energy is to be competent economically, it is important that renewable energy receives the same treatment as fossil fuels. Otherwise, such subsidies for fossil fuel have to be removed or made transparent in order to create level the playing field. Renewable Energy Business Facility (REBF) The setting up of this initial financial assistance program for RE project is especially to support the financial requirement of Full Scale Model Biomass Power Project (FSM) that will be established under the BIOGEN implementation program. This REBF is expected to act as a successful model in financing RE Project in Malaysia in order to give better perspective to other developers and financial institutions towards developing and financing the same mechanism of RE project in the country. The total size of the fund is RM 28.0 million which is equally contributed by Pusat Tenaga Malaysia (PTM) and Bank Industri dan Teknologi Malaysia Berhad (BITMB). The fund from PTM portion is a contribution from Global Environment Facility (GEF) of RM 9.2 million and Malaysian Electricity Supply Industry Trust Account (MESITA) of RM 5.0 million. BITMB which has been appointed as a fund manager will set up a special account and solely monitor all transaction involving the fund such as disbursement and repayment. The financing of the FSM under BIOGEN project is on sharing basis between PTM and BITMB, whilst each entity contributes 40% of total financing, while the remaining 20% will be contributes by the project promoter contribution. The fund will give up to 80% margin of financing of the project cost. In term of site selection, PTM as the owner of the project engineers will evaluate and endorse the technical aspect of the FSM project before qualified project being finance by REBF, whereas an evaluation on project commercial viability will be undertake by BITMB. BITMB has an absolute discretion to decline any project application that is not commercially viable. Expected after the tenure period of 15 years, the fund shall be on a revolving basis to enable other RE project to access the fund. 6.2 Solar energy The challenges associated to PV application in Malaysia are: • Local awareness • Capacity of local service providers is weak • Suitable policy, fiscal and financial framework is absent 39

High cost of PV system.

Institution Set up and Finance In the Fifth-Fuel Policy, much emphasis is on Energy Efficiency (EE) with programs like Demand Side Management (DSM), Energy Audit in Government Buildings (EAGB) and Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP). The current institutional and policy support regards biomass as the most viable RE option. Solar energy is not really considered as one of the RE resources referred to as the 5th fuel. In May 2001, the government announced the launching of the SREP Program. Small power generation plants (less than 10 MW) that utilize renewable energy can apply to sell electricity to the utility through the distribution grid system. Project developers are required to negotiate directly with the relevant utility on all aspects relating to the renewable electricity purchase agreement, including the selling price on a "willing-seller, willing buyer" and "take and pay" basis. The renewable energy electricity producers will be given a license for a period of 21 years, which will be effective from the date of commissioning of the plant. Under this Small Renewable Energy Power Program, the utilization of all types of renewable energy, including biomass, biogas, municipal waste, solar, mini-hydro and wind, are allowed. In order to coordinate the implementation of the government's strategy to intensify the development of renewable energy as the country's fifth fuel resource, a Special Committee on Renewable Energy (SCORE) has been set up under the Ministry of Energy, Water and Communications. SCORE is responsible in driving the Small Renewable Energy Power Program (SREP). RE has been given fiscal incentives in terms of tax relief and waiver of import duties since National Budget 2000. The incentives are part of the Government effort to encourage the implementation of RE projects as part of the fifth fuel policy. Starting from National Budget 2002, solar energy is classified as one of the components for RE and therefore receives the same tax benefits to the other RE fuels. The fiscal incentives for PV are applicable until 2005. Incentives for PV are integrated in the Renewable Energy fiscal incentives covering the following areas: Tax Break, Capital Allowance and Import Duties and Tax waiver. The fiscal incentive is an effective tool to create awareness amongst the stakeholders. It gives the technology the status of preferred industry. Because many parties analyze the tax incentives, the immediate exposure given by analyst will spread the message and taken seriously. Nevertheless, it is important to structure a good tax incentive for BIPV in the effort to create awareness and enhance its attractiveness. BIPV requires specially designed fiscal incentives that have an impact in the implementation chain especially in the retail end of the market. Unlike Biomass, BIPV is much smaller and applicable to different market segments such as commercial complexes and domestic consumers. Hence the current fiscal regime, which is embodied in the Malaysian budget, does not provide specific incentives to encourage and increase the take up rate of BIPV. Current BIPV application suggests that commercial and domestic market segments have the most economic potential for BIPV. Therefore, there is a need to structure incentives to tap the potential of these two markets. The features of tax breaks and financial mechanism should be designed to encourage the individual domestic owner to consider PV as part of their overall budget as well as encourage the small commercial enterprises to evaluate the potential of installing such a system. 6.3 Wind energy Among the major problems associated to wind energy system are lack of local expertise, spare parts availability, transportation and inefficient energy management.


6.4 Small hydropower There are some barriers and issues in the development of mini-hydropower in Malaysia. Due to the scattered location and remoteness of the plants, logistic and communication posed problems. The deteriorated condition of the plants and poor accessibility worsened the task. Logistic and communication The distance between the Headquarters and the plants range from 40 km to 400 km resulting in substantial loss of time in attending to breakdowns. The remoteness of the stations makes communications relatively impossible by either conventional or cellular and in some areas communications are virtually non-existent. Accessibility Access to most of the plants is through existing or abandoned logging tracks, which are dangerous and unsafe for commuting using smaller vehicles. Inadequate drainage systems and sometimes landslides cause difficulties to them. Deteriorated condition of the plant Mini-hydropower plants were generally unattended prior to the new management. The main problems faced by the stations were associated with electromechanical equipment, transmission line faults, damaged pipes and blocked intake inlets. The amount of debris in the rivers of Malaysia makes the cooling pipes clogged easily and this will cause the bearing oil, gearbox and hydraulic oil to overheat. The damages and faults of the electromechanical equipment and the transmission line were repaired and some modifications were made to improve generation efficiency.


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Pusat Tenaga Malaysia, 2005. Renewable Energy Resources and Applications in Malaysia. Pusat Tenaga Malaysia, 28 June 2005, Country Presentation on Policy Instrument for Promotion of Energy Efficiency & Renewable Energy in Malaysia. Manila, Philippines, 27–28 June 2005. Pusat Tenaga Malaysia, 7 September 2005. Option and Tools for Renewable Energy Implementation in Malaysia, 2nd Seminar on Harmonised Policy Instruments for the Promotion of Renewable Energy and Energy Efficiency in the ASEAN Member Countries. Glenmarie, 6-7 September 2005 Renewable Energy in Malaysia – Market Prospects, ETSU U/00/00069 REP, DTI/Pub URN 03/754, Eco Securities Ltd, 2003.


Renewable Energy in Malaysia – Market Prospects, ETSU U/00/00069 REP, DTI/Pub URN 03/754, Eco Securities Ltd, 2003. RESLAB, 2005. Resource Saver, 2005. RWEDP, 1997. Proceeding of the regional expert consultation on Modern Application of Biomass Energy, No.36. Shigeoka, Hitoshi, 2005. International Renewable Energy Policies and Comparison with Malaysia’s Domestic Policy, SIPA, Columbia University. Statistic of Electricity Supply Industry in Malaysia, 2004. Suruhanjaya Tenaga, 2004. Energy Efficiency Programs in Malaysia. TNB Research Sdn. Bhd., 2002. Added Values of Grid-Connected Solar Photovoltaic System, Ahmad Hadri Haris UNDP, 2004. Biomass-based Power Generation and Cogeneration in the Malaysian Palm Oil Industry. UNDP, 2004. Malaysia: Building Integrated Photovoltaic (BIPV) Technology Application Project (MBIPV)


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