Background Report: Overview of Policy Instruments For The Promotion of Renewable Energy and Energy Efficiency in Malaysia

Overview of Policy Instruments for the Promotion
of Renewable Energy and Energy Efficiency in

Malaysia
BACKGROUND REPORT
TABLE OF CONTENTS
1. Malaysia Energy Sector: An Overview......................................................................... 4

2. 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
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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
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1. 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 Amount
Value (US$) million 31,085
Sectoral GDP Components (estimated)
GNP growth (%) 5.6
Inflation CPI (%) 2.4
Exports (US$ million) 19,896
Current account balance (US$ million) 3,404
Source: RE in ASEAN website: www.aseanenergy.org (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 1998 1999 2000 2001 2002
Indigenous Production 73,655 72,439 79,473 77,264 80,519
Import 13,060 13,122 16,271 18,692 17,979
Export -43,714 -41,829 -43,637 -44,766 -45,199
Stock Change -648 -1,427 -396 183 -214
TOTAL PES 41,905 41,893 51,492 51,220 52,995
* Coal 1,660 1,376 2,308 2,911 4,133
* Crude oil & Petroleum 20,727 18,364 22,215 22,054 22,308
* Natural Gas 19,101 21,506 26,370 25,648 26,101
* Hydro Power 417 647 599 607 456
Source: Energy Data and Modeling Center, IEEJ (2004)
Table 3: Total primary energy supply (2003)

Primary Energy Supply Amount
Crude oil (ktoe) 25,344
Natural gas (ktoe) 20,878
Coal & coke (ktoe) 5,316
Electricity (GWh) 83,300
GDP energy intensity (TOE/ US$'000) 0.88
Domestic energy conversion losses (%) 36.1
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).
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Table 4: Final commercial energy consumption
Final Energy Consumption 1998 1999 2000 2001 2002
Agricultural Sector 307 106 104 98 95
Industrial Sector 10,122 10,239 11,401 11,853 12,853
Residential and Commercial Sector 3,313 3,653 3,867 4,047 4,386
Transportation Sector 9,793 11,393 12,070 13,138 13,441
TOTAL FEC 23,535 25,391 27,442 29,136 30,775
* Coal Products and Coal 767 608 991 977 1,086
* Petroleum Products and Crude Oil 17,488 18,782 19,581 20,324 20,638
* Gas 2,726 3,023 3,862 4,621 5,643
* Electricity 4,577 4,815 5,263 5,594 5,922
Source: Energy Data and Modeling Center, IEEJ (2004)
Table 5: Final commercial energy consumption (2003)

Final Energy Consumption (ktoe) Amount
Petroleum products 21,175
Natural gas 5,887
Coal & lignite 1,212
Electricity 6,313
Net Domestic Consumption Per Sector (ktoe)
Industry 13,472
Residential/commercial 4,399
Transport 14,271
Non-energy and others 2,345
Energy Consumption Indicators
Per capita final energy consumption (TOE) 1.381
Per capita electricity consumption (kWh) 2,840
Electrification of households (%) 83.3
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 co-
generators.
Table 6: Major electricity producers in Malaysia

Electricity Installed
Major Power Producers % %
Generation (GWh) Capacity (MW)
Tenaga Nasional Berhad (TNB ) 38,660 47.8 8,050 48.1
Independent Power Producer (IPP) (Peninsular) 31,462 38.9 5,423 32.4
Cogen 3,397 4.2 787 4.7
Sarawak Electricity Supply Company (SESCO) 2,265 2.8 552 3.3
IPP(Sarawak) 1,537 1.9 301 1.8
IPP(Sabah) 1,537 1.9 301 1.8
Sabah Electricity Sdn Bhd (SESB) 1,294 1.6 485 2.9
Private Generation 728 0.9 836 5.0
TOTAL 80,880 100 16,737 100
Source: EC-ASEAN COGEN III (December 2004)
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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
40% Fuel Oil
Diesel
20%
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 &
Gas, 72.8% Others, 0.7%
Coal Hydro Oil Biomass & Others Gas
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).
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2. 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 Others
Palm Oil Wood M unicipal Rice

Hydro Solar
EFB Forest M SW Rice Husk

Small Hydro Thermal
Fibre Sawmill Landfil Straws
Gas PV
Shell
POM E
Trunks/Frond
s
Source: Pusat Tenaga Malaysia (2003)
Figure 4: Malaysia renewable energy values.
Source: Pusat Tenaga Malaysia (2003)
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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)

Grid
Generation
Approved Connected
No. Type Energy Resource Capacity
Application Capacity
(MW)
MW)
1 Biomass Empty Fruit Bunches 22 200.5 165.9
Wood Residues 1 6.6 6.6
Rice Husk 2 12.0 12.0
Municipal Solid Waste 1 5.0 5.0
Mix Fuels 3 19.2 19.2
2 Landfill Gas 5 10.2 10.0
3 Mini-hydropower 26 99.2 97.4
4 Wind and Solar 0 0 0.0
Total 60 352.70 316.1
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 mini-
hydropower 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.
2.1 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
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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. Phase-
2, 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
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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 Residue Residue Residue Potential Potential Electricity
(‘000 Ton) Product Generated Energy Generation
Ratio (%) (‘000 Ton) (PJ) ( MW)
59,800 EFB at 21.14 12,641.7 57 521
65%MC
Fibre 12.72 7,606.6 108 1,032
Shell 5.67 3,390.7 55 545
Total Solid 16,670.6 220 2,098
POME(3.5m3/ton of CPO/65% 38,870 320
of FFB)
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 Percentage
(%)
Mesocarp Fiber 15
Empty Fruit Bunches 23
Shells 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
10
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)
Residue Residue Potential
Production (‘000 Potential Power
Residue product Generated Energy
Ton) (MW)
Ratio (%) (‘000 Ton) (PJ)
2,140 Rice Husk 22 471 7.536 72.07
Paddy Straw 40 856 8.769 83.86
2,140 1,327 16.305 155.93
Wood residues
Figure 5: Potential power generation from wood residues.
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 off-
cuts 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
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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.
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
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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 More than 55% are methane gas
Moisture Level of the Biogas Maximum at 80% moisture level
Temperature 240C
3
Calorific Value 5.32 kWh / m
3
Biogas Production Rate 40m / hr
Biogas Feeding System Direct extraction from gas field.
Monitored emission NOx < 500 mg / m3
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)
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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.
14
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 25kW-
5000kW. 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).
15
Figure 8: Solar irradiance map of Malaysia.
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
16
Sarawak, in the year 2000 was 1.5 MW (some are dismantled). The effect of grid-
connected 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 System-
experimental 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.
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
17
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 Target BIPV Min Target Cost Reserve Bidding Co-financiers
Capacity Reduction Price (RM)
Year 1 100 kWp 5% 25% Total Cost = RM27.5 Million
Year 2 300 kWp 5% 35% • Min 40% by public
Year 3 300 kWp 5% 40% • Max 50% by ST
Year 4 300 kWp 5% 50% • 10% by industry
TOTAL 1,000 kWp 20%
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
Samusan Tanjung Datu Pulau Talang-talang
Latitude 1° 56' N 2° 05' N 2° 03' N
Longitude 109° 37' E 109° 38' E 109° 50' E
Photovoltaic
Type Polycrystalline Polycrystalline Single Crystalline
Peak watt 77 77 40
Total Peak Watt 2078 1308 768
Quantity 27 16 32
Orientation (Facing) North North South
Tilted Angle 45° 25° 18°
Wind Turbine
Output 20 kWh/day 5 kWh/day -
Min Wind Speed 4.5 m/s 4.5 m/s -
Generator
Type Diesel Diesel -
Output (kW) 20kW 10 kW and 7 kW -
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.
3. Renewable Energy and Energy Efficiency Policy and Programs
3.1 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 Events Description
1949 CEB was formed Central Electricity Board (CEB) is the government body
which changed its name to National Electricity Board
(NEB) in 1965.
1974 The Petroleum PETRONAS, served as a state-owned enterprise, given
Development Act exclusive rights of ownership, exploration and
production was created under this Petroleum
Development Act
1975 The National Petroleum The policy aims at regulating the oil and gas industry to
Policy achieve the country's
19
Year Events Description
economic development needs is set
1979 The National Energy Policy Supply, Utilization and Environment Objectives were set
1980 The National Depletion The strategy is incorporated into the National Petroleum
Policy Policy. The objective is to extend the life of domestic
depletable energy resources.
1981 The Four-Fuel The strategy aims for a supply mix of four fuels, i.e. oil,
Diversification gas, hydropower and coal in energy use
Strategy
1990 Electricity Supply Act TNB was established through a corporatization and
TNB is established privatization exercise by the NEB. TNB is the Malaysia's
national electricity utility company.
1999 Pusat Tenaga Malaysia The role of PTM in the Development of Energy
was launched Efficiency & Renewable Energy in Malaysia
1999 The Five-Fuel Renewable Energy was recognized as the fifth fuel in
Diversification the energy supply mix.
Strategy
2001 Small Renewable Energy The aim is to encourage and intensify the utilization of
Program (SREP) was Renewable Energy in power generation.
launched
2002 Dept of Electricity and Gas EC is a regulatory agency responsible for energy
Supply (JBEG) was matters
transformed into the Energy
Commission (EC)
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
20
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 Non-
residential 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.
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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
22
• 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.
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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.
2. 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.
3. 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.
4. 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.
5. 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.
6. Petroleum Nasional Berhad (PETRONAS)

PETRONAS is a government controlled company with a mandate to manage the
oil and gas resources in Malaysia.
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4. Renewable Energy and Energy Efficiency Activities
4.1 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 Applications Generation Grid %
Approved Capacity Connected
(MW) Capacity
(MW)
Biomass: i) Oil Palm Residue 27 214.7 175.6 53.9
ii) Wood Waste 1 6.6 6.6 2.0
iii) Rice Husk 2 12.0 12.0 3.7
iv) Municipal Waste 1 5.0 5.0 1.5
v) Combination 3 19.2 19.2 5.9
Landfill gas 5 10.2 10.0 3.1
Mini-hydropower 26 101.2 97.4 29.9
Wind & Solar 0 0 0 0
TOTAL 65 368.90 325.8 100
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
25
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.
26
Figure 11: Communities, sectors and clusters that belong to MIEEIP.
Community
INDUSTRIAL ENERGY EFFICIENCY
Sector
Wood Rubber Food Pulp & Glass Iron & Ceramic Cement
Paper Steel
Clusters
-Plyboard, -Tyres -Cocoa -Paper box -Specialty -Billets -Tiles & -Integrated
-Chipboard -Gloves Sauce -Paper board -Bars & Rods Bricks plant
-Sheet
-Medium -Food Oil -Newsprint -Iron Casting -Sanitary
-Container
Density ware
Fibreboard -Clay Pipes
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 grid-
connected 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.
27
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 EFFICIENCY MEASURES ON THE SUPPLY
DEMAND SIDE SIDE
Types of measures : Types of measures :
• Reduction in unnecessary • Combined generation of electricity and
consumption heat/cooling
• (i.e. turn off airconditioner when the • Increase conversion efficiency of power
room is not occupied) production
• Insulation • Reduce transmission and distribution
• Efficient appliances losses
Types of policies Types of policies
• Awareness raising • Performance standards
• Labeling of energy consumption • (Best Available Technology)
• Standards for energy consumption • Economic incentives including taxes
• 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 e-
benchmarking.
28
Figure 12: Basic guideline in energy benchmarking.
¾ Where are you now?

Where?
40.00
35.84 ¾ How good are you?
29.50 Benchmark
35.00
Energy Use Index (EUI) GJ/t
23.95
30.00
¾ Why are you at this
25.00 18.39
20.00 Why? position Vs others?

15.00
12.06 ¾ How good can you be?
10.00
5.00 ¾ What can be improved?
0.00 What? ¾ How do you get better?
Campany A Campany B Average Campany C Campany D
Source: PTM (2005)
Figure 13: ‘Energy Use Index’ method of calculation.
Electricity Index
1,824 kWh/t
Electricity @ 6.6 GJ/t
10,000,000 kWh
Fuel Index
Production 912 l/t

Fuel Good Product
Process @ 32.9 GJ/t
5,000,000 l 5,484 t
Raw Material
Energy Use Index
6,000 t (Overall)
39.5 GJ/t
Source: PTM (2005)
Figure 14: Interactive e–benchmarking.
Source: PTM (2005)
29
5. 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).

Potential Annual
Quantity Potential Capacity
Sector Generation
kton / year (MW)
(GWh)
Rice Mills 424 263 30
Wood Industries 2,177 598 68
Palm Oil Mills 17,980 3,197 365
Bagasse 300 218 25
POME 31,500 1,587 177
Total 72,962 5863 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).
Bandar
Kota Kota Bayan Kuala Petaling
Month Kuching Senai Baru
Kinabalu Bahru Lepas Lumpur Jaya
Bangi
Jan 3,337.7 4,920.4 4,516.5 4,188.8 5,305.6 4,288.7 4,244.0 3,657.6
Feb 3,708.0 5,378.3 4,912.3 5,570.3 5,432.7 4,692.4 4,718.2 4,441.0
Mar 4,276.0 5,823.9 5,478.7 4,665.5 5,571.6 4,794.6 4,363.4 4,124.7
Apr 3,630.5 6,011.9 5,484.5 4,749.4 5,270.9 4,919.9 4,634.0 4,464.7
May 3,727.7 5,599.1 5,063.5 4,386.2 4,862.8 4,479.7 4,398.5 4,401.0
Jun 4,521.3 5,307.4 4,749.2 4,461.2 4,815.4 4,419.1 4,434.1 4,299.7
Jul 4,603.5 5,392.1 4,768.5 4,144.8 4,796.9 4,407.4 4,483.2 4,656.5
Aug 4,206.7 5,398.9 4,838.9 4,210.6 4,663.6 4,416.9 4,442.3 4,024.6
Sept 4,386.3 5,055.9 5.033.4 4,340.4 4,628.7 4,453.1 4,466.9 3,994.3
Oct 4,230.3 5,335.9 4,748.6 4,284.8 4,525.5 4,395.5 4,507.6 3,943.0
Nov 4,145.0 5,021.5 3.690.1 4,248.8 4,730.2 3,990.0 4,047.6 3,409.8
Dec 3,490.0 5,000.4 3,374.9 4,416.8 4,885.9 4,035.2 4,037.8 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 553
Food & Food Products 175
Hotels 250
Animal Food 43
Household (Medium & Upper) 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 mini-
hydropower 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 mini-
hydropower 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.
33
5.5 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.
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 <6.0 l/sec except one in Tambun, Perak, which are of
34
20 l/sec. All except 8 recently discovered thermal springs in the northern area of the
Peninsular are of neutral pH. Those newly discovered thermal springs show pH ranges
from 8.1-9.3.
Sabah
Geothermal activities could be found in two major areas in Sabah namely Poring-Ranau
and Semporna Peninsula (Figure 16). The Poring-Ranau thermal springs are believed to
be related to the Kinabalu batholiths. The chemistry of the spring waters is of bicarbonate
type with low sodium and chloride. These springs generally are located to the major faults
and lineaments. Surface water temperatures range from 34-57.2ºC with flow of 0.7-0.9
l/sec.
The highest concentrations of young volcanic rocks are found in the Semporna Peninsula.
Geothermal manifestations in the Semporna Peninsula include many hot springs, mud
pools and old steaming grounds. The geology of the area with active geothermal activities
consists of Quaternary dacitic to basaltic lava and tuff. The most active area of the
geothermal activities is Apas Kiri, Tawau area, located in the western part of the
Semporna Peninsula with the highest surface water temperature of 75.6 o C and near-
neutral pH. High concentration of sodium, chloride and bicarbonate were recorded.
Subsurface temperature of the Apas Kiri area estimated using Na/K geothermometers to
be between 189-236 o C, which shows high potential for harnessing of geothermal
energy. Results of analysis done under the IAEA program on the geothermal waters of
Poring and Apas, it was found that the values of Tritium (T.U.) are > 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.
35
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 calcium-
bicarbonate, 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.
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.
36
6. 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.
6.1 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 biomass-
based 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.
40
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.
41
References
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report
Electricity, Windows to Malaysia, http://www.windowstomalaysia.com.my/nation/14_3_1.htm.
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http://www.ieej.or.jp/egeda/database/database-top.html
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43

Background Report: Overview of Policy Instruments For The Promotion of Renewable Energy and Energy Efficiency in Malaysia

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Background Report: Overview of Policy Instruments For The Promotion of Renewable Energy and Energy Efficiency in Malaysia

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Overview of Policy Instruments for the Promotion

of Renewable Energy and Energy Efficiency in

1. Malaysia Energy Sector: An Overview......................................................................... 4

Figure 1: Malaysia’s electricity generation mix (1990-2003)................................................ 6

Table 1: Gross national product (at current price) (2004).................................................... 4

Table 1: Gross national product (at current price) (2004)

Table 2: Total primary energy supply (ktoe)

Table 3: Total primary energy supply (2003)

Table 5: Final commercial energy consumption (2003)

Table 6: Major electricity producers in Malaysia

Figure 1: Malaysia’s electricity generation mix (1990-2003).

Power Generation Mix (%)

Source: Pusat Tenaga Malaysia (7 Sept 2005)

Figure 2: Malaysia’s electricity generation mix (2003).

Coal Hydro Oil Biomass & Others Gas

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

Figure 3: Malaysian renewable energy sources.

Renewable Energy Sources

Palm Oil Wood M unicipal Rice

EFB Forest M SW Rice Husk

Source: Pusat Tenaga Malaysia (2003)

Figure 4: Malaysia renewable energy values.

Source: Pusat Tenaga Malaysia (2003)

Table 7: Status of SREP projects approved by SCORE (August 2004)

2.1 Biomass energy

The strategy involves the implementation of barrier-removal activities, including the

Oil palm residues

Table 9: Solid residue resulted from processing FFB

Source: RE in ASEAN website: www.aseanenergy.org (December 2005)

2.2 Biogas energy

Figure 6: Composition of municipal solid waste in Malaysia.

Source: RE in ASEAN website: www.aseanenergy.org (December 2005)

Table 11: Characteristics of the biogas captured.

Figure 7: TNB Jana Landfill Biogas Project in Malaysia (2 MW).

Source: Malaysia Energy Center (2005)

Malaysia's hydropower capacity is estimated at 25 GW with a total electricity output of 107

2.4 Solar energy

Source: RE in ASEAN website: www.aseanenergy.org (December 2005)

Only recently, Malaysia demonstrated several pilot grid-connected solar PV technologies.

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: www.aseanenergy.org (December 2005)

Table 12: Target BPIV ‘Suria 1000’ program

2.5 Wind energy

Meanwhile, the utilization of RE in Sarawak national parks were to reduce the

2.6 Geothermal energy

3. Renewable Energy and Energy Efficiency Policy and Programs

3.1 Malaysia’s energy policies

National Energy Policy

The Four-Fuel Diversification Policy and the Fifth-Fuel Policy

Greenhouse Gas Mitigation Policy

The Eighth Malaysia Plan (2001-2005)

3.2 Policy initiatives and programs

Small Renewable Energy Power (SREP) Program

In addition, to coordinate the implementation of the Government's strategy to intensify the

1. Ministry of Energy, Water and Communication (MEWC)

2. Pusat Tenaga Malaysia (PTM)

3. Economic Planning Unit (EPU)

4. Energy Commission (EC)

5. Tenaga Nasional Berhad

6. Petroleum Nasional Berhad (PETRONAS)