Renewable Energy Scenario in Malaysia

Malaysia, with population of about 28 million, is one of the fastest-growing economies in Asia. Although blessed with petroleum resources, this strategically-important Southeast Asian nation is relatively a small producer with reserves of 5.5 billion barrels of oil and 88 trillion cubic feet of natural gas. Malaysia has significant natural gas exploration and development in the Malaysia-Thailand Joint Development Area, located in the lower part of the Gulf of Thailand, which is highlighted by almost three-fourth share of natural gas in the energy mix in 2009.

During the last decade, Malaysia has seen almost 20 percent increase in energy generating capacity from 13,000MW in the year 2000 to 15,500MW in 2009.  The maximum demand for electricity last year was 14,000MW in Peninsular Malaysia, 700MW in Sabah and 900MW in Sarawak. Electricity generation in Malaysia is projected to grow further at an average annual rate of 4.7 percent. Most of power stations in Malaysia are based on fossil fuels as the energy mix is heavily dominated by natural gas and coal. Thermal power plants contribute 86 percent while hydropower plants account for 13 percent to the electricity generation capacity. Tenaga Nasional Berhad (TNB) is the largest electricity utility company in the country with generation capacity of 10,481MW. Other major utility companies are Sarawak Electricity Supply Company (SESCO) and Sabah Electricity Limited (SESB).

Under the 8th Malaysia Plan (2001–2005), the government of Malaysia changed the Four-Fuel Policy (based on oil, gas, coal and hydropower) to the Five-Fuel Policy with the addition of renewable energy as the fifth source of fuel.

 The Ninth Malaysian Plan (2006-2010) targets 350 MW of grid-connected renewable electricity by with fuel mix of 40 percent gas, 40 percent coal, 10 percent hydropower and 10 percent renewable energy. Another major development in the offing is the proposed introduction of feed-in-tariff for renewable energy in 2011.

Renewable Energy Resource Potential in Malaysia (in MW) Biomass                                   2,400 Biogas                                     410 Solar                                       6,500 Municipal Waste                        400 Mini-hydro                                500 Total                                      10,210

Among the various sources of renewable energy, biomass seems to be the most promising option for Malaysia. In line with the promotion of using biomass energy, a Biomass Power Generation & Cogeneration Project (BioGen) was commissioned in October 2002. Photovoltaic (PV) systems are also another attractive renewable energy source for Malaysia as climatic conditions are favorable for the development of solar energy. However there is not much development in the domestic PV market despite the fact that Malaysia is currently the world’s fifth largest producer of PV modules. To encourage the development of grid-connected PV systems, the Government is providing financial incentives through the Malaysia Building Integrated Photovoltaic (MBIPV) Project.

Malaysia's 2011 Proposed Solar, Biomass, Biogas, & Hydro Tariffs

In a presentation on July 29th, 2010, Ahmad Hadri Haris, the chief technical advisor to Malaysia's Minister of Energy, announced proposed feed-in tariffs for solar photovoltaics (PV), biomass, biogas, and minihydro.

Haris' Industry Briefing on Feed-in Tariff Procedures revealed as sophisticated a program as found anywhere in the world.

Progress on implementing feed-in tariffs in Malaysia has continued at a steady pace. In April, Malaysia's cabinet approved the introduction of the Renewable Energy Act and the Act for a Feed-in Tariff Implementing Agency which will then be passed to parliament.

On June 10, 2010, the government announced the National Renewable Energy Policy and Action Plan with a goal of increasing renewable energy from 1% to 5.5% of electricity supply by 2015.

Parliament will begin debate on the Renewable Energy Act and the Act for a Feed-in Tariff Implementing Agency in October of this year with the expectation that the program passed into law and launched by the second quarter of 2011.

The legislation will establish the Sustainable Energy Development Authority (SEDA) which will manage the feed-in tariff program.

The new detailed tariffs announced by Haris did not include tariffs for wind or geothermal, two technologies previously included in the proposed program. No explanation was given why they were not included.

The Malaysian program includes some aspects unique to the country. Majority of equity in the project must not be owned by an electric utility or a foreign entity.

Malaysia's proposal also seems designed to avoid several of the problems encountered with solar PV in Spain, including annual technology caps, and project registration.

The current proposal limits the program to 219 MW in 2011, increasing to nearly 1,000 MW in 2015. The bulk of the new generating capacity to be installed under the program is set aside for biomass and minihydro. 

Renewable Energy Programmes

As Malaysia’s fifth fuel, renewable energy is expected to be a major energy source. The Government’s long-term commitment and strategy targets key sectors and initiatives to stimulate RE activities. The establishment of the Energy Commission ensures all energy forms and options are viable for the market. The Malaysian Energy Centre (PTM) plays a lead role to assist industry and government to develop RE. And the Centre for Education and Training in Renewable Energy Efficiency (CETREE) disseminates information and reinforces awareness on all aspects of EE and RE.

Ministry of Energy, Water and Communications (MEWC) - Established in 2004 to replace the former Ministry of Energy, Communications and Multimedia, its new role is to administer and manage the nation's energy, communications, postal services and water functions. MEWC has shifted from being a service provider to a policy formulator and service regulator for the Energy, Water and Communications sectors and facilitates the growth of these industries to ensure the availability of high quality, efficient and safe services at a reasonable price to consumers throughout the country. 

Energy Commission – The EC is responsible for creating and enforcing a regulatory framework for the achievement of a reliable, efficient and safe energy supply industry to enhance economic growth and sustainable development. It protects consumers’ interests, ensures a competitive and efficient marketplace. Besides advising on energy matters, the EC also promotes the use of renewable energy and the conservation of fossil fuels.

Malaysian Energy Centre (PTM) – The rationale behind PTM's establishment is to fulfill the need for a national energy research centre to co-ordinate activities related to energy planning and research, energy efficiency, technological research and development within the energy sector. It has three divisions to assist in energy projects, research and policies: Corporate Affairs and Business Development; Energy Industry and Sustainable Development; and Policy Analysis and Research Management.


Centre for Education and Training in Renewable Energy Efficiency (CETREE) – CETREE’s main objective is to enhance awareness on RE and EE in Malaysia by improving and increasing energy curriculum in primary and secondary schools, universities and among energy professionals as well as information for the general public. Activities are designed and structured in such a way to address each target group since there is an obvious need to increase awareness amongst the public, private sector and government officials on the applications and benefits of RE and EE. 

The launch of the Small Renewable Energy Power Programme (SREP) in 2001 kicked-off the Government’s policy implementation and intensified research into RE utilisation in power generation. With a primary objective to get small power plants connected to the power grid, SREP supports biomass and biogas power production. Small energy producers can sell electricity to the distribution grid using purchase agreements to negotiate directly with utilities. 

Private companies can choose several options when considering investing in RE projects. First, companies will receive tax and duty exemptions to start and expand their businesses. And power generation through co-generation technology is given special preference. Based on a government study, viable tariffs for RE grid connection are in the range of 14 to 17 sen per kWh, more so for existing than new plants.

The Special Committee on Renewable Energy advises that companies need to fulfil some requirements for grid connection:

• Plant Location – All plants should be within 10 kilometres from the nearest medium voltage interconnection point to the grid.

• Price – Purchase agreements with relevant utilities are on a “willing buyer, willing seller” basis.

• Licence Period - RE electricity producers receive 21-year licences with a stipulation to limit sales to a maximum of 10 MW to the grid.

Incentives and Measures

In line with Malaysia’s objective to diversify energy resources and develop alternatives, the Government continues to assess and revise incentives for renewable energy projects. To encourage energy generation using biomass, hydropower and solar power, the Government offers several incentives to those that qualify:

• Pioneer status with tax exemption of 70% will be increased to 100% of statutory income and the incentive period is extended from 5 years to 10 years.

• Investment tax allowance of 60% is to be increased to 100% on qualifying capital expenditures incurred within a 5-year period, with the allowance to be set off against 100% of statutory income for each year of assessment

• The incentive package of pioneer status, investment tax allowance, and import duty and sales tax exemptions will be extended until 31 December 2010.

Companies would be wise to understand the impact of these incentives on their internal rate of return (IRR) and payback periods for implementing RE projects. Studies show that IRR can be increased up to 2% and payback periods reduced as much as three years for tax exemptions on eligible costs alone. This lowers the burden of a company’s annual taxes as well: 32% to 53% via investment tax allowance. Integration of these incentives reveals the bank-ability of RE projects to increase both the cash flow and confidence of investors.

The 2006 Budget set forth a National Biofuel Policy initiative to encourage production and utilisation of biofuel from palm oil as an environmentally friendly alternative energy resource. The programme starts with a biofuel mix of 5% of processed palm oil and 95% diesel. And three palm oil biodiesel commercial plants, with a total capacity of 180,000 tons for export, are to be built.

Renewable Energy Resources Opportunities

The market for renewable energy solutions is expected to boom in the near future. By implementing feasible projects now, local manufacturers would be wise to pay attention to this growing market and take advantage of business opportunities and lower energy costs.

Several key factors already exist that make using abundant renewable energy resources to produce energy a sound business decision:

• RE resources are relatively no or low cost fuels – Processing industries, such as palm oil mills and sawmills, have ready and abundant waste products that require disposal. On-site energy production helps avoid transportation costs and provides direct savings for the company.

• RE energy technologies are very competitive – Due to escalating oil prices, RE equipment is even more cost effective despite initial higher expenditures. And local manufacturers already assemble and install quality biomass and solar energy equipment.

• RE projects will save money in the long-term – A comparison of fuel costs reveals that RE reduces operational costs and lowers the overall cost for energy production. Over the lifetime of RE equipment, the savings on fuel expenditures pays back the cost on investments.

• RE turns biomass waste into profits – Government programmes offer local industries a chance to invest in RE and arrange power purchase agreements and low financing to limit risk and raise revenue.

Biomass projects are viable in Malaysia. Commercial interests can choose several options to achieve overall savings and expand opportunities that capitalize on RE resources: 

Option 1: Change from fossil fuels to cheaper biomass fuels.

• Most factories use oil-fired boilers. Changing to biomass fuels decreases the cost of steam generation and is cheaper by a factor of three. A typical system requiring 10 tons per hour has an initial investment of RM 2.3 million; whereas, savings from lower fuel costs are expected to be RM 300,000 per month. Thus, the recovery rate of investment is achieved within the first year.

Option 2: Connect existing co-generation plants at palm oil mills to the grid.

• Most mills already produce both steam and electricity, but not enough of the latter to generate enough power for their own consumption. Connecting to the electric grid allows mills to produce more power without waste because excess energy is sold. With co-generation plants already in place, it’s possible to reap RM 850,000 per annum after an investment of RM 1.5 million to connect to the grid (assuming close proximity). Hence, recouping costs in just two years.[SOURCE: RE A Public Sector Initiative Brochure, PTM, p. 9]

Option 3: Take advantage of new biomass technologies in the wood processing industry.

• Replacing diesel generators with biomass boilers and steam turbines not only reduces energy costs, but also utilises a steady supply of waste material. Comparative costs indicate that electricity produced by diesel is 2.5 times more than biomass.

Option 4: Harness the sun’s energy and install solar thermal heaters in commercial buildings.

• Hotels, schools and other institutions consume large amounts of hot water. Changing existing electrical heaters with solar replacements leads to substantial energy savings. The capital cost of installing solar heaters is RM 50,000 – five times more than an electric heater. However, running electric heaters costs RM 1200 per month, so investment in solar technology is recovered in less than four years.

Biomass and solar energy

Renewable energy (RE) resources are reliable, efficient and competitive when compared to more conventional technologies. Over the past few decades, increased use of RE has resulted in a substantial improvement in RE technologies. Industrial and institutional equipment - biomass boilers, photovoltaic panels, combined heat and power plants, and solar water heaters - can provide immediate benefits to many Malaysian businesses.

Here are some examples to illustrate the choices and effectiveness of RE solutions: Biomass Boilers – These boilers produce steam from available residues such as empty oil palm bunches, fibres, shells or sawdust instead of fossil fuels. Combustion with excess air produces hot flue gases that also generate steam in heat exchangers. Making the switch to biomass can be done without any technical or quality problems and both foreign and local built boilers are available in the market. Palm Oil Industry Boiler – A modern biomass boiler made specifically for use in the palm oil industry allows local factories to burn raw waste efficiently, limit environmental emissions and maintain steady production supplies. Co-generation Plants – From a single fuel source, both electricity and thermal energy can be produced simultaneously for maximum exploit of fuel material leading to energy savings. Where traditional fuels convert only 35% to 55% of energy inputs, co-generation plants increase efficiency up to 75%. Solar Thermal Technologies – By tapping the sun’s energy to heat water or air, homes and commercial facilities using solar dryers or water heaters extract this “free” resource that meets big demands and provides even bigger benefits. Photovoltaics Technologies – These machines convert direct sunlight into electrical power. Imagine using freely available sunlight to produce year-round power to operate lighting and other energy requirements for homes, factories and offices.

Public & Private Sector Benefits

With current consumption rates and prices, fossil fuels will be depleted in a matter of decades. Adopting alternative energy resources is vital to maintain the progress and prosperity of the country.

International trends show that RE resources are gaining a larger share of energy programmes, especially in Europe and the USA. Various RE efforts also stimulate new economic activities and the possible spin-off potential may well generate new exports and employment. These developments bode well for Malaysia due to the nation’s abundance of renewable energy.


According to a 1999 DANCED study, energy resource biomass from palm oil bunches, rice husks, municipal wastes and wood residues, together with solar energy account for over 90% of the RE potential in Malaysia. RE contributions to the national economy from biomass alone can reach up to RM 10 billion per year. Even with only a 5% RE share of the national electricity generation, the country saves RM 2.8 billion in coal import costs over 20 years.
[SOURCE: RE A Public Sector Initiative, PTM brochure, p. 2)

The Ninth Malaysia Plan calls for the further development and utilisation of RE resources by supporting initiatives such as the Small Renewable Energy Power Programme (SREP) and Renewable Energy Power Purchase Agreement (REPPA). By 2010, RE is expected to generate and connect about 300 MW of power to the grid in Peninsula Malaysia; with 50MW added to the grid in Sabah. The Plan also encourages other RE sources, such as solar hybrids and the expansion of biomass co-generation.

Adding to the overall benefits are the following public and private sector spin-offs resulting from the implementation of RE and its associated activities:

• An increase in local production of RE-related equipment, such as boilers, solar panels and water heaters, and an increase in the construction, operation and maintenance of biomass power plants.

• A greater emphasis on R&D activities for local exportable RE technologies, as well as, an opportunity to develop options for future trading of CO₂ emissions.

• An increase in fuel handling services, including collection, treatment, transportation, storage and logistical services and the creation of RE-related businesses, such as trading companies for RE resources.

• Generation of income from the sale of electricity to the main grid and conservation of fossil fuels that reduce the dependency on energy imports.

• Improved corporate image with “green” technologies and a chance to open up marketing opportunities.

Renewable Energy in Malaysia

Renewable Energy

Renewable energy is readily available and easy to extract. For the country, biomass utilization leads to substantial economical and environmental gains. For businesses, exploiting renewable resources enhances profit margins and eliminates waste disposal costs. The potential to utilise huge biomass reserves and solar resources allows progressive companies can generate electricity exports, seek regional markets and expand opportunities from lower manufacturing costs. In the Eighth Malaysian Plan, Renewable Energy was announced as the fifth fuel in the energy supply mix. Renewable Energy is being targeted to be a significant contributor to the country's total electricity supply. With this objective in mind, greater efforts are being undertaken to encourage the utilization of renewable resources, such as biomass, biogas, solar and mini-hydro, for energy generation. The Government has launched several fiscal incentives to stimulate the emergence of RE activities and technologies. Palm oil mills, sawmills, manufacturers and large institutions can start to benefit immediately by using local technology to generate income and reduce operating costs. Renewable energy resources are available in two primary forms: biomass residues from agriculture wastes (palm oil waste, wood waste, rice husks, etc.), municipal solid waste and energy from the sun. Many companies are already taking advantage of renewable energy technologies to begin reaping energy cost savings and revenue: TSH Bio Energy Sdn. Bhd. – As the first biomass RE project using empty fruit bunches as fuel, the company sold electricity to TNB at 21.25 sen/kwh. Jana Landfill – By producing biogas and converting it to electricity, this project, the first RE grid-connected project in Peninsula Malaysia, eventually sold power to TNB at 16.7 seb/kwh. Bekok Kiln Drying and Moulding Sdn. Bhd. – By converting a fuel oil boiler to one that burns wood waste, annual fuel savings alone amount to RM 2 million. Awana Kijal Golf & Beach Resort – By installing a solar water heating system to supply up to 35% of its consumption needs at a cost of RM 400,000, the resort continues to save on energy and maintenance and paid back its investment in only six years. For Malaysia, embarking on renewable energy provides benefits that enable the country to remain strong. Among these include an improved balance of trade, foreign exchange savings, more competitive industries, new export markets, employment opportunities, lower consumer prices and a better environment. Renewable energy is a commodity just like any other form of energy. It has a major role in meeting energy demand needs and combating global warming. Presently, RE represents a prime opportunity to seek alternative energy options.

Related News ! Phoenix Solar forms Malaysian subsidiary to tap new feed-in tariff

Germany’s Phoenix Solar has established a new subsidiary in Malaysia to develop and build turnkey ground-mounted and rooftop photovoltaic (PV) plants.

The Malaysian subsidiary, based in capital Kuala Lumpur, will also offer products and services such as stand-alone PV systems and building-integrated solar plants.

Phoenix’s Singapore branch has already completed two projects in Malaysia – a rooftop plant with 169kWp built on a factory building and a 71kWp plant installed on the roof of a governmental building.

The draw into Malaysia follows an announcement by the ministry of energy on the introduction of feed-in tariff (FIT) for PV plants from 2011 onwards.

Industry observers say the FIT scheme could be introduced as early as October this year.

Malaysia’s National Renewable Energy Policy and Action Plan provides for an increase in the output of electricity from renewable energies from 1% to 5.5% by 2015.

PV electricity is to be subsidised at a rate of about $0.27-57 per kilowatt hour over a period of 21 years, with an annual degression rate of 8% for newly installed systems.

The Malaysian parliament is expected to consult on the National Renewable Energy Policy and Action Plan in October.

Renew Malaysian Energy Through Renewable Energy

With increasing environmental concerns and rising oil prices, governments across the world have been forced to look for alternative sources of energy which are sustainable and environmentally-friendly. Malaysia, one of the world's primary palm oil producers, is taking steps to promote the use of renewable energy (RE) – a move that will be welcome news to consumers of energy world-wide. Production of oil has already shown signs of slowing growth from 2005 and it is forecasted that only about 700,000 barrels of oil will be produced per day in 2008.

Primarily driven by industrialization, Malaysia 's commercial demand for energy is expected to increase nearly two-fold to an estimated 2,218 PetaJoules (PJ) in 2010. With its oil and gas reserves predicted to last for another 19 and 33 years respectively, the Malaysian government has begun stressing the importance of RE and Energy Efficiency (EE). Together with the current energy supply mix in the country, made up of gas (70%), coal (22%), oil (2%) and hydro power (6%) , RE has been recognized as the country's fifth fuel by the Malaysian government in the 8 th Malaysian Plan (2001-2005). By 2010, the Malaysian government is expecting RE to contribute 350 MW to the total energy supply in Malaysia, which is projected to reach 3,128 PJ.

Several fiscal incentives, policy instruments and institutional mechanisms are in place to drive these RE and EE strategies. Companies enjoy incentives such as pioneer status, investment tax allowance and import duty and sales tax exemption for equipment used in energy conservation. According to the Energy Commission, an estimated total investment of RM 30 Bn(approx USD 8.8 Bn) is required to be spent in the electricity supply industry for the next 5 to 10 years. Out of the total investments, 60% will be invested in power generation, while the rest will be split equally among transmission and distribution.

The implementation of the Small Renewable Energy Programme also promotes small power plants, utilizing renewable energy, to sell electricity to the state-owned electricity utility. This programme applies to all types of RE, including biomass, biogas, municipal waste, solar, mini-hydro and wind. The National Biofuel Policy, an initiative set forth in 2006, also encourages production and utilization of biofuel from palm oil as an alternative energy resource. The programme started by launching the Envo Diesel, a mixture of 5% processed palm oil and 95% diesel, as a form of biofuel. Currently, Malaysia is already producing 500,000 tonnes of biofuel annually.

Many local companies are already taking advantage of RE technologies to begin reducing energy costs and earning revenue. For example, as the first biomass RE project using empty fruit bunches as fuel, TSH Bio Energy Sdn. Bhd. sold electricity to Tenaga Nasional Berhad (TNB) at 21.25 sen/kwh. The Malaysian government anticipates that as Malaysian industry becomes increasingly aware of the eventual benefit of EE equipment and applications, demand for them should increase as well.

According to one study , the total market size in 2005 for RE in Malaysia is estimated at USD 380 Mn and is expected to grow by 10% per annum as a result of the government's energy strategy. The total imports of renewable energy equipment in 2004 were estimated at USD 317 Mn, increasing 19% from a year before. Hence, commercial opportunities are available to OEMs which produce equipment related to direct combustion, boilers and furnaces, steam turbines and generators, fuel handling and storage systems, and environmental control systems. Existing major foreign players in the sector include GE Energy, Babcock & Wilcox, Volund ApS and Vyncke NV.

The solar sector, in particular, has the strongest potential for growth. Malaysia 's location in the equatorial region is ideal for large scale solar power installations. Some companies in the solar power sector such as First Solar Inc. have already made announcements on manufacturing plant expansion in Malaysia in 2007. Nonetheless, for sectors such as biofuel, moderate growth is expected in the next few years. This is due to growing international pressure for stricter environmental standards in the production of biofuel, making industry prospects more difficult to forecast. It is also worth noting that while the EU has introduced regulations mandating the use of biofuel, other countries have been more circumspect. Even in the EU, there are growing pressures for a rethink of its mandatory biofuel targets.

The Ministry of Energy, Water and Communications estimated the combined energy value for the two segments, palm oil biomass and solar, to be USD 2.7 Bn per annum. A study conducted by an American university confirmed this when it ranked Malaysia as one of the top five developing nations most likely to attract biodiesel investments. The reasons cited were that Malaysia has a strong agricultural industry, as well as relative economic and political stability. As Malaysia doggedly pursues its vision of becoming a developed country by 2020, the demand for energy, and with it RE, will ascend even greater heights.

Renewable Energy

Most renewable energy comes either directly or indirectly from the sun. Sunlight, or solar energy, can be used directly for heating and lighting homes and other buildings, for generating electricity, and for hot water heating, solar cooling, and a variety of commercial and industrial uses.

Along with the rain and snow, sunlight causes plants to grow. The organic matter that makes up those plants is known as biomass. Biomass can be used to produce electricity, transportation fuels, or chemicals. The use of biomass for any of these purposes is called bioenergy.

The sun's heat also drives the winds, whose energy, is captured with wind turbines. Then, the winds and the sun's heat cause water to evaporate. When this water vapor turns into rain or snow and flows downhill into rivers or streams, its energy can be captured using hydroelectric power.

Hydrogen also can be found in many organic compounds, as well as water. It's the most abundant element on the Earth. But it doesn't occur naturally as a gas. It's always combined with other elements, such as with oxygen to make water. Once separated from another element, hydrogen can be burned as a fuel or converted into electricity.

Not all renewable energy resources come from the sun. Geothermal energy taps the Earth's internal heat for a variety of uses, including electric power production, and the heating and cooling of buildings. And the energy of the ocean's tides come from the gravitational pull of the moon and the sun upon the Earth.

In fact, ocean energy comes from a number of sources. In addition to tidal energy, there's the energy of the ocean's waves, which are driven by both the tides and the winds. The sun also warms the surface of the ocean more than the ocean depths, creating a temperature difference that can be used as an energy source. All these forms of ocean energy can be used to produce electricity.