Green Technology Policy On Energy In Malaysia


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Malaysia’s intended development progress of green technology policy on energy turned to be very slow and still at its infancy. Currently, there is no clear plan or roadmap on how the government wants to implement green technology on the energy sector. The recent achievement in renewable energy was way far from the set target as set in the Fifth Fuel Diversification Policy. The main objective of this study paper is to investigate the current progress of green technology policy on energy in Malaysia. Policy cycle give was used as methodology. It gave advantage since the basic idea of policy integration is not only to change bureaucracies, but also to actually change the real world it is very important. There are five green technology policies on energy introduced after year 2000 with the latest one of National Renewable Energy Policy 2010. Almost all of the policies from 2000 onwards are still relevant and yet to be fully utilized. The achievement of seven programs under green technology on energy is below average with two programs are considered failed. The most successful programme is the Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP) even though it did not involve major technology revamp. There are six improvements can be made in the implementation of green technology on energy especially in biomass sector. The main development must be focused on palm oil based biomass energy as it will not only provide energy yet it will reduce the green house gases emission simultaneously. With functional energy green technology policy on energy, Malaysia must emphasize on proven programmes to that yield the best result and focus on major improvements in high potential and critical areas.

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Green Technology Policy On Energy In Malaysia

  1. 1. GREEN TECHNOLOGY POLICY ON ENERGY IN MALAYSIA By NOOR SHAHIWAN BIN ISMAILResearch Project Submitted to the Faculty of Environmental Studies, UniversitiPutra Malaysia in Fulfillment of the Requirements for the Degree of Master of Environment May 2011 i
  2. 2. Abstract of research project presented to the Faculty of Environmental Studies of Universiti Putra Malaysia in fulfillment of the requirement for the Degree of Master of Environment GREEN TECHNOLOGY POLICY ON ENERGY IN MALAYSIA By NOOR SHAHIWAN BIN ISMAIL May 2011Supervisor : Associate Professor Mohd Bakri Ishak, PhDFaculty : Environmental StudiesMalaysia’s intended development progress of green technology policy on energy turnedto be very slow and still at its infancy. Currently, there is no clear plan or roadmap onhow the government wants to implement green technology on the energy sector. Therecent achievement in renewable energy was way far from the set target as set in theFifth Fuel Diversification Policy. The main objective of this study paper is to investigatethe current progress of green technology policy on energy in Malaysia. Policy cycle givewas used as methodology. It gave advantage since the basic idea of policy integration isnot only to change bureaucracies, but also to actually change the real world it is veryimportant. There are five green technology policies on energy introduced after year 2000with the latest one of National Renewable Energy Policy 2010. Almost all of the policiesfrom 2000 onwards are still relevant and yet to be fully utilized. The achievement ofseven programs under green technology on energy is below average with two programsare considered failed. The most successful programme is the Malaysian IndustrialEnergy Efficiency Improvement Project (MIEEIP) even though it did not involve majortechnology revamp. There are six improvements can be made in the implementation ofgreen technology on energy especially in biomass sector. The main development must ii
  3. 3. be focused on palm oil based biomass energy as it will not only provide energy yet itwill reduce the green house gases emission simultaneously. With functional energygreen technology policy on energy, Malaysia must emphasize on proven programmes tothat yield the best result and focus on major improvements in high potential and criticalareas.Keywords: policy, green technology, energy, Malaysia iii
  4. 4. Abstrak projek penyelidikan yang dikemukakan kepada Fakulti Pengajian Alam Sekitar, Universiti Putra Malaysia sebagai memenuhi keperluan untuk Ijazah Master Alam Sekitar POLISI TEKNOLOGI HIJAU UNTUK TENAGA DI MALAYSIA Oleh NOOR SHAHIWAN BIN ISMAIL Mei 2011Penyelia : Profesor Madya Mohd Bakri Ishak, PhDFakulti : Pengajian Alam SekitarKemajuan polisi teknologi hijau untuk tenaga adalah sangat perlahan dan masih diperingkat awal. Malah, ketika ini tiada rancangan jelas ataupun gerak kerja bagi kerajaanuntuk mengaplikasikan teknologi hijau dalam sektor tenaga. Pencapaian dalam tenagaboleh diperbaharui baru-baru ini amat tersasar dari sasaran yang dicanang dalam PolisiLima Diversifikasi Tenaga. Objektif utama kajian ini adalah untuk menyiasat progresterkini polisi teknologi hijau untuk tenaga di Malaysia. Kitaran polisi digunakan sebagaikaedah kajian. Kaedah ini member kelebihan kerana idea asas bagi integrasi polisi bukansahaja berkaitan dengan birokrasi, namun juga menyebabkan perubahan yang penting didunia sebenar. Ada lima polisi tenaga hijau yang diperkenalkan selepas tahun 2000yang mana Polisi Tenaga Boleh Diperbaharui Kebangsaan 2010 adalah yang terkini.Kesemua polisi tahun 2000 dan seterusnya adalah masih relevan dan masih perludilaksanakan sepenuhnya. Pencapaian tujuh program di bawah teknologi hijau bagitenaga adalah di bawah paras sebenar dengan dua program mengalami kegagalan.Program yang berjaya adalah “Malaysian Industrial Energy Efficiency ImprovementProject” (MIEEIP) walaupun tidak melibatkan modifikasi teknologi major. Ada enampenambahbaikan yang boleh dilakukan ke atas perlaksanaan teknologi hijau ke atas iv
  5. 5. tenaga terutama di dalam bidang biomas. Pembangunan mesti difokuskan ke atas bidangminyak sawit kerana ia bukan sahaja membekalkan tenaga malah mengurangkanpembebasan gas rumah hijau serentak. Dengan polisi teknologi hijau ke atas tenaga yangberfungsi, Malaysia mesti menekankan program yang terbukti membuahkan hasil danfocus ke atas penambahbaikan ke atas bidang yang berpotensi dan kritikal.Kata kunci: polisi, teknologi hijau, tenaga, Malaysia v
  6. 6. ACKNOWLEDGEMENT I would like to express my deep and sincere gratitude to my supervisor,Associate Professor Dr. Mohd Bakri Ishak whom generously supported me with hisknowledge, patience, guidance and precious time in completing this project. I attributethe completion of my master’s degree to his encouragement and wisdom. My top appreciation to all parties involved in providing me inputs and sufficientdata to be collected for this project. I also would like to thank government organizations,industry players and consumers for their assistance and enthusiastic response. Finally, I owe my loving thanks to my family and friends for supporting methroughout the process. Their prayers, understanding and support are essential anddesirable. Only Allah can pay back all your good deeds. vi
  7. 7. TABLE OF CONTENTS PagesABSTRACT iiABSTRAK ivACKNOWLEDGEMENTS viAPPROVAL viiDECLARATION viiiTABLE OF CONTENT ixLIST OF TABLES xiiLIST OF FIGURES xiiiLIST OF ABBREVIATIONS xiiiCHAPTER 1 INTRODUCTION 1 1.1 Background of Study 1 1.2 Problem Statements 2 1.4 Objectives of the study 3 1.5 Significance of study 4 1.6 Organization of study 4 2 LITERATURE REVIEW 6 2.1 Introduction 6 2.2 Review of Literatures Green Technology Policy on Energy 6 2.3 Research Methods on Green Technology Policy 8 2.3.1 MARKAL-MACRO 8 2.3.2 Policy Cycle Instrumentation 9 2.4 Selected Research Method 10 2.5 Summary 11 vii
  8. 8. 3 METHODOLOGY 12 3.1 Introduction 12 3.2 Research Framework 12 3.3 Data Collection 13 3.3.1 Study Area 13 3.3.2 Data Collection 13 3.3.3 Raw Data 14 3.4 Data Analysis 15 3.4.1 Inclusion Criteria 15 3.4.2 Consistency Criteria 16 3.4.3 Weighting Criteria 17 3.4.4 Reporting Criteria 18 3.5 Summary 18 4 RESULTS AND DISCUSSION OF THE RESULTS 19 4.1 Introduction 19 4.2 Results 19 4.3 Discussion of the Results 19 4.3.1 Policy Strategies 19 4.3.2 Policy Implementation 27 4.3.3 Policy Outcomes-Improvement 39 4.4 Summary 49 5 CONCLUSION AND RECOMMENDATIONS FOR 50 FUTURE RESEARCH 5.1 Conclusion 50 5.2 Recommendation for Future Research 51REFERENCES 53APPENDICES 60 viii
  9. 9. A Renewable Energy Bill 2010 (Front Page)B Sustainable Energy Development Authority Bill 2010 (Front Page) ix
  10. 10. LIST OF TABLESTables Page3.3.3 Raw Data 143.4.1 Inclusion Criteria Analysis 153.4.2 Consistency Criteria Analysis 163.4.3 Weighting Criteria Analysis 173.4.4 Reporting Criteria Analysis 184.3.1 Focus in the NGTP by sectors 244.3.2 The Proposed Feed-in-tariff 37 x
  11. 11. LIST OF FIGURESFigures Page 1.2 Generation Mix Plant in 2009 3 2.3.2 Levels of Finnish technology policy where environmental 10 policy integration could take place 4.3.2 Building Energy Efficiency Programme a) KeTTHAs Low Energy Office Building 34 b) Malaysian Green Technology Zero Energy Office building 35 xi
  12. 12. LIST OF ABBREVIATIONSGHG - Green house gasesSEDA - Sustainable Energy Development AuthorityRE - Renewable EnergyMIEEIP - Malaysian Industrial Energy Efficiency Improvement ProjectMBIPV - Malaysian Building Integrated Photo VoltaicBEEP - Building Energy Efficiency ProgramGBI - Green Building IndexCDM - Clean Development MechanismCO2 - Carbon DioxideMW - MegawattUNFCC - United Nation Framework on Climate ChangeDOE - Designated Operational EntityCER - Certified Emission ReductionFiT - Feed-in-TariffLEO - Low Energy OfficeZEO - Zero Energy OfficeGTFS - Green Technology Financing SchemeREPPA - Renewable Energy Power Purchase AgreementEFB - Empty Fruit BunchUNDP - United Nations Development ProgrammeGEF - Global Environment FacilityFiAH - Feed-in Approval Holder xii
  13. 13. CHAPTER 1 INTRODUCTION1.1 Background of StudyGreen technology is an alternative way that reduces fossil fuels and demonstratesless damage to human, animal, and plant health, as well as damage to the world.Many of green technology products are helpful in conserving energy or reducingwaste. Green technologies include such area as renewable energy sources, wastemanagement, and remediation of environmental pollutants, sewage treatment, andrecycling and water purification. According to Malaysian Green Technology Corporation official website,green technology refers to products, equipment or systems which satisfy thefollowing criteria:  Minimize environment degradation  Emit zero or low green house gases (GHG) and safe for use by promoting healthy and improved environment  Conserve energy and natural resources usage  Encourage the use of renewable resources. Energy is often known as the medium for development. Globally, the percapita consumption of energy is often used as a barometer to measure the level ofeconomic development in a particular country. The accomplishment of civilizationhas largely been accomplished due to the increasing efficient and extensiveharnessing of various forms of energy to extend human capabilities andinventiveness. Energy is thus one of the indispensable factors for continuousdevelopment and economic growth (Rogner and Popescu, 2001). Realizing theimportance of energy as a vital component in economic and social development, thegovernment of Malaysia has been continuously reviewing its energy policy to ensurelong-term reliability and security of energy supply through green technology policy. 1
  14. 14. Even though the term „Green Technology‟ was only used late 90s, Malaysia hasalready started the plan and implementation towards it as early as 1974 throughconcentrated hard work are being undertaken with the common goal of ensuring thesustainability of energy resources, both finite and renewable. The energyconsumption is expected to accelerate rapidly in developing countries. Their growthis mainly focused on industrial activity to increase their Gross Domestic Product(GDP) thus improving their income per capita. Policy definition in this study is basic principles by which a government isguided. They must have declared objectives which a government seeksto achieve and preserve in the interest of national community. The main focus will bebased on Malaysian Policy starting from 8th Malaysian Plan year 2000. It willencompass not only policy makers but also the implementation and stakeholder‟sparticipation. However, the latest policy on Renewable Energy and SEDA Act, themain entity in National Renewable Energy Policy is still in Parliament tabling.1.2 Problem StatementAfter a series of energy policy introduction since 1975, Malaysian intention topromote green technology on energy became obvious when the Five-FuelDiversification Policy replaced the four-fuel policy back in 1999. In this policy,Renewable Energy (RE) was added as the fifth source of energy with the target tocontribute 5% of the country energy mix with RE by year 2005. (Lau et al., 2009).The intended development progress of RE in Malaysia turned out to be very slowand still at its infancy. The contribution in 2009 is only at 2.9% of the totalrenewable energy mix with 617MW electricity produced, even though the fifth fuelpolicy had been announced more than 10 years ago (Figure 1.2). 2
  15. 15. Figure 1.2. Generation Mix Plant in 2009 (Source: Suruhanjaya Tenaga) Furthermore, National Biofuel Policy was introduced in 2006 to promotepalm oil based biofuel. However, until today it is still not fully utilized after a fewfalse starts. Malaysia again introduced National Green Technology Policy in 2009and Renewable Energy Policy in 2010 to give further boost green technologyespecially in energy. Occasionally, there are many doubts on the direction of thesepolicies as there is no clear plan or roadmap on how the government wants toimplement green technology on the energy sector.1.3 ObjectivesThe main objective of this study is to determine the current progress of greentechnology policy on energy in Malaysia. The specific objectives are: i. To determine the current green technology policy on energy in Malaysia ii. To analyze the achievement of green technology policy on energy in Malaysia iii. To recommend improvements in the implementation of green technology on energy in Malaysia 3
  16. 16. 1.4 Significance of StudyAll of the green technology policy related to energy adopted by Malaysia will beoutlined in this study. Therefore, the direction of green technology on energyindustry in Malaysia can be determined. Based on achievements andimplementations, it will reveal weakness and the real problem that merit amendmentto the present policy and its implementation. Results of this study may help policymaker in amending current policy or drafting future policy. The policy implementation has been given ample of time and resources tosucceed despite of the poor results it produced. For example, the recent achievementin renewable energy shows that the set target was way far from achievement in theFifth Fuel Policy. This study will show the best ongoing program that needed to beprolonged and below performance programs that needed to be improved. The bestprogram does not necessarily require high capital of resources. It might need lessresource but yield the best result over the investment if it is applied on the targetsubject effectively. Besides that, in drafting and implementing the green technology policy onenergy, it is important to adapt the current situation in Malaysia. Model policy fromother country does not necessarily will do well in Malaysia. This study will view thepolicy from the best perspective of Malaysia in order to identify the true potential ofMalaysian energy sector in implementing green technology. The framework andpolicy structure of model country may be used, but with modifications to suitMalaysia‟s condition.1.5 Organization of the studyThe study was started with Chapter 1 of introduction. This section consists ofdefinition of green technology, and policy whereas the importance of energy wasexplained. The objectives of this study were outlined to address the problemstatement and the benefit of this study was explained in the significance of study. 4
  17. 17. Next, the Chapter 2 is Literature Review. The literature review consists ofsimilar local and international study on policy. The focus will be on similar study ofpolicy in Malaysia and methodology used for the study of policy related to energy.Later in Chapter 3 of Methodology, the framework of this study was explainedtogether with the raw data presentation. The policy cycle analysis was used toanalyze the energy policy accordingly. Later, the Result was revealed in Chapter 4. It is according to the statedobjectives. In the discussion section, the results were further elaborated. It includedthe policies involved, program implementations and also potentials of greentechnology on energy in Malaysia. Finally in Chapter 5, the Conclusion was madeand several Recommendations were suggested for future study. Therecommendations are based on the next missing gap that needed to be filled withfurther study to extend the result and discussion. 5
  18. 18. CHAPTER 2 LITERATURE REVIEW2.1 IntroductionIn this chapter, a literature review has been done on related policy based researches.Eventually, the accomplishment of results from similar study that has been made canbe identified. There were four similar studies related to energy policy reviewed inthis section. The findings can be used as reference to differentiate the findings of thisstudy to one another. Furthermore, two methodologies used in international study onenergy policy were listed. The methodologies used in policy study were outlined andanalyzed. Finally, the best methodology was chosen and used in this study.2.2 Review of Literatures on Green Technology Policy on EnergyA study by Zamzam et al. (2003) examined the intricacy of energy policies, issuesand challenge woven into the development of the energy sector in Malaysia. Theirtitle of the study is “Greener energy solutions for a sustainable future: issues andchallenge for Malaysia”. As highlighted in the Third Outline Perspective Plan(OPP3) and the Eighth Malaysia Plan (8MP) unveiled in April 2001, efforts will beintensified to moderate the growth of energy demand and to develop renewableenergy as the fifth fuel in electricity generation. Whilst the general energy policythrust for the next ten years remains unchanged, concerted efforts will be made tousher the energy sector development on a greener path. With a projected averageeconomic growth rate of 7.5% per year in the 2001–2005 period, resource richMalaysia would have to cater for the 7.8% yearly increase in final energy demand.Total primary energy supply is projected to grow at an average of 7.2% per year inthe same period. Against the backdrop of a growing need for coal and piped naturalgas imports and Malaysia becoming a net crude oil importer in 2008, greaterchallenge lie ahead for the energy sector. Higher utilization rate of natural gas as the 6
  19. 19. „green‟ fuel will be encouraged in electricity and non-electricity sectors.Furthermore, fiscal incentives in Budget 2001 to promote renewable energy andenergy efficiency provide a timely boost for implementation of the new fifth fuelstrategy. Not long after that, sustainable energy policy was studied using the Bakundam as a subject. Energy demand, economic growth, and energy efficiency- theBakun dam-induced sustainable energy policy revisited (Choy, 2003) is the title ofthe study. In the course of harnessing a truly sustainable energy policy, the questionat issue is no longer the flow of energy per se, but the nature and source of energyflow that is renewable, cost-effective, socially and environmentally sustainable.Although the Bakun energy policy is able to answer to the increasing needs of theMalaysian energy demand scenario, it has failed to fulfill the social, ecological, andenvironmental dimensions of sustainable development. Consequently, it cannot beregarded as truly sustainable. In other words, hydroelectricity must be harnessed insuch a way that it produces less or minimum social and ecological impact on theindigenous population and environment. As analyzed in this study, it is suggested theMurum project, which is less socially, ecologically and environmentally destructiveshould be optimized in lieu of Bakun. The Malaysian energy policy was further studied with a title: Energy forsustainable development- Energy policy and alternative policy (Abdul and Keat,2005). Their findings suggested that the Malaysian energy sector is still heavilydependent on non-renewable fuel such as fossil fuels and natural gas as a source ofenergy. These non-renewable fuels are finite and gradually depleting and alsocontribute to the emission of greenhouse gas. While it is recognized that the world,including Malaysia is not ready to displace non-renewable energy with renewablefuels, the implementation of various policies and programs by the government ofMalaysia has increased the awareness of the importance of the role of renewableenergy in a sustainable energy system. Apart from that, this study emphasized thatclose cooperation within the countries in this region is needed to further promote theuse of renewable energy. 7
  20. 20. The study by Oh et al. (2009) with a title: Energy policy and alternativeenergy in Malaysia- Issues and challenge for sustainable growth, focused on an over-dependence on non-renewable fossil fuels in Malaysia energy sector. Among policybeing analyzed in the study also is newly introduced then the National GreenTechnology Policy 2009. Results again suggest that the country extremely vulnerableto volatile prices and interruptions to the fuel supply, especially since Malaysia isexpected to become a net oil importer by 2030. Concerted efforts undertaken by thegovernment so far are slowly gaining momentum with concerns about skyrocketingoil prices and higher feed-in tariff, and they have definitely increased the publicawareness on the importance of the renewable energy in the countrys sustainableenergy system as a whole, although being met by countless obstacles from numerousparties. Generally, it is quite obvious that Malaysia is not ready to embracerenewable energy totally and replace non-renewable energy with renewable energyin the near future. Therefore, it needs a proper policy in place with an emphasis ongreen technology on energy.2.3 Research methodologies on policy2.3.1 MARKAL-MACROIn a study titled: Evaluation of green certificates policies using the MARKAL-MACRO-Italy model by Mario et al. (2006) had evaluated by means the impact ofthe policies of the Italian energy–environment system. MARKAL is not a model, buta generator of economic-equilibrium programming models of energy systems andtheir time development. Contrary to most economic equilibrium models,supply/demand curves of commodities are not represented by means of analyticfunctions with econometrically estimated parameters, but are specified by stepwiselinearised functions. The extension of the MARKAL methodology used in this studycombines the energy model built with MARKAL with the long-term macroeconomicgrowth model called MACRO, to provide a dynamic, neoclassical, applied generalequilibrium model (Hamilton et al., 1992). The integrated model, whichsimultaneously solves energy and economic components using non-linear 8
  21. 21. optimisation, is able to analyse separately price-induced energy conservation andautonomous energy efficiency improvements. Formulating economic equilibrium models of the energy systems with theMARKAL methodology has several advantages. When all equations are linear, thesolution of very large size models (approaching one million variables and equations)requires an hour or little more in normal PCs if recent powerful linear programmingsolvers are used. Till the number of non-linear functions remains low, the solution ofthe corresponding non-linear programming models does not require much more.Since each step of supply–demand curves represents a technology or a fuel source,further to equilibrium quantities and prices the solution of the model indicates the setof technologies or fuel sources that makes the equilibrium feasible.2.3.2 Policy Cycle InstrumentationPaula K. and Per M. (2006) in their study: The challenge of greening technologies-Environmental policy integration in Finnish technology policies, have used thepolicy cycle to evaluate the integration of environmental policy. In policy analysisand evaluation, the policy cycle is often used as a tool to conceptualise key aspects ofpolicy formation and implementation (Pollitt and Bouckhaert, 2000). It is earlierdeveloped a conceptual model of the policy cycle that can be used as a basis ofevaluating policy integration. The model illustrates that policy integration could, inprinciple, take place at many levels of the policy cycle. Assuming that there is aperception that policies should be integrated, this should be reflected at the level ofpolicy strategies as well as at the level of the instruments by which these areimplemented. Policy cycle give advantage since the basic idea of policy integration isnot only to change bureaucracies, but also to actually change the real world it is veryimportant, although challenging, to extend the examination to include policy outputsand outcomes. If environmental concerns are integrated into technology policies,projects funded and technologies developed should become environmentally sounderand this should be reflected in the state of the environment. 9
  22. 22. There are three levels of policy cycle. Firstly, the level is policy strategies.This level involves policy makers and policy planning. In this study, the policy isdrafted by the government with the assistance of appointed consultants. It decides onthe direction of the country by setting the vision and mission. Secondly, the nextlevel is policy implementation. Many programmes and projects will be organized inorder to execute the policy and yield results. Each of the programmes has specificobjective in certain area. Some of the programmes might cover a policy or moreduring implementation. Finally, the last level is policy outcomes. The main entity inthis level is the stakeholders. All the programmes implemented will be involving thestakeholders including industry player, client and consumer. The end results areexpected to be beneficial to the community. Figure 2.3.2. Levels of Finnish technology policy where environmental policy integration could take place (Paula and Per, 3006)2.4 Selected Research MethodThe selected methodology is Policy Cycle Instrumentation. Theoretically, policycycle can be used to examine the green technology implementation in Malaysia‟senergy. Policy cycle consists of 3 levels namely policy strategies, policy instruments, 10
  23. 23. and policy outcomes. Each level will be evaluated using four criteria. First evaluationcriteria used is inclusion, followed by consistency, then weighting, and the last one isreporting. Each of the criteria used will be further explained in the methodologysection.2.5 Summary Related study on energy and policy were reviewed. Generally, all of thestudies are focusing on the problem of implementing energy policy. None of them isfocusing on green technology except for environmental aspects that are beingemphasized. There are two relevant methodologies from previous study that aresuitable to be used. Policy cycle instrumentation was chosen to provide results ofpolicy not only according to bureaucracies, but also according to the real situation.The examination will also include policy outcomes. Thus, this study was focused onpolicy development starting from year 2000 using Policy Cycle Instrumentation. 11
  24. 24. CHAPTER 3 METHODOLOGY3.1 IntroductionIn this chapter, a methodology has been set based on Policy Cycle Instrumentation.Eventually, the accomplishment of results will be completed using analysis of the setcriteria that will be further explained in the data analysis section. The methodologywill create a research framework for a better understanding and show a flow ofdirection. Towards the achievement of the stated objectives, the extended researchframework is utilized. Finally, the outputs will be used as results and to be discussedin the next chapter.3.2 Research Framework POLICY CYCLE DATA COLLECTION 1. Policy, Policy 2. Program Descriptions, 3. Thematic Review Final Report Interviews DATA ANALYSIS USING CRITERIA 1. Inclusion 2. Consistency USING CRITERIA 3. Weighting 4. Reporting RESULTS 12
  25. 25. 3.3 Data Collection3.3.1 Study AreaMalaysian government establishes energy policy to address issues of energyproduction, distribution, and consumption. Policy declared by the government isenforced all over Malaysia including Sabah and Sarawak. Policy maker and thesecretariat base are at the administrative capital of Malaysia, Putrajaya and alsocapital city of Malaysia, Kuala Lumpur. The Department of Electricity and GasSupply acts as the regulator while other players in the energy sector include energysupply and service companies, research and development institutions and consumers.Petroliam Nasional Berhad and Tenaga Nasional Berhad are the major players inMalaysias energy sector. Other government organizations involved are MalaysiaEnergy Commission and Ministry of Energy, Green Technology and Water. TheMalaysian Green technology Corporation was later developed to assist theimplementation of green technology policy.3.3.2 Data CollectionGreen technology policy on energy was evaluated in by collecting strategydocuments produced and policy inputs, such as people and financial resourcesallotted to energy issues in Malaysia. Eight policies of energy in Malaysia introducedafter year 2000 were collected. The strategy documents were evaluated using thecriteria stated in literature review. Green technology policy on energy that wascollected is focused on the objectives of different technology programmes and on theallocation of financial resources to different types of programmes including projectfunding decisions. Other technology programme-related documents are includingfinal reports and evaluations. In addition, five thematic interviews were made amongthe actors in Malaysian energy policy to provide background information on thepolicy outcomes. Malaysian Energy Commission web-site information on projectapplications and funding criteria were also sourced. 13
  26. 26. 3.3.3 Raw data Table 3.3.3. Raw DataPolicy Cycle Data Collected SubjectsInstrumentationPolicy Strategy  Policy i. Five-fuel Diversification Policy  Policy Review 2000 ii. Kyoto Protocol 2005 (Enforced) iii. National Biofuel Policy 2006 iv. National Green Technology Policy 2009 v. National Renewable Energy Policy 2010 vi. Renewable Energy Bill 2011 (Approval Stage) vii. Sustainable Energy Development Authority Bill 2011 (Approval Stage) viii. Renewable Energy Fund 2011 (Proposed)Policy  Program i. Fuel DiversificationImplementation descriptions ii. Small Renewable Energy Plant  Final report iii. Biofuel iv. MIEEIP v. MBIPV vi. BEEP vii. GBI viii. Incentives 14
  27. 27. Policy Outcomes  Thematic i. Azah Ahmad, Policy interviews on Development Officer, policy Malaysian Building Integrated implementation Photo Voltaic ii. Fendi Abdullah, Greentownship Officer, Malaysian Green Technology Corporation iii. Abdul Rahim, Marketing Director, SolarGE Sdn Bhd iv. Paul D. Millott, Researcher, Advanced Solar Voltaic Sdn Bhd v. Steve Lojuntin, Principal Engineer, Malaysian Green Technology Corporation3.4 Data Analysis3.4.1 Inclusion CriteriaThe first evaluation criteria is the inclusion of green technology aspects to determineto what degree green technology aspects are covered in policy, either in general or byhighlighting specific environmental outputs. Different policy instruments areconsistent with each other in addressing the green technology. Green technology onenergy policy should be matched with a commitment to minimize contradictions. Table 3.4.1. Inclusion Criteria AnalysisLevel Inclusion Criteria AnalysisPolicy Strategy Green technology aspects have been included in the strategies of all of the policy listed. However, the environmental term is used to replace the green technology function.Policy Implementation Green technology objectives have been included in all 8 of 15
  28. 28. the listed programs; 5 of these programmes comprised renewable energy-related aims. Sector specific differences have been noted to exist and environmental aspects are rarely considered in programmes without clear environmental objectivesPolicy Outcomes In principle, environmental impacts are among the criteria for selecting projects. In practice, however, the funding application forms do not itemize a section for green technology applications. Based on technology programmes, no list or assessment of potential green technology in renewable energy appears in funding allocations3.4.2 Consistency CriteriaThe second evaluation criteria, the consistency of the green technology aspect inrelation to other aspects, is used to assess the role policy documents give to the issueof consistency when they address green technology matters. The criteria is not usedto evaluate consistency in the documents, but to assess whether the policiesthemselves take the issue into account. Some degree of inclusion is thus aprerequisite for the consistency criteria. It has been argued that, from a normativeviewpoint, green technology aspects should take priority in situations wherecontradictions between different policy objectives emerge. Table 3.4.2. Consistency Criteria AnalysisLevel Consistency Criteria AnalysisPolicy Strategy The consistency of, or the potential conflicts between, the different objectives have not been addressed in the policies listed. Strategy points out the objectives overlap between policies and execution organizationsPolicy Implementation Within programme objectives no direct conflicts can be observed. However, the green technology objectives have rarely been all inclusive and have focused mostly on specific objective. Consistencies between the different programmes 16
  29. 29. and between the objectives are separated by target subjectPolicy Outcomes The project objectives tend to be very specific and technically detailed. Consistency is difficult to be evaluated without expertise in the technological field.3.4.3 Weighting CriteriaWithout engaging in the debate of the pros and cons of such a prioritisation, the thirdcriteria is used for weighting of the green technology aspect with respect to otheraspects, to assess the importance given to green technology issues in policydocuments. This criteria also requires some inclusion criteria. Table 3.4.3. Weighting Criteria AnalysisLevel Weighting Criteria AnalysisPolicy Strategy The importance of green technology aspects has been implicitly emphasized in all policies. However, no ranking in green technologies has been provided for cases where prioritization must be made. Only green technology of biofuel was been given specific policy to be implemented. Other green technologies were generalized as renewable energy and energy efficiency.Policy Implementation In selected programmes, green technology have been emphasized and some programmes have been specifically designed for renewable energy of solar. Biofuel importance, however, has diminished in recent years after experiencing few false starts.Policy Outcomes Green technology is considered less relevant compared to business potential and profit making 17
  30. 30. 3.4.4 Reporting CriteriaThe fourth criteria, reporting is based on the importance of feedback for policyconsistency and effectiveness. Regarding policy documents, the fourth criteriaaddresses the degree to which strategies include specifications about how the greentechnology aspects are to be followed up and reported and the degree to whichassessments of technology programmes/projects include environmental aspects. Table 3.4.4. Reporting Criteria AnalysisLevel Reporting Criteria AnalysisPolicy Strategy The strategies have not in general included specifications about how their green technology aims are to be followed up and reported. Reporting is based on policy implementation.Policy Implementation Positive and negative outcomes generated by the programmes have been brought up in the final reports and assessments of only those programmes containing numerical measurements. However, there was neither declaration of success nor failure for each programme.Policy Outcomes The post assessments of programme outcomes are quite technically detailed to public and most of the reports were prepared by the implementation organization themselves3.5 SummaryMethodology section has been completed with results to be discussed. Starting withdata collection, all the data needed are collected for data analysis. In data analysis,four criteria have been used namely inclusion, consistency, weighting and reporting.All of these criteria had been analyzed on three level of policy cycle which is policystrategies, policy implementation and policy outcome. The analyzed data will beused to determine the results on the next section. 18
  31. 31. CHAPTER 4 RESULTS AND DISCUSSSION OF THE RESULTS4.1 IntroductionIn this chapter, results were made to answer the set objectives. In policy strategies,all the policies involved were outlined. Each of the policy will be discussedindividually. Furthermore, in policy implementation, the completed and ongoingprograms during the policy duration were also discussed. The achievement wasexplained for each specific program. Lastly, the policy outcomes will be discussingthe improvements to be highlighted in the policy. Most of them are the left out matterin the policy and implementation. These potentials are also critical in determining thesuitable program to support the policy.4.2 ResultsThe results of this study are: a) There are five green technology policies on energy introduced after year 2000 with the latest one of National Renewable Energy Policy 2010 b) The achievement of seven programs under green technology on energy is below average with two programs are considered failed. c) There are six improvements can be made in the implementation of green technology on energy especially in biomass sector4.3 Discussion of the results4.3.1 Policy StrategiesStarting from the 8th Malaysia Plan (2001-05) energy policy was formulated byincluding aims for a safe, cost-effective, secure energy supply which means 19
  32. 32. promoting renewables, cogeneration, diversification, efficiency and using auditing,financial and fiscal incentives, technology development, and labeling. The 8th Planincludes several incentive mechanisms for the promotion of environmental measuresand the use of renewables in the private sector.i. Five-fuel Diversification Policy 2000Originally the four fuel diversification policy focused on oil, gas, coal and hydro.Over the years, the government has devised quite a number of energy-related policiesfor long term impacts. The fuel diversification policy is reviewed constantlyaccording to the energy status of the country. In the 8th Plan, it was broadened toinclude renewable energy as a fifth fuel in the new Five Fuel Strategy. In the 9thMalaysia Plan (2006-10) the energy policy of the 8th Plan has been continued whileproviding a more conducive environment to support renewable energy projects. The direct result from the fuel diversification strategy saw the drastic drop ofoil in the energy mix contribution, from a high 87.9% in 1980 down to a mere 2.2%in 2005, with the remaining 70.2% and 21.8% coming from natural gas and coalrespectively (Razak and Ramli, 2008). In addition to the five-fuel policy, thegovernment has endorsed the Kyoto Protocol in September 2002 and being a non-Annex 1 country, Malaysia can utilize the CDM to reduce domestic CO2 emissionsas well as transfer advanced technologies from developed countries. Additionally, the 9th Plan announced a target of 350 MW of grid-connectedrenewable electricity generation by 2010. The five-fuel policy has targeted tocontribute 5% of the country energy mix with RE by year 2005 and mitigate 70million tonnes of CO2 over a span of 20 years (Lau et al., 2009). Subsequently, whenthe Five-Fuel Diversification Policy replaced the four-fuel policy back in 1999, REwas added as the fifth source of energy with the target to contribute 5% of the energysources mix ture by 2010. The intended development progress of RE in Malaysiaturned to be very slow and still at its infancy. The current contribution at around2.9% only of the total energy mix, even though the fifth fuel policy had beenannounced more than 10 years ago. 20
  33. 33. Currently, RE in Malaysia is still being generated on a small-scale basis only.Malaysia abundant resources of renewable basis, with mostly from mill wastes suchas such as palm oil, rice, sugar cane, timber/sawmill, paper recycling, municipalwaste, and biogas are not even half utilized. The most promising potential forrenewable energy in Malaysia is the biomass and biogas from the oil palm industry.This is not surprising considering that 15% of the total land area of Malaysia iscovered by this single crop alone. It is estimated that the country has the capacity toproduce up to 2000 MW using biomass and biogas alone. ii. Kyoto ProtocolAt present, most of the developed countries are committed to cap their CO2emissions as stipulated under Kyoto Protocol as well as the recent declaration duringthe recent 2009 Climate Summit. In this respect, developing countries are stilllacking behind most of the developed countries, but are catching up quickly.Malaysia as one of the fastest growing countries in Southeast Asia is continuouslycombating global warming with aggressive efforts. The cutback on GHGs emissionscan be accomplished by restructuring company operations and processes tophysically reduce emissions and through purchases of carbon credits to meet thecarbon emission reduction deficits. The reduction can be achieved through financial exchanges by supporting theCDM or simply by buying carbon credits from companies or developed countriesthat have excess allowances. Carbon credits are awarded to projects in a country bythe Designated Operational Entity (DOE) after grilling through the stringent andcomplex procedures adopted by the United Nation Framework on Climate ChangeConvention (UNFCCC) to be certified as having reducing a real and quantifiableamount of GHGs. Since Certified Emission Reduction (CER) can be traded and usedby developed countries to comply with emission reduction targets, hence this shallcreate a win–win situation between developing and developed nations (Lau et al.,2009). 21
  34. 34. Malaysia government has been very supportive and instrumental in the CDMparticipation and has established the machinery and mechanisms for smoothimplementation to tackle the GHGs emissions and the promotion of carbon trading inthe country. To encourage corporations to go green, the Malaysian government hasexempted carbon credit income from tax from 2008 to 2010. From a corporationsperspective, the main incentive to go green would be that such practices make goodcorporate social responsibility as well as its cost recovery potential. In theannouncement of the countrys Budget 2008, an additional 10-year pioneer statuswere granted to companies involved in energy conservation, on top of a 3-year taxexemption for income derived from carbon credits trading. iii. National Biofuel Policy 2006Implementation of the National Biofuel Policy is spearheaded by the Minister ofPlantation Industries and Commodities. This initiative is in line with nation‟s Five-Fuel Diversification Policy, a national policy to promote renewable energy (RE) asthe fifth fuel along with fossil fuels and hydropower. The strategis thrusts of thispolicy are including transportation, industry, technologies, export, and cleanerenvironment. As a start, the Government is promoting a 5%-mix of processed palmoil with petroleum diesel (B5 diesel) by applying to a fleet of government vehicleson a trial basis and by establishing B5 diesel pumps at selected stations. Thejustification is that biofuel production has the potential to generate new jobs, raisepalm oil prices through increased demand, hence boost farm incomes, and as a toolfor rural economic development by promoting value-adding activity. Thus, biofuelproduction could help retain or even attract new resources to rural areas. Malaysian government also announced that starting from February 2009,application of mandatory B5 biodiesel blend which is consisting 5% palm biodieselplus 95% petroleum biodiesel is used at all sector in selected government agencies.Followed by nationwide implementation in 2010, the mandatory blend of B5 isexpected substantial amount of demand for high supply in the market. The MalaysianBiofuel Industry Act 2007 (Act 666) was enacted with the purpose of providinglegislation for the mandatory use of biofuel, licensing of activities relating to biofuel 22
  35. 35. and for matters connected therewith and incidental thereto. The Act was enforced on1 August 2008, while the licensing activities under the Act as stipulated under theMalaysian Biofuel Industry (Licensing) Regulations 2008 was enforced on 1November 2008. Government stopped issuing new licensing as of July 2006 – andthe total capacity has reached 3,000,000 tons/year, which is six times larger than theprojected biodiesel demand for the domestic transportation sector. iv. National Green Technology Policy 2009The Ministry of Energy, Communications and Multimedia is replaced by theMinistry of Energy, Green Technology and Water to in early 2009. It reflectsMalaysias commitment in spreading the message that „clean and green‟ is the bestway towards generating economy that is based on sustainable solutions. Malaysiangovernment also has launched the National Green Technology Policy (NGTP) on 24July 2009 to promote low-carbon technology and ensure sustainable developmentwhile conserving natural environment and resources. The policy has five strategicthrusts as follows: (i) Strengthen the institutional frameworks, (ii) Provide conduciveenvironment for green technology development, (iii) Intensify human capitaldevelopment in green technology, (iv) Intensify green technology research andinnovations, and (v) Promotion and public awareness. The aim is to generateimprovements in major sectors of energy, buildings, water and waste managementand transportation towards fulfilling its goals as shown in Table 4.3.1. Besides that, government restructured the Malaysia Energy Centre as theNational Green Technology Centre tasked with formulating a green technologydevelopment action plan. This Centre will function as the focal point to set standardsand promote green technology. To intensify green awareness activities and practiceenvironmental-friendly lifestyle, an allocation of RM20 million has been provided.In line with the new focus on green technology, the Malaysian Government hadlaunched the RM1.5 billion Green Technology Financing Scheme on 26th January2010. This move is intended to attract the private sector to participate in GreenTechnology entrepreneurship. It is hoped that this fund will be able to facilitate andfast track efforts by companies that are now pursuing green technology businesses. 23
  36. 36. Table 4.3.1. Focus in the NGTP by sectorsSector Focus  Construction,  ManagementBuildings  Maintenance  Demolition  Infrastructure  VehiclesTransportation  Biofuels  Public road transport  Energy efficiencyEnergy utilization  Demand management  Power generation  Supply managementEnergy supply  Co-generation by the industrial and commercial sectors  Water resources managementWater and waste  Waste water treatmentmanagement  Solid waste and sanitary landfill v. National Renewable Energy Policy 2010With the vision of enhancing the utilization of indigenous renewable energyresources to contribute towards National electricity supply security and sustainablesocio-economic development, the new RE policy is intended to transform Malaysiato become a leader in renewable energy applications. This will ensure that Malaysiawill develop into a nation that is able to satisfy its own energy needs from indigenousresources, be independent from fuel imports, and able to conserve its natural 24
  37. 37. environment so that it can also be enjoyed by the future generation. A big local REindustry could ensure that the power generation from fossil fuel or nuclear beminimized while creating a new source of economic activity for the country. A moreinformed and committed Malaysians in utilizing RE can ensure that such aspirationand vision would be achieved. Among the significant transition in this policy is the creation of RenewableEnergy Bill & Sustainable Energy Development Authority Bill. During theParliament sitting in December 2010, the Energy, Green Technology and WaterMinister, Datuk Peter Chin Kah Fui tabled the Renewable Energy Bill 2010 &Sustainable Energy Development Authority Bill 2010 for the first reading. Thesecond and third reading already being carried out in the next Parliamentary sitting inMarch 2011, and thereafter Malaysia‟s first Renewable Energy Act is expected tocome into effect in the early second half of 2011. Besides that it also means that theformation of Renewable Energy Fund will be initiated. These bills are seen as acatalyst for renewable energy generation and it is aligned with Malaysiangovernment‟s aims to achieve 5.5% renewable energy in Malaysia‟s total energy mixby 2015. vi. Renewable Energy Bill 2011 (Approval Stage)The essence of the RE bill is a proposed feed-in tariff (FiT) mechanism. The FiTmechanism allows electricity produced from renewable energy sources to be sold toutilities companies at a premium rate for a specific duration. The government hopesthat this could be the answer to the slow implementation and take up of renewableenergy generation in the country, a task in which the 5th Fuel Policy and the SmallRenewable Energy Program haven‟t been successful so far. Under the FiT, up to30MW of electricity generated from four renewable sources, solar photovoltaic,biogas, biomass, and small hydro, are eligible to apply to connect its power generatorto the national grid, and sell the power back to utilities companies (TNB inPeninsular, SESCO in Sarawak, and SESB in Sabah). 25
  38. 38. Applications for the sales will be handled and approved by SEDA, and whenapproved, the successful applicant will be paid by FiT using funds available in theRenewable Energy Fund. The FiT rate and effective period varies based on thedifferent renewable energy sources and methods, and is subjected to an annual fixeddegression rate. The degression is intended to be common in the renewable energyindustry, and its aim is to be part as a means for gradually eliminating the premiumpaid to renewable energies relative to the so-called market price. The degression isintended to account for lower costs to generate renewable energy as productionvolumes increase and the technology moves down the learning curve. When the cost of electricity produced from the renewable source becomescheaper than the electricity produced from the grid, FiT will cease to be paid usingthe Renewable Energy Fund. Instead the utilities companies will assume the paymentbecause the cost to buy from the renewable energy generator will be cheaper than thecost of producing its own electricity.vii. Sustainable Energy Development Authority Bill 2011 (Approval Stage)The Sustainable Energy Development Authority Bill 2010 will establish theSustainable Energy Development Authority (SEDA), where its main function is tospearhead the development of renewable energy in Malaysia. It will also act as thefocal point to assist the Minister on climate change matters relating to energy. SEDAwill be led by a chairman, a chief executive officer, and a team of not more than ninemembers. The membership of SEDA will be appointed by the minister. They willhave the authority to employ employees or committees to perform its functions. The operational expenses of SEDA, including the remunerations of itsemployees, will be borne by the Sustainable Energy Development Authority Fund,which derives its income from various means, including funds provided by theParliament. As such, SEDA and its employees are deemed to be civil servants whosesalaries are paid partly using the tax payers‟ money. One specific function of SEDAis to implement and manage the Feed-in Tariff (FiT) mechanism, which forms theessence of the Renewable Energy Bill 2010. 26
  39. 39. viii. Renewable Energy Fund 2011 (Proposed)The Renewable Energy Fund will be established and administered by SEDA. Thisfund will derive its income from various legal means, two of which, are sumsprovided by the Parliament and allocation from current electricity tariffs. Essentially,tax payers will be paying partly to this fund, through our taxes, and a tariff paid fromour electricity bill by the utilities companies. At press time, it is still unsure whetherthe tariff paid will translate into an increase in our electricity bills, or it will be takenfrom the utilities companies‟ income. The utilities company will recover from thisfund, the difference between the FiT it pays out to renewable energy sources and thenormal cost it incurs to purchase electricity from traditional sources.4.3.2 Policy ImplementationThere are several programmes being implemented under current policies. Most of thepolicies served as foundation of legal structure and government stand on anyparticular matter. In order to produce achievable results, these programmes have tobe organized to ensure the ultimate goal is also shared by all level of society. All theprogrammes outlined here are initiated after year 2000. Some of them have alreadycompleted the implementation period and others still ongoing. Therefore, theachievement of each programme will be analyzed according their respective plan andtarget. i. Small Renewable Energy Plant (SREP)In 2001, the Small Renewable Energy Power (SREP) Program was launched toproduce energy from biomass, biogas, landfill waste and mini-hydro. Later in 2003,solar PV and wind were added into the source of renewable energy. The utilization ofall types of RE under SREP is meant to generate electricity which will be sold to theutility through the countrys distribution grid system. 10 MW is the maximumcapacity of small RE plant. Subsequently, Special Committee on Renewable Energy(SCORE) has been set up under the then Ministry of Energy, Communications and 27
  40. 40. Multimedia to regulate the program. Plus, it will also functions as secretariat at theEnergy Commission (EC) to facilitate industry activity in the program. Report from Malaysian Green Technology Corporation shows 55 projects havebeen approved as in 2009 from 60 projects in 2005, using various types of renewableenergies (Table 3), with the majority of biomass using palm oil wastes and mini-hydro. All of them are given a 21-year operating license to generate up to amaximum of 10 MW, manage to generate a total of 309.3 MW energy and285.7 MW connected back to the national distribution grid whereas in 2005 a total of375 MW and 325 MW respectively. It shows declination of 17.5% in energygenerated and 12% in energy connected back to grid. This is due to cheap tariff givenfor energy contributed back to the grid. The escalating cost of maintenance andoperation is the major contributor of the plant inefficiency. Plus, based on experienceduring early years of SREP, many potential applicants are not convinced with thereturn on investment and the long payback period. Although the SREP has targeted to generate 5% or 600 MW of the Malaysianelectricity sources from RE by 2005, only 0.3% was achieved. Until 2009, theachievement is only more than half of its target at 2.7%. Obviously, the progress inbringing RE generation into the mainstream is time-consuming due to severalreasons and limitations. Even though fossil fuels will remain the dominant source ofenergy for decades to come, energy from RE such as biomass, solar, mini hydro,biofuel and geothermal heat is expected to increase 100% up to year 2030.Unfortunately, their share in the energy mix is insignificant which most likely will bearound 5.9% of the total energy demand by 2030. The main obstacles throughout this year to RE development in Malaysia are thelack of a policy framework and a financial mechanism before Green TechnologyPolicy being introduced. Without a legal and financial framework, the promotion ofRE usage is often difficult. Moreover, the exorbitant price of RE gives householdsand businesses less incentive to adopt the technology, on top of the limited loansallocated for RE development. Beyond this, a lack of consulting services and accessto the information on RE are also hampering its development (Shigeoka, 2009). 28
  41. 41. Another key stumbling block is the high capital cost of RE implementation and thelow sales price of electricity (17 cents/kWh) make the production of RE consideredas uneconomical (BioGen, 2005). ii. Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP)MIEEIP is organized to address such barriers to energy efficiency and energyconservation in the country‟s industrial sector. The Government of Malaysia initiatedthe Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP) in 1999to improve the rational use of energy in the industrial sector. Support and fundinghas been provided by the Global Environment Facility (GEF), the United NationsDevelopment Programme (UNDP) as well as the Government of Malaysia and theprivate sector. UNDP is the project‟s implementing agency on behalf of the GEF.The Ministry of Energy, Water and Communications (MEWC, formerly known asMinistry of Energy, Communications and Multimedia, during the initialimplementation of the project) was appointed the project‟s executing agency,whereas Pusat Tenaga Malaysia (PTM) (now Malaysian Green TechnologyCorporation) is the designated implementing agency. It is formed to achieve this byeradicating barriers to industry energy efficiency with initiating institutional capacityin policy management and implementation of sustainable energy projects. Despite the low cost of energy, the MIEEIP project has managed todemonstrate the feasibility and achievability of energy saving measures and hasmanaged to entice managers in industrial companies as well as some financialinstitutions to get involved in energy efficiency and conservation. While suchvoluntary participation is laudable in an initial phase, energy efficiency promotionand implementation needs to be an integral part in the Government‟s long-termpublic policy. The sustainability of MIEEIP and the eventual impact depend much onwhether the Government decides to put an energy efficiency policy in place witheffective policy instruments backed up by substantial resources. The analysis of thisEvaluation Report suggests that if similar energy efficiency projects are implementedin future they should be predicated on the expectation that appropriate regulationsand substantial government funding will subsequently be available. 29
  42. 42. iii. Mandatory blend of B5 in BiofuelMalaysia‟s once-vaunted biofuel industry has seen production grind to a halt since aMarch announcement that the government‟s mandatory switch to the green energywill be delayed to June 2011 originally from February 2009. Malaysian Palm OilBoard figures show that the production of biodiesel, a mixture of diesel with 5percent processed palm oil (B5), dropped 99 percent from 12,640 metric tons inMarch to just 137 metric tons in July 2010. The country had the capacity to produce2.6 million metric tons of biofuel annually but that demand had completely dried up. The local biodiesel sector reached a standstill last year with zero productionas many players were unable to maintain operations due to the high cost ofproduction as well as the lack of incentives from the Government, according toMalaysian Biodiesel Association (MBA). MBA, which represents 22 biodiesel localand international companies with operations in Malaysia, reported that they werechurning out fewer than 100,000 tonnes compared with their combined installedcapacity of 2.6 million tonnes. It was reported that the Government would subsidisepalm oil-based biofuel at the pump to keep the price at the same level as diesel whichis now selling for RM1.80 per litre The Government would be paying between fourand six sen per litre for a 5% blend of palm-based biofuel with diesel. However, thefeedstock cost of palm methyl ester is quite high. Palm oil-based biofuel productioncost is about 15 sen per litre and the Government is only willing to subsidise up to 7sen. 60 biodiesel manufacturing licenses had been issued by government at endFebruary 2011 but only less than one fifth has started production. Only 10 biodieselplants were operating last year, despite some 29 biodiesel plants having beenestablished with total production capacity of 3.37 million tonnes per year (theMalaysian Palm Oil Board). In 2010, biodiesel exports more than halved in bothquantity and earnings, compared with 2009. Biodiesel plants produced 117,173tonnes of palm biodiesel, with only 89,609 tonnes exported, bringing in RM266.53million in earnings for the year. The countrys biodiesel production will be more than 30
  43. 43. enough to cater for the needs of the central region of Peninsular Malaysia, once themandatory use of palm oil biodiesel (B5 programme) is implemented come June2011. Five states have been chosen to be pioneer in term of logistics to support thisprogramme which are Selangor, Kuala Lumpur, Putrajaya, Negri Sembilan andMalacca. In a move to promote the usage of biodiesel, the government has committedto funding the price differential between diesel and biodiesel through AutomaticPricing Mechanism. Petroliam Nasional Bhd (Petronas), Shell, BHP, ExxonMobiland Chevron have been allocated with a start-up fund worth RM1mil each by theMalaysian Palm Oil Board (MPOB) to set up infrastructure for B5 biodiesel blendingfacilities including pipes, tanks and automation system to blend B5 biodiesel at thedesignated depots. iv. Malaysia Building Integrated Photovoltaic Technology Application (MBIPV)The Malaysia Building Integrated Photovoltaic (BIPV) Technology ApplicationProject, was launched by PTM and administered by the KeTTHA on 25th July 2005and completed on 31st December 2010. It was intended to induce the long-term costreduction of the non-emitting GHG technology integration of the PV technologywithin building designs and envelopes. It is aimed at creating a sustainable BIPVmarket in Malaysia that will generate widespread BIPV applications. Over thelifetime of the expected installed BIPV capacity from the project, the energygenerated will avoid 65,100 tons of CO2 emissions from the country‟s power sector,in addition to contributing towards the national energy policy objectives. The MBIPV project will specifically focus on the market growth for BIPVtechnology, and creating the national capacities on three major areas: (a) policy andeducation; (b) technical skill and market implementation; (c) technologydevelopment support. The project will encourage BIPV technology acceptanceamong the public, policy makers, financiers and building industry, which ultimatelywill lead towards a stable BIPV industry beyond the completion of the project. The 31
  44. 44. project objectives will be achieved via a multipronged approach: (1) BIPVinformation services, awareness and capacity building programs; (2) BIPV marketenhancement and infrastructure development; (3) BIPV policies and financingmechanisms program; (4) BIPV Industry Development and R&D enhancementprogram. As at 31st December 2010, the total capacity installed and commissionedunder this program is 1,516 kWp. The core entity of MBIPV is the SURIA 1000 programmes which wereimplemented via a bidding process in which the bidding process. Those whorequested for the least financial support from the government will win the bid.Statistic from the first five offers of SURIA 1000 shows that: (i) a total of 612 kWpin PV capacity is achieved from the target of 450 kWp, (ii) Payment capability of thebidders increases from 46.7% in the first call to 59.9% in the fifth call of total PVsystem installed (iii) the PV system pricing (per kWp) shows fluidity of prices, fromfirst call around RM 28,000 to around RM 24,000 in the fifth call. By latest, the priceas in March 2010 was recorded at RM19,210 per KWp. However, the biddingmechanism had given a wrong perception that the solar technology is only for thosefrom upper class of the society. If we go through the list of participant especially theresidential one, most of them are from elite housing area and carry titles such as„Datuk‟, „Dr‟, „Ir‟, and even from royalty family. Until know, none of the installationhave shown return on investment or even achieve break even given that if the price iswithout subsidies and external fund. v. Building Energy Efficiency Programme (BEEP)From the national perspective, implementation of energy efficiency measures willnot only discourage wasteful energy consumption but will also bring economicbenefits such as possible export of energy on the portion saved and reduction ofnegative environmental impact from decrease in fuel combustion. „Development ofEnergy Efficiency Strategy in Malaysia‟ study done by the Government in 2000revealed that if the industrial and commercial sectors were to improve their energyuse efficiency by 10%, there would be an economic benefit of more than RM 5.8 32
  45. 45. billion in five years. In addition, the benefits will continue to accrue over the life ofthe equipment. Building Energy Efficiency Programme (BEEP) emphasizes on EnergyEfficiency in buildings. It promotes optimal use of energy in heating, cooling andlighting which can be achieved by several strategies that optimize and regulateenergy use in the building envelope such as insulating, windows glazing, and energyusage regulations. The Malaysian Green Technology Corporation will service theenergy audit of EE buildings and as technical advisory on EE of new buildings,standard development and industry linkages with suitable technology providers. Thecurrent examples are low energy office and zero energy office. a) Low energy office (LEO) buildingMinistry of Energy, Green Technology and Water (KeTTHA) utilized its ownbuilding in Putrajaya (Figure 9). The cooperation of Danish InternationalDevelopment Assistance (DanIDA) with local consultants has produced a design forLEO building and a showcase for EE. It is set with goal of 50% savings of energy ofthrough energy efficiency and reduction of 10% from the construction cost toprovide a payback period for the upfront investment of less than 10 years. Currently,this building‟s performance of building energy index is around 100 kWh/m2/year andawarded with ASEAN Energy Awards 2006 for the best practice in the new energyefficient building category. 33
  46. 46. Figure 4.3.2. a) KeTTHAs Low Energy Office Building. b) Zero energy office (ZEO)Malaysian Green Technology Corporation building project officiated on July 2009in Bangi, Malaysia as a ZEO building. ZEO‟s specification is the electricityconsumption of the building must not exceed the electricity than is produced usingRE sources on site. As shown in Figure 10, BIPV systems with a total 92 kWpcapacity were installed in various parts of the building including solar PV and windturbine. This building is a model building for EE in Malaysia with a designed energyindex of 65 kWh/m2/year compared to typical conventional office building in KualaLumpur of 250–300 kWh/m2 year It also serves as foundation of Malaysianconstruction industry towards energy efficiency and self-powered constructions. TheBIPV panels integrated into the building design including the parking lots providedelectricity for the building. The excess electricity is fed back to TNB grid which helpshaves the peak power demand during the peak hours. Almost 50% of everydayelectricity needs is provided by the system. Costing up to RM 20 million, it is thefirst in Malaysia and also Southeast Asia. 34
  47. 47. Figure 4.3.2. b) Malaysian Green Technology Zero Energy Office building vi. Green Building Index (GBI)GBI is a rating system consisting comprehensive guidelines for building assessmentin terms of energy efficiency, indoor environment quality, sustainable sitemanagement, materials, water efficiency, and innovation. It is similar label to theGreen Star from Australia and Green Mark from Singapore. The GBI was launchedin 2009 and it was initiated by Malaysian Institute of Architects and the Associationof Consulting Engineers Malaysia. The main objective of the rating system is toenable green grading and certification of Malaysian buildings. Malaysian GreenTechnology Corporation building is the first green rated building in Malaysia. In Malaysia Budget 2010 announcement, the GBI is given a further boost asincentives will now be given to owners/buyers of buildings with GBI certificates. Anowner of a building who incurs capital expenditure to obtain a GBI certificate will begranted an allowance equivalent to 100% of the capital expenditure incurred whichmay be offset against 100% of its statutory income. Buyers of buildings andresidential properties which have GBI certificates will be entitled to stamp dutyexemptions in respect of the additional costs incurred to obtain the GBI certificate. Itis unclear at this stage as to how the mechanism of this exemption will operate, butthis will presumably require the developers to indicate the additional costs incurredto obtain the GBI certificates. These incentives will apply in relation to costsincurred per building purchased between 24 October 2009 and 31 December 2014. 35
  48. 48. vii. Feed-in-TariffIncentives are mostly welcome to spur the green technology growth in Malaysia. Asgreen technology is still yet to achieve acceptable price compared to currenttechnology, incentives from government can ease the burden and decrease the breakeven period. Furthermore, it will nourish the side industries which mainly dependingon market trend that influenced by government incentives. Malaysia is currently in the process of updating its energy policy by means ofthe 10th Malaysia Plan (2011-15) with a new National Renewable Energy Policy andAction Plan. The Malaysian government included a comprehensive FiT programmeto be part of the 10th Malaysia Plan (Renewable Energy, 2009). It isexpected to be enacted in June 2011. The Malaysian proposal includes all renewableenergy technologies, differentiates tariffs by technology, and derives the tariffs basedon the cost of generation. In the proposal it is also suggested that the FIT programmewould add 2% to the average electricity price in the country. However, an exemptionfor this rise in electricity costs is available for low-income consumers. TheMalaysian government acknowledges that some basic non-economic barriers willneed to be overcome in order for the scheme to be successful such as guaranteed gridaccess and legal obligation for utilities to purchase renewable electricity, streamlined(local) procedures, FITs preferably to be fixed for 20 years and implementation by acompetent agency that includes constant monitoring and progress reporting. It alsoacknowledges as a critical factor for success the installation of a renewable energyfund manager. Renewable energy feed-in tariffs (FITs) are price-driven policies whichhistorically have been designed to support renewable electricity. Under such asystem, electricity generated from renewable energy sources (RES) is paid apremium price for delivery to the grid. In many countries the scheme functionswithout using state budget: the government sets the price per kWh and utilities areobliged to purchase a given amount of this energy at this premium price which theythen pass on to consumers. Another advantage of FITs is their guarantee of actual 36
  49. 49. output since premiums are only paid for renewable electricity produced. Feed-intariffs are also expected to accelerate cost reductions of renewable energytechnologies, speeding up cost competition with conventional technology (Mendonçaand Jacobs, 2009). FITs are growing in popularity as one of the most effectivemechanisms of promoting renewable energy development. Where they started inWestern, mainly European countries, FIT schemes are now being introduced all overthe world, including a number of ASEAN countries. Table 4.3.2. The Proposed Feed-in-tariff Despite the fact that FITs have proven to be an effective and efficient policyfor encouragement of renewable electricity, the specific design of this policy iscrucial for its success. In developing countries, the design of a feed-in tariff schememight have to be adjusted to local circumstances due to the vulnerability ofelectricity consumers, especially the poorest, to price increases and thecharacteristics of monopoly or oligopoly electricity markets. As example ofMalaysia, these factors must be realized in order for FiT to work. Among of them arethe access to the grid must be legally guaranteed with 20 years of price certainty. Thepayment capability in that period must be guaranteed with adequate fund. Mostimportantly, the implementation by a competent agency must be effective andprogressive. 37
  50. 50. The basic differences between Malaysian proposed FiT as compared to theEuropean/Germany/UK FiT are that: 1. It does not have efficiency criteria for electricity power generation to qualify for FiT or Grid connection whereas their governments impose a minimum efficiency through a concept of CHP quality which is high. 2. It allows up to 30 kW per installation for Solar PV energy to qualify for FiT whereas in the UK the maximum power capacity allowed per installation is 50 kW. 3. It allows up to 30 kW capacity per installation for small Hydro power to qualify for FiT whereas in EU small hydro is not considered for FiT and in Thailand the maximum power capacity allowed per installation for FiT is 200 kW.viii. Tax exemptionIn Malaysia, companies that undertake environmental oriented activity namely forestplantation projects or energy conservation measures or use energy from renewablebiomass, mini-hydro or solar are eligible for Pioneer Status with a tax exemption of100% of the statutory income for 10 years; or Investment Tax Allowance of 100% onthe qualifying capital expenditure incurred within five years, which can be offsetagainst 100% of the statutory income for each year of assessment. For the energy related measures, companies can also qualify for higherexemptions or allowances if the activities take place in the promoted areas. Importduty and sales tax exemption are provided for equipment used in such RE activities,provided that the equipment is not produced locally. For locally produced equipment,sales tax exemptions are given. Any revenue from Carbon Emission Reduction(CER) trading is 100 percent tax exempted. Import duty and sales tax exemption tosolar PV systems used by third parties. Most of the SME companies in the industry already received pioneer statusfrom Malaysian Industry Development Authority (MIDA) even before the NationalGreen Technology Policy was introduced. Import duty exemption for them are 38
  51. 51. insignificant because the volume acquire is relatively small and often involvingdistributors. They prefer subsidy rather than tax exemption as with this governmentcan control the price of the equipments. ix. Financial Facilities (Green Technology Financing Scheme)Prior to National Green Technology Policy, government also launched RM1.5 billionsoft loan under Green Technology Financing Scheme. Maximum financing up RM50million (US$ 14.3 million) for suppliers and RM10 million (US$ 2.9 million) forconsumer companies, while the government shoulders 2% of the total interest rate.On top of that, the government is providing a guarantee of 60% on the financingamount, with the remaining 40% by banking institutions. So far, until March 2011,12 projects had been financed with accumulated of more than RM150 million worthof soft loan facility (GTFS, 2011). In order to be qualified for this scheme, acompany must be certified as green projects. Having provided the catalyst for greenbusinesses to grow in the country, it is envisaged that the initiatives that theGovernment had implemented so far will generate impressive economic multipliereffects. Malaysian policy is equipped with the establishment of new ministry,department and incentives for Green Technology Industry. Most of the green technologies are capital intensive. Therefore, financialfacility is crucial to ease the burden especially in start up phase. Furthermore,commercial banks lack interest in green technology as this industry is classified ashigh risk and expected long term Return on Investment (ROI). Among othercomment is on the strict regulations imposed by Credit Guarantor Corporation(CGC) as a government guarantor. The lacking financial means in developingcountries results in limited possibilities for introduction of capital cost grants.4.3.3 Policy Outcomes-ImprovementUnfortunately, there are some limitations in the green technology policy particularlyin Renewable Energy Policy that need further analysis. This is an important policyhaving far fetching effects because it involves public financial support for long-term 39
  52. 52. contracts the government will be engaging with the private sector. The fund isexpected to be raised through higher electricity rates to the public. The most obviousshortcoming is that the Renewable Energy Policy has not set efficiency standards forharnessing renewable energy. This is a fundamental requirement because renewableenergy must meet certain objectives such as environmental sustainability and energysecurity through diversity. The reason that RE low efficiency is not acceptable isbecause then it does not contribute to net carbon footprint reduction and thereforedoes not comply with the duty to contribute towards environmental sustainability, inparticular Climate Change. The Renewable Energy Policy has overlooked thisfundamental premise of why the world is pursuing RE with such vitality. After all we have had almost a decade since the Energy Policy in the 8thMalaysia Plan, which introduced renewable energy for the first time. This should beplenty of time to grasp the state of affairs and requirements and sufficientopportunity for this purpose. The framework appears to be satisfactory perhaps forsolar photovoltaic, where efficiency is not much of an issue. It is easy to implementsolar photovoltaic systems where no special knowledge or skills is required. It can beconsidered a technician‟s job whether small or large capacity is involved.Unfortunately, it is not the same with other forms of renewable energy, especiallywhere biomass and biogas are concerned, which require some innovative thinking forits success. The government is moving in the right direction, but it seems to havestopped short. Even though the government uses productive policy from Germany asa model, it does not necessarily will produce the same results like in Germany. We are aiming for environmental sustainability by reducing harmfulgreenhouse gases and enhancing energy security because we want independencefrom fossil fuel and diversification in fuel supplies. Solar energy may be inabundance but its harnessing technology is not affordable at the present time. On theother hand biomass and biogas are scarce resources in the renewable energy mix butthere are dire urgent needs to exploit them for several pressing reasons, main reasonbeing if biomass and biogas are left unutilized they will emit enormous amounts oflethal greenhouse gas, far more than when fossil fuel is burned, affecting climatechange even more adversely. 40
  53. 53. i. BiomassBiomass and biogas can offer carbon emission reduction when they displace fossilfuels, but only if they are used efficiently and this is established science. Renewableenergy regulations must reflect the scarcity of the resource and findings of thescience. Unbelievably, the Renewable Energy Bill sets no minimum efficiency forbiomass energy resource. Unless it is corrected early we are going to be burdenedwith 16 to 21 year contracts with the damaging mistake. Surprisingly, the newregulations give private biomass energy plants special status to receive publicsubsidy for their energy under the community feed-in tariff without attention toefficiency. In Malaysia, biomass and biogas are predominantly from the Oil Palmindustry. Other sources of biomass are timber industries, rice mills, and sugar millsbut these are a small portion, whereas municipal solid waste needs special treatment.The Oil Palm industry has been for quite sometimes under severe pressure to movethe industry towards environmental sustainability. This pressure comes from severalfronts, one from their own conscience of Corporate Social Responsibility (CSR) andthe other from Western Environmental NGO‟s which continue to pursue relentlesscampaigns against unsustainable Oil Palm industry activities. All these areinfluencing European Community trade policies. The Americans are pacified for themoment but they are watching us too. In actual fact the industry has the means to reduce carbon footprint by awhopping 30 million tonnes of Carbon Dioxide per year that would contributesignificantly towards global environmental sustainability in respect of ClimateChange. This amounts to CO2 emission equal to almost half the coal burning in theUK. The good news is the Oil Palm industry has the capacity to provide up to 2,000MW of Green Energy to the national power grid and another 4,000 million litres offuel oil equivalent per year by solid biofuel for industrial heating purpose.However they are unable to exploit it because of the lack of grid access for electricityexport and market access for its biofuel. 41
  54. 54. Presently this amount of renewable energy is shamefully left wasted topollute the environment. In another perspective, 2,000 MW of electricity generatingcapacity is the capacity of three nuclear power plants that is currently under reviewby the government. Weird enough the Oil Palm industry has never asked for anypublic subsidy but instead local market access for the excess energy. Theyneed Feed-in-Grid to harness the renewable energy in the biomass and biogas tomove the industry forward to environmental sustainability. Only about 25% of thepalm oil mills are located within 5 kilometres from the nearest power grid accesspoint and laying electric cables to carry the power to the grid cost about RM 1million per kilometre. Presently the conditions imposed for export of electricity tothe power grid are too stringent for a process industry. The market for solid biofuel is yet to be established. As far as the Oil Palmindustry is concerned, the present electricity purchase price provided in RenewableEnergy Power Purchase Agreement (REPPA) is satisfactory for undertakinginvestment into efficient energy generation for export. This is because the millsalready can have good profits but they are unable to develop it further because ofproblem with power grid access. The REPPA electricity purchase price is set at 21sen per kWh, which is about the present displaced cost to the distribution licensee.The conditions dictated for export of electricity to the power grid under the REPPAare too stringent for a process industry. It is very hard for a process industry to meetthe conditions of a dedicated electricity generating utility. Therefore, whatever Feed-in-Tariff is offered, the industry‟s quest or the country‟s desire to push the renewableenergy agenda cannot be accomplished, unless the power grid infrastructure and theappropriate conditions of supply-intake are ready. It should be highlighted that if ever there is some screaming for higher tariff,they are not the palm oil millers but corporate entrepreneurs who intend to purchasethe Empty Fruit Bunches (EFB) from the mills and set up cheap low efficiencypower plants. These operators are in desperate need for higher tariff subsidy to showtheir investment as viable. These power plants are run typically at about 14 – 17 %efficiency and at these low efficiencies the electricity produced is not considered 42