What Key Moves will Facilitate the Greening Process?


Dr Maximus Johnity Ongkili
KeTTHA

I want to move on to discuss how industry stakeholders can pursue the greening process and transform the energy landscape into a low-carbon space conducive to green energy growth. Sanjay, what is the ASEAN perspective on the greening process?

Dr Sanjayan Velautham
ASEAN Centre for Energy

One of the fundamental components of the greening process around the world is energy efficiency and conservation. In that sense, it is crucial that Malaysia, and indeed all countries, begin to incorporate these concepts into their energy management approaches.

Part of this process requires a more holistic outlook with regard to the issue of electrical and thermal energy and includes assessing the regulatory certification framework that pertains to both. This is especially pertinent on the thermal side because, according to the U.S. Energy Information Administration, only 21 per cent of final energy consumption in Malaysia in 2012 corresponded to electricity, compared to 75 per cent that related to petroleum-based products. Therefore, improving efficiency on the thermal side will have a significant impact on energy savings and conservation. In turn, this will help to produce up-to-date and accurate data related to energy efficiency measures, which will contribute towards more effective policymaking.

An additional way in which ASEAN countries can begin decarbonising their economies is to apply the lessons learned from the ASEAN Economic Community (AEC) to the field of energy. The harmonisation of national-level priorities and best practices at the regional level is being geared towards distinct AEC goals, for example, facilitating the movement of people engaged in the trade of goods and services across borders. It would be extremely beneficial to replicate this kind of harmonisation in the energy space in regard to energy management.

For example, Malaysia has the opportunity to harmonise its own energy management agenda with that of the four ASEAN countries that are actively pursuing energy management practices, Singapore, Thailand, Indonesia and Vietnam. Greater cooperation at the regional level would strongly boost expertise in energy efficiency and conservation and help to foster the long-term growth of sustainable energy practices. This would directly benefit the green energy space, not just in Malaysia, but also in all ASEAN member states.

Ahmad Fauzi Hasan
Energy Commission

The Malaysian Government has commissioned the construction of approximately 5,000 megawatts of coal-fired power plants between 2015 and 2020. As a result, it will be a real challenge to genuinely transform the energy space prior to 2020. However, this does not, of course, preclude the development of small-scale projects in the green sector, it simply illustrates that on the larger scale, wheels are already in motion and it will be hard to redirect them until after 2020.

Torstein Dale Sjotveit
Sarawak Energy

For the greening process to succeed, it is essential to emphasise the role of biomass in the energy mix. In particular, this will involve ensuring the security of feedstock.

From experience, I know that various biomass plants and developers are encountering difficulties in simply obtaining biomass feedstock to use in the generation process. For example, they are having significant problems in securing long-term agreements with mills and landowners to obtain the raw material for its use in the biomass process.

By law, mills cannot simply dump the material and they have to pay for its correct disposal. Meanwhile, biomass plants are struggling to form relationships with the correct parties to ensure their long-term supply. This is certainly hindering the growth of the sector.

Given the tremendous potential to form mutually beneficial partnerships between mills and biomass plants, it is essential to re-evaluate the existing framework and introduce some kind of incentive-based approach to resolve the problem.

Ahmad Jauhari Yahya
Cenergi SEA

In regard to Torstein’s point, a commercial arrangement is required between the biomass plant and the mill. Since the mill owner has a right to benefit from this arrangement, just as the biomass plant owner has a right to acquire raw materials, it is logical that the latter pays the former by means of a raw material purchase agreement.

Dr Maximus Johnity Ongkili
KeTTHA

Additional policymaking in this area is certainly required to ensure that waste generated by the agricultural sector is utilised productively. Similarly, steps must be taken to enable bioenergy producers entering the market to have sufficient access to feedstock.

Ahmad Jauhari Yahya
Cenergi SEA

Beyond resolving the shortage of feedstock, a key part of fostering the growth of the biomass sector in Malaysia is to resolve the existing biomass tariff discrepancy in relation to biogas. Accordingly, the current per-kilowatt tariff for biomass is MYR0.10 less than biogas, while the capital cost to build a biomass plant is the same as a biogas plant on a per-kilowatt basis. In addition, typical biogas generation is more reliable than biomass generation. Ensuring tariff parity between biomass and biogas will make biomass generation a viable option.

Dr Maximus Johnity Ongkili
KeTTHA

The price discrepancy between biomass and biogas is something the government will look into as part of its wider drive to facilitate the greening process and propel the development of the green energy space.

One of the best examples of government efforts in this direction is the Feed-in-Tariff (FiT), which is designed to increase investments in this field by offering long-term contracts and guaranteed pricing to producers of green energy. Linked to the FiT is the imposition of a 1.6 per cent surcharge on electricity usage that exceeds 300 kilowatts. This surcharge helps to finance the Renewable Energy Fund that, in turn, finances the FiT mechanism.

Clearly, the State cannot act alone and requires additional actors to play their part in reducing carbon emissions and boosting green energy generation.

Dr Zaini Ujang
KeTTHA

In addition to the government efforts mentioned by the minister, KeTTHA is also in the process of devising a quantitative breakdown of data relating to off-grid renewable energy generation and consumption in the country. Latest calculations show that this may amount to as much as 2 gigawatts, including approximately 500 palm oil mills that generate their own power from biogas and biomass sources, in addition to multiple households and businesses using solar panels off-grid.

This rationalisation of existing data to produce a more accurate understanding of the national energy landscape will help the government to fully confront the policy challenges that arise in the energy sector in the future.

Daud Ahmad
Cypark Resources Berhad

It is interesting to hear about the needs and initiatives in relation to the biomass space. Nevertheless, to genuinely boost the sector it may be necessary to come at this from a different angle. This involves considering a paradigm shift by re-examining the view that energy generation from biomass in Malaysia necessarily relates to isolated rural locations far from an urban setting.

One alternative is to utilise and expand on existing infrastructure that sees some biomass in the country being treated and converted into pellets and exported, mainly to Japan and South Korea, where they are used to co-fire boilers to generate electricity. For example, transporting the processed biomass pellets to be burned in biomass power stations located closer to energy demand centres in Malaysia would have multiple benefits, including lower carbon footprints and increased energy efficiency due to reduced transport and energy transmission infrastructure.

Clearly, this kind of step will also involve reassessing energy pricing, including liberalising the market. It is, therefore, important that the government, in collaboration with other green energy stakeholders, begins to consider these types of paradigm shifts to genuinely transform the energy landscape in Malaysia.

Ahmad Farouk Mohammed
Khazanah

Another source of fuel particularly relevant to this topic is waste-to-energy (WtE), which is the incineration of municipal waste to create electricity. Although WtE may not come under the remit of green energy since it involves incineration, it is non-fossil based and, hence, deemed renewable, with a range of other benefits, especially in terms of resource savings and a reduced amount of waste going to landfill. As such, investors will continue to evaluate and develop WtE projects moving forward.

One interesting point about WtE relates to what Torstein and Ahmad said about business models and tipping fees with regard to mill waste and biomass feedstock. Typically, incineration plants will receive a tipping fee from the municipal authorities to dispose of their waste, which helps the latter to offset their costs.

However, new models are becoming increasingly popular. For example, in Thailand, WtE plants receive no tipping fee and the waste disposal costs are passed on to consumers via the electricity generated. It is important to have a similar kind of debate in Malaysia because finding the economic balance between green, or renewable, and economically viable is key to unlocking the country’s energy potential.

Dr Maximus Johnity Ongkili
KeTTHA

That leads us nicely on to the topic of pricing and tariffs. Why is it so important for Malaysia to address issues relating to energy prices?

Adif Zulkifli
PETRONAS

The question of energy pricing is important because it directly relates to efficiency, particularly on the demand side. The only way to counter the huge amounts of energy wastage and leakage is by raising tariffs.

In terms of what can be done, liberalising the energy market will enable prices to be set by market players in accordance with customers’ needs, in which decisions about fuel and electricity purchases will be taken based on overall lifecycle costs, including all externalities. Other markets are able to generate electricity from different energy sources very competitively and so we need to replicate this example in Malaysia.

Significantly, and despite low fuel prices around the globe, worldwide investment in the renewables space continues to grow year-on-year. This is driving increasing technological innovation, which, in turn, is helping markets such as the U.S. to close in on grid parity.

Another relevant point relates to what Zaini said about the potential of off-grid generation and usage. As advancements are made in battery technology, there will be increasing cases of people and companies generating, storing and utilising their own energy from green sources. If this approach turns out to be the cheapest option, so be it. The most important consideration is to create the conditions for market forces to determine pricing.

From the Malaysian perspective, this requires all parties to reassess the price of fossil fuels, including subsidies for the gas sector. This is the first step towards liberalising the market and boosting the growth of green energy.

Torstein Dale Sjotveit
Sarawak Energy

To promote the long-term growth of the green energy industry in Malaysia, it is essential to address the price of energy in the country. Such low energy prices cannot continue if industry stakeholders are serious about wanting to expand the impact of the national green energy sector.

Dr Zaini Ujang
KeTTHA

It is likely that the 1.6 per cent surcharge on electricity usage that exceeds 300 kilowatts will be increased in the future. This will go some way towards disincentivising wasteful energy consumption and generating additional sums for the Renewable Energy Fund.

More fundamentally, Malaysia needs to replicate the principle of sustainability that is so prevalent in countries such as Sweden, where people are genuinely proud to be associated with green energy.

Ahmad Jauhari Yahya
Cenergi SEA

While low energy prices in Malaysia have had a positive impact on national economic development, they are not so constructive in regard to efficiency. When things are cheap, there is no incentive to save and things are wasted.

Consequently, it is essential that all stakeholders re-examine this from the policy perspective and ask how beneficial it is to maintain such cheap energy in the long term. When Indonesia raised its domestic petrol prices by approximately 30 per cent in 2014, the population changed its behaviour and began to consume less petrol. It is therefore important that Malaysia learns from these kinds of examples to guide strategy development in the future.

Dr Maximus Johnity Ongkili
KeTTHA

Malaysia can certainly learn lessons from other countries in terms of consumer behaviour, as well as in promoting green and sustainable lifestyles and energy pricing.

In terms of the latter, one of the main objectives of the FiT mechanism is to achieve grid parity. Through the FiT, individuals or businesses can generate electricity from green sources and then sell the energy to power utilities, called distribution licensees, such as Tenaga, for every kilowatt hour (kWh) of electricity generated. The price of the electricity is based on a fixed premium, the FiT tariff, and this is calculated depending on the type of green energy being generated. The distribution licensees will pay for the energy generated for a set period, also dependent on the energy source; for example, 16 years for biomass and biogas resources, and 21 years for small hydropower and solar photovoltaic technologies. The latest average end-user tariff is approximately MYR0.38.

With that in mind, in what way can the FiT be enhanced to help fulfil the goal of achieving grid parity?

Ahmad Fauzi Hasan
Energy Commission

There is still a long way to go to achieve the goal of securing grid parity between green energy sources and fossil fuels. For example, latest research from the Energy Commission shows that the generation tariff for coal is MYR0.25 and for gas it is about MYR0.35, primarily due to subsidies from PETRONAS. These figures illustrate the lengthy road ahead to reach grid parity between energy produced from green sources and fossil fuels.

One way to boost progress is to improve energy efficiency in generation. In particular, this can be achieved through the increased use of cogeneration systems. Cogeneration, in which a combined heat and power system generates electricity and heat simultaneously, is a highly efficient way to produce energy. In Sweden, cogeneration systems are utilised extensively to power district heating systems, which in turn are generated using primarily biomass as the fuel source. It is therefore vital that stakeholders in the Malaysian energy sector investigate these efficient forms of generation as part of a holistic effort to ensure energy efficiency across the board, from generation to consumption.