Focus

Energy from Biomass: A Growing Opportunity

Widespread access to the raw material, a positive investment climate and favourable government policymaking have all helped to lay the foundations for a strong national biomass sector. As energy realities continue to change around the world, joint action by Malaysian stakeholders in the field to build on this solid base will enable the industry to fulfil its true long-term potential: to become a significant, high-value energy segment.


Ample possibilities

Global commitments forged under the 2015 United Nations’ Paris Climate Change Conference (COP 21) have demonstrated the international concern for energy security, a recognition of the impact of climate change and the need to develop alternatives to traditional fossil fuel-driven power generation. As a result, governments around the world are taking active steps to develop new, renewable forms of energy production.

Malaysia has tremendous potential in this regard. In particular, its large expanses of tropical rainforests, in addition to sizeable agriculture and forestry sectors, are capable of producing vast quantities of biomass and resultant biomass products that can be used to generate power.

 

Technological advancement

Part of realising the potential of biomass involves progress in the development of green technology. Crucially, ongoing advancement of such technology in Malaysia is facilitating the conversion of the natural resource into valuable intermediate and end products that are being used as cost-effective alternatives to fossil-based commodities. The range of products is broad and includes solid, liquid and gas biofuels, biocomposites, biofertilisers and green chemicals, industrial sugars, and polymers.

To maximise the potential of the green resource, the Malaysian Government has established a series of energy-related policies and action plans over recent years, including a number of distinct targets. As first established under the National Renewable Energy Policy and Action Plan 2009 (NREPAP), and subsequently reiterated by the 2013 National Biomass Strategy 2020 2.0, the target is for biomass conversion to energy to reach 800 megawatts by 2020 and 1,340 megawatts by 2030.

 

A favourable investment climate

In order to realise the full potential of biomass and successfully meet the national targets, the establishment of a climate conducive to investment in the sector has been crucial. In this regard, the Malaysian Investment Development Authority (MIDA) approved a total of 14 palm biomass projects worth MYR275.6 million in 2016, in addition to the 15 palm biomass projects worth MYR397.2 million in 2015. These approved projects primarily relate to the utilisation of empty fruit bunches and oil palm trunk to produce biocoal, pellets, fibres, plywood and veneers.

Overall, biomass produced from palm trees is critical to the growth of the biomass sector in Malaysia. Indeed, MIDA contends that maximising the use of biomass from the oil palm industry for higher value-added downstream activities could benefit national GDP by an additional MYR30 billion and 66,000 incremental jobs.

A total of 111 green energy projects were approved in 2016, with investment reaching MYR1.9 billion. Six of these projects pertained to biomass, accounting for MYR343.6 million overall. Among these six schemes was a power plant initiative that provides a pertinent example of the type of project required in Malaysia if the country is to successfully meet its biomass targets. The project in question, which was approved for MYR121.1 million, is due to be located in Padang Terap, Kedah. It will use paddy husks and wood chips to generate electricity, with a potential capacity of 9.95 megawatts, and has been designed not only to produce green energy, but also to alleviate the problem faced by rice millers in disposing of their paddy husks.

As these approved projects are demonstrating, the biomass investment environment is sound in Malaysia. This is largely the result of the distinct policies and action plans implemented by the government since 2009 (see fig. 1). Although some were not specifically developed with the biomass industry in mind, the strategic programmes have had a favourable impact across the value chain of the entire sector.

 

 

Challenges remain

There are widespread opportunities for growth in the biomass sector as efforts intensify to stimulate its next stage of development, including the construction of more biomass power plants. Nevertheless, challenges remain and increased collaboration between industry players and additional institutional intervention will be critical in driving biomass towards the high value-add phase of its life cycle. At the macro level, some of the most significant challenges are as follows:

Projected versus verified availability: The amounts of biomass generated frequently stem from projections based on outputs of the most commonly produced agricultural products. The introduction of a formal mechanism to accurately measure total biomass output would help stakeholders gauge the true quantities produced.

Remote location: Most sources of biomass, such as palm oil mills, are located in rural areas. This increases the cost of transporting the material to ports and other key infrastructure and, as a result, logistics constitute a major part of the overall cost of biomass feedstock. Re-evaluating the interaction of factors related to feedstock location and logistics is crucial.

Moisture content and degradability: Biomass from tropical regions has a high moisture content and warm temperatures precipitate its rapid degradation. Efforts to enhance biomass stability and induce lower rates of degradation would benefit sellers and buyers who trade the raw material between collection and reception points.

Monitoring and tracking: The introduction of a formal mechanism to accurately monitor the biomass that is generated, traded and utilised, as well as to track the identification of its primary sellers, traders, buyers and end users, would boost holistic efforts to foster industry growth.

Data and information for financial evaluations: Financial institutions would benefit from additional data and more detailed information regarding the biomass industry. This would enable them to conduct more accurate financial evaluations of biomass ventures submitted by the private sector.

Grid connection: The improved connection of power generated from biomass sources to the national grid is one of the main goals of green energy stakeholders. Such connection will require additional investment in, and increased project expertise of developers.

SME technical capability: The majority of small and medium-sized enterprises (SMEs) working in biomass produce low-value creations such as long and/or short fibers, compost and fuel pellets. Improving internal capabilities, including increasing their access to external technical capacities, will facilitate the creation of high-value ventures.

Access to feedstock: Many biomass developers would benefit from a more secure supply of feedstock from mills and landowners. Long-term supply contracts based on mutually beneficial agreements between contracting parties would facilitate this process and provide a welcome fillip to the sector.

Innovation: This is a crucial enabling element for spurring biomass development. Innovation will help to convince customers and end users to switch from traditional fossil-based resources to new and cost-effective biomass-based products.

 

Final remarks

The collective ability to overcome the distinct challenges facing the biomass industry will be key in determining the success of wider efforts to deliver a sustainable energy mix to Malaysia. Stakeholders from both industry and government must therefore engage in ongoing dialogue, joint actions and implementation to consolidate and expand the position of biomass within the wider energy landscape. Only then will its true potential be realised.

 

Internation Investor

Copyright 2018 InternationalInvestor. All Rights Reserved.
Website by Keetrax.