Country Report

Status and Future Trend of Bioenergy

Production and Utilization

MALAYSIA

October 2013

by

TANG KOK MUN tang.rapid@gmail.com

Rapid Genesis Sdn. Bhd.

www.rapidgenesis.com

Executive Summary The commercial use of bioenergy in Malaysia find its origins in the agricultural sector for heat and later power generation in the primary processing of the agricultural products. These include the use of rubberwood for smoking rubber sheet, burning of rice husks in rice mills; as well as palm mesocarp fibers for palm oil milling. These forms of utilization were more due to the low-cost availability of the biomass in-situ rather than the intention to develop sustainable practices. The use of renewable energy for large scale electricity generation for supply into the national grid only started in 2000 when the Five-Fuel Diversification Policy was developed to support the sector. This was followed by the National Renewable Energy Policy and Action Plan in 2006. In 2011, Malaysia initiated its Feed-in-Tariff scheme to encourage the generation and sell back of electricity to the grid from renewable sources such as solar, biogas, biomass, mini-hydro and wind. Being a main producer of palm oil, there is also potential for production of palm biodiesel. This was promoted in 2006 with the National Biofuels Policy to develop the biodiesel industry for both export market as well as local market via implementation of B5 programme. This has been further upgraded to B10 programme slated for implementation in mid-2014. In the 2009 United Nations Summit on Climate Chage, the leadership of Malaysia made a voluntary pledge to cut its total carbon emission to 40% of its 2005 level by 2020. This raises the bar and expediency for Malaysia to switch to RE as well as increase the nation’s efficiency in energy utilization. The utilization of bio-energy in Malaysia is estimated to be 700MW, with a large portion as direct in-situ heat and power generation in primary agricultural processing. Sources of biomass with potential for bio-energy generation include palm biomass (EFB, mesocarp fiber, palm kernel shell, palm effluent, fronds and trunks), rice husks and straws, wood waste; as well as municipal solid waste. As of Q1 of 2013, the total renewable energy generated for supply into the national grid stands as 57.46MW. It is estimated that the total bio-energy potential in Malaysia is about 5,000MW; therefore there is still a lot of untapped potential considering that by 2020, the expected energy needs of Malaysia will reach 20,700MW. R&D in the utilization of biomass for both energy and non-energy uses has also received much support from the government in terms of funding as well as facilitation of commercialization, in tandem with the waste-to-wealth concept. Nevertheless, the development of bioenergy in Malaysia still faces many technical and non-technical challenges. This include the specific characteristics of local biomass; collection, aggregation, availability and supply of the biomass; access to project funding; dependency on imported technologies andlow uptake of local R&D for commercialization; as well as competing potential uses of the biomass.

Chapter 1: Country Introduction Malaysia consisting of 13 states and two federal territories, occupies a total land area of 329,847 square km. As of 2011, Malaysia has a population of 28.86 million. In terms of economic development, the gross domestic product based on purchasing power parity (GDP-PPP) of Malaysia stands as USD453 billion with the GDP-PPP per capita of USD15,800) as of 2011. For the last decade, the GDP growth of Malaysia has been maintained in the region of 4-7% with the exception of 2009. Main contributors to the Malaysian economy are from services (58.6%), manufacturing (27.5%), agriculture (7.3%), mining (6.3%), and construction (3.2%) based on 2011 figures. The current target for the nation is to achieve the developed nation status no later than 2020. Economic challenges are abound in achieving this target, these includes external challenges such as the economic downturn in Europe, slowdown in China and India; as well as internal ones including the need to exit the middle-income trap, improving productivity and moving into high-value economic activities. As part of the Malaysian government’s macro-measure to address these challenges and maintain its 2020 course, the Economic Transformation Programme (ETP) was launched in 2010 to further stimulate the economy development of the country. Twelve economic focus areas called National Key Economic Areas (NKEAs) have been targeted as illustrated in Figure 1.a. below.

Figure 1.a. National Key Economic Areas under Economic Transformation Plan Source : etp.pemandu.gov.my

Energy Use & Carbon Emission The total primary energy supply in Malaysia amounts to 883TWh (75,907ktoe) in 2011. Major sources of energy are gas (37.5%), oil (36.4%) and coal (20.5%); energy from biomass is only at 4.6%. Figure 1.b. provides an overview of Malaysia’s changes in primary energy supply over the last 4 decades.

Figure 1.b. Malaysia Total Primary Energy Supply Mix

Source : iea.org

Energy consumption in Malaysia is mainly derived from grid electricity as up to 99.4% of the population has access to electricity. Grid electricity generation is dominated by coal and gas; however the use of gas is gradually declining due to decreasing national supply of natural gas resources. As of 2011, electricity consumption in Malaysia amounts to 122 TWh. Energy-intensive industries also use fossil-based energy sources such as liquefied natural gas (LNG), fuel oil as well as coal. Generation of energy from renewable resources such as biomass, solar and wind is still at very low level. The use of biomass for heat and power generation is largely utilized in upstream agricultural processing such as palm oil mills, rice mills and sawmills. There is a total of 429 palm oil mills, over 400 rice mills and 1,019 sawmills currently in operation. For instance, it is estimated that the total renewable energy generated from palm biomass (i.e. mesocarp fiber) for palm oil milling is about 400MW; while rice husk biomass for rice milling operations is at 200MW. On the other hand, the total renewable energy generation for supply to the national grid is only at 57.46MW as of 2013Q1.

Malaysia’s total carbon emission is relatively high at about 123,000 ktCO2e, numbering 30th in global ranking. In terms of per capita emissions, Malaysia stood at 10.8 ton CO2e/capita e while its carbon intensity emission was at 0.58 CO2e/GDP. Figure 1.c. below gives an overview of the major sources of greenhouse gases emission in Malaysia.

Figure 1.c. CO2 Emissions by Sector in Malaysia (based 2008 data)

Source: World Resources Institute In 2009, Malaysia has made a voluntary pledge in the United Nations Summit on Climate Change to reduce its carbon intensity by 40% by 2020 from its 2005 level. This commitment has become one of the key drivers in two GHG reduction strategies in the nation’s energy production and consumption; increasing the production of renewable energy and efficient consumption of energy. Other major drivers for the switch to renewable energy include the need for energy security and diversification as well as creating a new economic sector in green technology and clean energy.

Chapter 2: Biomass Potential Figure 2.a. below provides a snapshot of the types of biomass and amount available in Malaysia. Being a major global producer of palm oil, palm biomass naturally forms the majority of the biomass resources available. Other types of biomass include municipal solid waste (MSW), rice husk and straw as well as wood waste.

Figure 2.a. Biomass Types and Availability in Malaysia

It has been estimated that the total amount of renewable energy (RE) that can be produced from biomass amounts is about 5,000MW. The breakdown of this potential is shown in Figure 2.b.

Figure 2.b. Bar Chart of Biomass RE Capability

(Source : MPOB, 2012; Milbrandt & Overend, 2008; Sovacool & Drupady, 2011)

As of Quarter 1 of 2013, the total output from biomass power plants to the national grid is 57.46MW where 76% are from oil palm biomass; mainly EFB and biogas from POME. Figure 2.c. below provides a breakdown of this total capacity. Combined with the renewable energy generated from biomass for upstream agricultural processing use, it is therefore estimated that in total Malaysia is only exploiting about 13% of its biomass RE potential.

Figure 2.c. Renewable Energy Generation in Malaysia The bio-energy sector in Malaysia can be divided into three sub-sectors i.e. solid bio-energy, bio-fuels and bio-gas. These renewable energy resources are utilized in the following ways: 1.) Direct heat and power generation in upstream agriculture processing and

factories to meet in-situ energy requirement; 2.) Electricity generation to supply to national grid; 3.) Export to overseas market Solid Bio-Energy This sub-sector consists of solid fuel sources such as wood pellets and briquettes, EFB pellets, palm kernel shell, charcoal as well as refuse-derived fuel (RDF). There is large demand of these solid fuels from regional and overseas market as countries shift from fossil-based fuel sources to renewable sources due to factors such as commitment to climate change mitigation, diversifying and reducing dependency on fossil-fuel sources.

Wood pellets and briquettes are primarily made from sawdust sourced from sawmills all over the country. There are a number of small companies producing these pellets for the export market to European Union, China, South Korea and Japan. Pelletizing technologies are usually sourced from China or Taiwan as similar equipment from developed countries such as EU and Japan is too expensive. Some form of local modifications is usually required as the imported equipment is usually designed for sawdust from softwood as opposed to tropical hardwood. Production and export is limited by the low amount of sawdust available locally as timber industry in Malaysia is already a matured industry. There are a number of companies venturing into the production of EFB pellets due to the availability of large amount of EFB from the oil palm industry. Some of these companies sourced directly from the mills while some form joint-ventures to produce the pellets in-situ, taking advantage of the excess power from the mills. While there is great interest from overseas market for EFB pellets especially Japan, South Korea and China; the use of EFB pellets to substitute existing solid fuel sources faces some technical challenges as the former has higher content of chloride and ash which is not suitable for boilers designed for wood-based pellets. Another challenge is the ability of local players to secure sufficient supply of EFB feedstock to meet the large quantity of pellets required by the export markets. There is already a large demand for palm kernel shell (PKS) due to its physical characteristics and energy density that is close to that of coal, therefore enabling it to be used as direct substitute of the latter. PKS is used locally as well as exported as solid fuel source in power plants, cement kilns and other energy-intensive industries. In 2006, a major cement producer in Malaysia, Lafarge registered its Clean Development Mechanism (CDM) project to utilize PKS to substitute 5% of its energy consumption from coal for cement production. It is estimated that 68,000 tons of PKS is required per year leading to an annual carbon offset of more than 60,000 tons of CO2. The use of municipal solid waste (MSW) to generate power is also being pursued by a number of projects in Malaysia. MSW contains approximately 90% of combustible matter (47% organic waste, 14% plastics, 15% paper and cardboard, 14% others). One such project is near the capital of Kuala Lumpur where the combustible components of MSW is separated and processed into refuse-derived fuel (RDF) pellets for power generation to supply to the national grid. The electricity output is about 8.9MW with a consumption of 700 – 1,000 tonnes of MSW per day. There are also a number of MSW incinerator-cum-energy recovery projects under implementation in island locations where conventional landfilling of the waste is costly as well as environmentally damaging. It has been determined that the use of MSW for electricity generation will only have a ‘cradle-to-gate’ carbon footprint of 0.138 kg CO2/kWh as opposed to the Malaysia’s current grid electricity carbon footprint of 0.683 kg CO2/kWh

Liquid Biofuels Liquid biofuels sub-sector in Malaysia is focused on two products; biodiesel from palm oil (or palm methyl esters) and bio-ethanol from ligno-cellulosic biomass matter. In 2006, in response to both the declining price of crude palm oil and upward price of fossil fuels; Malaysia embarked on its biodiesel program to diversify the use of CPO to energy use in addition to food and oleochemical uses. A total of 92 biodiesel production licenses were issued with a total capacity of 10.2 million tonnes. Beginning with a production capacity of only 55,000 tons in 2006, the output of biodiesel peaked to 222,000 tons by 2009 (Figure 2.d). By 2010, there were only 10 biodiesel plants in operation with additional 19 plants built but not commissioned. As of 2012, the export of palm biodiesel has fallen back to only 50,000 tonnes.

Figure 2.d. Palm Biodiesel Exports and Production (2006 – 2009)

Source of Graph : MPOB The majority of the biodiesel is for the export market with EU as the main market, driven by favorable policies and subsidies for biofuels under the EU Directive 2003/30/EC. Due to the high cold point of palm biodiesel, the use of palm biodiesel in EU is however only limited to summer months or as biodiesel blends. Realizing the risk of being dependent on a single major market, Malaysia also developed its own B5 program to stimulate local consumption of the excess biodiesel produced. However by 2008, the price of CPO has surged to high levels that it is no longer economical viable for biodiesel to compete with fossil fuels in the absence of costly biofuel subsidy. In addition, EU adopted the Renewable Energy Directive in 2009 which established environmental sustainability criteria that biofuels consumed in the EU have to comply with. This created a new challenge for the export of more palm biodiesel into the EU market as the industry has to prove that palm biodiesel is able to meet these criteria.

With the current price of CPO hovering slightly less than RM3,000 per ton, there is renewed intention from the Malaysian government to revive the palm biodiesel industry in order to reduce the CPO stockpile and sustain the CPO price . A new B10 program is being formulated for implementation by mid-2014. Whether the plan will be implemented will depend on the global price movement of both CPO and fossil fuel prices as well as the amount of subsidies that the government can afford to provide. On the positive side, the prospect of CPO as biofuel has provided the Malaysian government with an extra mechanism to manage its CPO stock and sustain its price at levels that can benefit the industry stakeholders from the plantation companies to the smallholders. In the case of bio-ethanol production from ligno-cellulosic biomass, this falls under the national policy to promote biotechnology industry in Malaysia. There are currently a few initiatives spearheaded by various government agencies to bring in bio-conversion technologies and foreign investments into the country. Most of the technologies are fermentation-based either using microbes or enzymes. The strategy of these ventures is to produce intermediates such as bio-sugars, succinic acid etc. that will serve as feedstock for further downstream conversion to biofuels, bio-polymers or fine chemicals. A major challenge faced is the adoption of the imported technologies to suit local biomass feedstock such as EFB that has very different physical and chemical characteristics to wood chips or switchgrass. As such, most of these ventures are still at testing stages of the proposed biomass feedstock. Biogas There are two main sources of biogas that can be utilized for bio-energy generation i.e. palm oil mill effluent (POME) and MSW landfills. During the favorable period of clean development mechanism (CDM), a number of biogas projects have been implemented in palm oil mills and landfills. Presently, there are 57 biogas plants in operation in palm oil mills with another 164 mills in various stages of implementation. However, this only constitutes about half of all the palm oil mills in Malaysia. In the case of biogas projects in landfills, there are now five projects in place with four registered as CDM projects. All of these landfill biogas projects feed into the national electricity grid while not all the palm oil mill biogas projects is as such due to the remote location of some of the mills that renders power transmission to the grid expensive. The collapse of the CER price has been a setback for more biogas projects in Malaysia; however with the new feed-in-tariff scheme being implemented, there is now renewed interest in biogas ventures. There are also some smaller community-based projects that propose to convert food and kitchen wastes in food courts and markets into biogas for in-situ use; therefore diverting the organic waste away from landfills.

Competing Uses of Biomass The advancement of technologies and global drive towards the green economy has brought about more means to convert the biomass into higher value products. This has become a major challenge for bio-energy projects in Malaysia as demand for biomass by other sectors is also increasing. Figure 2.e. gives an overview of the various current and potential uses of biomass from the Malaysian context. Some of the ventures that compete with the bio-energy sector for biomass feedstock include: 1.) Production of pulp and paper products from EFB 2.) Production of bio-composite furniture and building materials from rice husks,

wood chips and fibers 3.) Production of activated carbon from palm kernel shell 4.) Production of compost and bio-fertilizers from EFB and POME With more potential uses of biomass, the lower availability and higher pricing of the feedstock may make it more difficult to venture into bioenergy production, unless the government provides more subsidies and financial incentives.

BIOMASS Solid Fuel & Pellets

Liquid Biofuels

Biogas & Syngas

Bio-sugars & bio-chemicals

Compost & bio-fertilisers

Bio-Composites Others

Palm EFB P D R D P Paper Pulp & Erosion Mat

Palm Shell P Activated Carbon

Palm Trunk R D R D R D

Palm Effluent R P R P

Rice Husk R P

Rice Straw P R

MSW P P

Saw Dust P R P Mushroom CultIvation

Figure 2.e. Current & Potential Utilization of Biomass in Malaysia Legend: P – In Production, D – Under Development, R – Research Stage

Chapter 3: Yield Improvement Technology Development of yield improvement technology in Malaysia is focused on three different strategies: 1. Unlocking the availability of biomass feedstock such as EFB, palm trunks,

rice straws etc. from the field and mills for downstream utilization. In the case of EFB, majority of the biomass is presently recycled by the plantation owners back to the field as mulching, reducing the amount available downstream. Interestingly, the practice of mulching was developed in the 80’s as a solution to the accumulation of EFB waste in the mills. However, this practice is now hindering the release of the biomass (now no longer a waste) to downstream uses as removal from field may affect the yield of the oil. Similarly, it is also a practice now to burn rice straws in the field post-harvest to recycle the carbon and mineral nutrients back to the paddy fields. Hence, it is important to develop solutions that are sustainable and able to allow the biomass to be used downstream, yet without affecting the yield of the agricultural crops

2. Develop alternate feedstocks for bioenergy production such as jatropha, algae, luceana tree and acacia. Jatropha is being investigated on its yield performance in the East coast of Malaysia while there are at least two private companies undertaking development in algae cultivation to extract both phytonutrients and lipids for energy use. This is also important for Malaysia to diversify from high dependency on single commercial crop i.e. oil palm. Technologies to improve the biomass yield from these alternate feedstock is underway, including the optimization of fertilizer use, culture conditions etc.

3. Under one component of Malaysia’s government Economic Transformation

Programme (ETP), concentrated efforts are also being made to accelerate the replanting of oil palm area with new variety that can generate higher oil yield. This is expected to also increase the amount of biomass available for bioenergy and other uses from the felled oil palm trunks and higher amount EFB generated.

Chapter 4: Biomass Conversion Technology The conversion of biomass into energy in general can occur in three different pathways i.e. physico-chemical, bio-chemical and thermo-chemical as illustrated in Figure 4.a.

Figure 4.a. Biomass to Bio-Energy Conversion Pathways Physio-Chemical Pathway The conversion of vegetable oil to fatty acid methyl ester (FAME) is a straight-forward technology with relatively high yield. As a general rule-of-thumb, 100kg of oil will yield nearly 100kg of FAME while consuming 10kg of methanol and producing 10kg of glycerin as by-product. Most of the conversion technologies used in Malaysia during the biodiesel programme is imported from technology providers in US and EU. Two sub-categories of biodiesel technologies being commercially employed are homogenous alkaline catalysis and heterogeneous alkaline catalysis. One interesting technology employed by a few companies in Malaysia is the use of biodiesel conversion pathway to extract the phytonutrients such as tocotrienols and carotenes from crude palm oil, producing palm methyl esters as a by-product. It has also been reported that there are also some entrepreneurs who has developed their own conversion technologies and ventured into small-scale production of biodiesel from oil sources such as jatropha oil and waste cooking oil for use in rural areas.

BIOMASS

Physio-Chemical

Thermo-Chemical

Trans-esterification

Anaerobic Digestion

Fermentation

Pyrolysis

Gasification

Combustion

Liquefaction

Biodiesel

Biogas

Bio-Chemical Bioethanol

Steam

Syngas

Bio-oil

Syngas & Char

Hence, biodiesel technology in Malaysia is already well-proven and its production is already a commercial reality. However there are only four plants in operation with an annual production capacity of 300,000 tonnes; despite a total of 91 licenses have been issued. The main impediment is the relatively high price of palm oil as well as the high cost of subsidizing a large-scale biodiesel programme locally. Thermo-Chemical Pathway The most basic of this pathway is the direct combustion of the solid biomass, whether in the raw form or pelletized form. Most of the boilers used in Malaysia are the grate type and some using the more advanced fluidized bed type. However, the combustion of local biomass feedstock poses a number of technological challenges that require localized know-how to overcome them. The main reason is that boilers that are wholly imported or locally fabricated from imported designs are based on solid biomass available in the countries of origin which is of different physical and chemical nature. The use of palm-based biomass for direct combustion such as EFB has the problem of high chloride and ash content in the biomass which affects the efficiency and durability of the boiler. Moreover, raw EFB has high moisture content (up to 65%) as compared to other biomass feedstock such as wood chips. There are two strategies to overcome these problems; one is to pre-treat the feedstock to reduce the chloride and ash contents; or to use modifed boiler designs that can tolerate these high contents. Similarly, MSW in Malaysia also has high loading in moisture, organic waste as well as oily waste. Early attempts in the 90’s to incinerate MSW using imported equipment faces many challenges in the handling and combustion stages. Since then, a number of local companies have done extensive development work in the design of the combustion equipment to suit the local characteristics of MSW. One company, Core Competencies Sdn. Bhd. has also developed the technology to treat and convert MSW into refuse-derived fuel (RDF) for direct combustion and power generation. The plant has been in operation since 2005 to process 700 tons of MSW per day and generate up to 9MW of electricity for both internal use and supply to national grid. Companies in Malaysia has also explored into other thermo-chemical pathways such as pyrolysis, gasification and liquefaction of biomass. Genting Bio-Oil Sdn. Bhd. is one player in this sphere, collaborating with foreign technology providers to convert EFB biomass into bio-oil via pyrolysis. Other smaller companies have also developed small-scale biomass gasification equipment to generate power as well as bio-char which has commercial value. One of the key challenges in utilizing thermo-chemical pathway for local biomass feedstock is to ensure the consistent supply of the material for continuous operation.

Similar as well to direct combustion, the physical and chemical characteristics of the feedstock such as high contents of moisture and ash, as well as the fibrous nature of EFB also poses additional challenges to these ventures. Bio-Chemical Pathway The bio-chemical pathway can be classified into two sub-categories; the ‘natural’ conversion i.e. digestion by indigenous microbes to produce biogas and the biotechnology conversion i.e. the use of enzymes to ferment and convert the biomass into sugars and ethanol. The ‘natural’ conversion for biogas production is a well-established technology, currently used in 57 palm oil mills in Malaysia. Biogas is captured either in digestion tanks or polymer fabric domes built over anaerobic ponds. The biogas is either flared to gain carbon credits or used in gas engines to generate electricity for use in plantation housing or sold into national grid. Currently, the Malaysian government is implementing initiatives to encourage and facilitate more palm oil mills to venture into biogas production. The use of biotechnology to convert biomass into liquid fuels is also being actively explored in Malaysia in line with the country’s biotechnology policy as well as the need to add value to local biomass resource. One government special-purpose-vehicle (SPV) MYBiomass Sdn. Bhd. is working closely with Italian technology provider to test the viability of converting palm biomass such as EFB, oil palm trunks and fronds into industrial bio-sugars and possibly bio-ethanol. In East Malaysia, a pilot plant is already operational in collaboration with South Korean technology provider to utilize enzymatic process to convert EFB into bio-ethanol. It is expected that within the next five years, there will be a commercial-scale plant in place to utilize biomass for conversion into green intermediates such as bio-sugars. It will depend on the global market conditions to determine whether the bio-sugars will be used as feedstock for production of bio-ethanol or other green chemicals.

Chapter 5: Bioenergy Policy Policy on Renewable Energy Generation The development of bio-energy in Malaysia started in 2000 with the introduction of Five-Fuel Diversification Policy; that included for the first time renewable energy (RE) as the fifth fuel source. POME and EFB are naturally the best candidates as the fuel source as the oil palm industry at that time was facing disposal and pollution problem with these wastes. This policy was incorporated into the 8th Malaysia Plan (2001-2005) with the target of 5% of RE into the national energy mix; whereby financial incentives in the form of tax allowances were provided to encourage the participation of private sector in RE sector. A specific program, Small Renewable Energy Program (SREP) was implemented in 2001 that allows private companies to utilise biomass waste such as EFB, POME and MSW to develop RE projects with maximum capacity of 10MW and sell the electricity generated to the national grid. As of 2010, there were already 30 biomass RE projects with a total 225MW of grid-connected capacity under this program. This is however less than 1% of the total current generation capacity. More intensified efforts were undertaken by 2009 with the introduction of National Renewable Energy Policy and Action Plan (NREP) to increase the contribution of RE to the national power generation mix. Five strategic thrusts shall guide this policy namely; (1) formulation of RE law, (2) creation of conducive environment for RE business, (3) human capital development, (4) R&D action plan and (5) development of RE advocacy programmes to support the policy. Additionally, the leadership of Malaysia has also made the pledge to reduce its carbon intensity by 40% from its 2005 level by 2020.

Figure 5.a. Projected Cummulative RE Target for Biomass Source : Ministry of Energy, Green Technology and Water, Malaysia

Thrust 1 of NREP has been translated into Renewable Energy Act 2011 to provide for the establishment and implementation of feed-in-tariff (FiT) system to intensify RE activities in Malaysia. The act covers the mechanism of the FiT system, regulations on the connection, purchase and distribution of RE, provision of RE funding, incentives and enforcement. The Act is complemented by the Sustainable Energy Development Authority Act 2011 to establish an agency, Sustainable Energy Development Authority of Malaysia (SEDA) to manage the FiT mechanism. Figure 5.b. provides the total FiT quota that is opened between 2011 to 2014 for the local RE industry to bid for; and Figure 5.c. of the approved capacities as of Oct. 2012.

Figure 5.b. Malaysia Feed-in-Tariff Quota (2011-2014) Source : Ministry of Energy, Green Technology and Water, Malaysia

Figure 5.c. Feed-in-Tariff Approved Capacities (MW)

as of Oct. 2012 (Total 386.34MW) Source : Ministry of Energy, Green Technology and Water, Malaysia

Policy on Biofuels

Malaysia’s National Biofuel Policy was launched in 2006 to promote the conversion of palm oil into biodiesel with the objective to stabilize the price of palm oil via diversification of the use of palm oil as well as reduce the nation’s dependency on fossil-based fuels. Under the policy, five strategic thrusts are put in place to achieve these objectives: - Thrust 1: Biofuel for Transport - Thrust 2: Biofuel for Industry - Thrust 3: Biofuel Technologies - Thrust 4: Biofuel for Export - Thrust 5: Biofuel for Cleaner Environment The policy also promotes the use of B5 called Envodiesel for the local transportation sector. This policy is further strengthened with the passing of the Malaysian Biofuel Industry Act 2007 that seeks to regulate the production, blending, trading, export, import and associated services of biofuels. The implementation of the Act was delayed due to the high price of CPO rendering the use of CPO as biodiesel not economically viable. Provision of subsidy for the biodiesel is also not favorable as Malaysia is already subsidizing the supply of fossil-based petrol and diesel to consumers. It is only in end-2011 that the B5 programme was introduced in selected locations around the federal capital and used mainly by government vehicles. The government has spent about RM80 million to build blending and distribution facility for the biodiesel. With the recent decline in palm oil price, the government is again looking into the implementation of the biodiesel programme, with the aim of introducing B10 and phasing out B5 by middle of 2014. A consortium consisting of major oil palm producers in Malaysia has been setup to implement and oversee this new programme. Additionally, plans are also in place to introduce biodiesel B40 for fuel-oil fired power plants in East Malaysia.

Chapter 6: Bioenergy Research In tandem with Malaysia’s drive to introduce bio-energy utilization for local RE industry, research institutions and universities (RIUs) have also embarked on R&D projects in this area. Bio-energy and biomass have been put under the Priority Areas for provision of public funding to RIUs to conduct their research with the objective of leading to commericialization of the technologies developed. A number of RIUs has established research groups to intensify their R&D focus in this area. The table below provides a non-exhaustive list of major RIUs in Malaysia that have significant R&D in this area.

No. Research Institutions & Universities Section Areas of R&D

1. Malaysian Palm Oil Board (MPOB)

Biomass Technology

Centre

- Bioethanol - Biogas - Bio-oils - Pelletizing & briquetting - Gasification

2. Universiti Putra Malaysia (UPM)

Bioenergy Research

Group

- Bioethanol - Biobutanol, - Biohydrogen - Biogas

3. Universiti Malaya (UM) Chemical Eng. - Biodiesel from POME

4. Universiti Kebangsaan Malaysia (UKM)

Fuel Cell Institute

- Biohydrogen - Microbial fuel cell

5. Universiti Teknologi Malaysia (UTM)

Institute of Bioproduct

Development

- Biodiesel from EFB biomass via thermo-chemical pathway

6. Standards Research Institute Malaysia (SIRM)

Environment & Bioprocess

Tech. Centre

- Biogas - Bioethanol - Biodiesel (jatropha & algae)

7. Forest Research Institute Malaysia (FRIM)

Forest Products Division

- Biodiesel from non-food feedstock

Among the RIUs that venture early into biomass and bioenergy research is MPOB that has been tasked to convert palm biomass waste, mainly EFB and POME into valuable products based on the waste-to-wealth concept. Another active research groups is the Bioenergy Research Group from UPM with research in areas concerning Bioethanol, Biobutanol, Biohydrogen and Biogas. Their projects include: Improvement of methane fermentation from palm oil mill residuals in line with of

zero emission strategy of the oil palm industry Biological production of hydrogen using microorganisms from agricultural or food

industry wastes Production of bioethanol from lignocellulosic biomass using enzymes Production of biobutanol from agricultural biomassfrom oil palm empty fruit

bunches (OPEFB), oil palm decanted cake (OPDC), rice straw and sago pith residue using locally isolated microorganisms

The Chemical Engineering group of UM has also recently developed the technology to convert POME into biodiesel. The production cost of the biodiesel known as BIOPRO Diesel is estimated to be as low as RM1.50 per liter. Other areas of bio-energy research in Malaysia include: Cultivation and conversion of algae biomass into biofuels Recovery and conversion of waste cooking oil (WCO) into biodiesel Cultivation and conversion of jatropha oil into biodiesel Supercritical transesterification of vegetable and waste oil into biodiesel In addition, companies have also undertaken their own research and development of bio-energy processes and equipment. Most are concerning the adoption of imported technologies or equipment to suit the characteristics of local biomass feedstock. High-end research is still confined to RIUs and some large corporations due to the high cost involved and long gestation period. Recommendations for Future Research Over the last decade, RIUs in Malaysia have already developed a strong knowledge base in various areas of bio-energy research. To move forward, there are a number of recommendations made here to drive this further ahead. R&D should focus on solving pertinent problems associated with the utilization of biomass for bio-energy use as well as tapping into the existing industrial base on the country. One area of recommended research is to expand the existing conversion technologies into other forms of biomass beside palm-based biomass. All biomass consists of nearly the same components, namely cellulose, hemi-cellulose, lignin and mineral ash. One concern that needs to be addressed is that the many competing uses of palm-based biomass will result in the increasing price of the feedstock as well as scarcity in supply, rendering the use of palm biomass for bio-energy not

economical. By extending the research into the utilization of other forms of biomass feedstock for bio-energy production, this will increase the attractiveness of the R&D outputs for commercialization. Bio-energy research in Malaysia should also take advantage of the country’s strong base in oil & gas sector to tap into the latter’s value chain. One concept is to develop large-scale thermal conversion technologies to convert biomass into intermediates such as bio-oil and syngas that can be processed by existing oil & gas facilities to produce hybrid fuels. R&D effort should also be made in the improvement of extraction efficiency of methane from the many landfills in Malaysia. Currently, the generation and extraction of landfill gases is difficult to predict due to the heterogenous nature of the buried MSW; therefore reducing the extraction efficiency and increasing cost of landfill gas projects. Besides the core research in conversion technologies, R&D should also be undertaken in supporting areas such as the pre-treatment of palm biomass to reduce its chloride and ash content; improving the thermal and physical characteristics of biomass pellets such as via torrefaction and blending with other types of biomass to enhance calorific value, reduce ash content and breakage; improving boiler design and combustion technology for local biomass utilization; as well as process engineering of the conversion technologies. Last but not least, it is apt time that various areas of bio-energy and biomass R&D in Malaysia should be reorganized into focused areas of research and development in order to reduce redundancy in R&D as well as bringing multi-disciplinary expertise and know-how in the research-to-commercialization value chain. This whole value chain shall bring together academic and business expertise ranging from applied science, engineering, economics, finance, business and entrepreneurship. This will increase the chance of the R&D outputs being taken up by the private sector for commercialization.

Chapter 7: Summary of Technical and Non-Technical Barriers for Bioenergy Promotion The development of bioenergy sector in Malaysia faces both technical and non-technical barriers. Nevertheless, much research and intervention measures has been put in place for the last two decades by the government agencies, research institutions, universities as well as private companies to remove these barriers and exploit the biomass resources. One of the more significant technical achievements in the utilization of palm biomass is the development of EFB shredding and fiberizing processes in the 90’s; this allows the hardy EFB materials to be broken down into fibers for many downstream uses; both bioenergy and non-bioenergy. Non-technical barriers are associated with the economic viability of using biomass as fuel source, logistics in the collection and aggregation of biomass in large volume, as well as availability and pricing the biomass for sustainable ventures. The table below provides a list of technical & non-technical barriers faced in Malaysia for use as bioenergy source.

No. Barrier Description

A. Technical

A.1.

High moisture content and rapid decomposition of biomass renders logistical challenge in handling and transport from sources to point of utilization

There is a need to pre-treat the biomass at sources to stabilize the materials However, pre-treatment facilities are not cheap and many biomass generators are reluctant to invest in the equipment

A.2.

Imported technologies & equipment not entirely suitable for local biomass feedstock

Local feedstock such as EFB, POME & MSW has different chemical and physical characteristics (e.g. high ash, moisture, oil contents etc.) This requires adaption of the technologies and equipment to the local biomass

No. Barrier Description

A. Technical

A.3.

Biomass pellets is not able to entirely substitute the use of fossil-based fuel sources in existing power plant and boilers

Existing power plants and boilers are designed and optimized for fossil-based fuels such as coal. Direct substitution with biomass pellets will reduce the thermal efficiency and possibly operational and maintenance problems.

A.4.

Palm-based bioenergy products such as biodiesel and pellets for export market faces issues on compliance to sustainability requirements

Sustainability requirements include RSPO* compliance, carbon footprinting, life-cycle analysis as well as negative perception on the overall palm industry *RSPO – Roundtable on Sustainable Palm Oil

A.5.

Low rate of commercialization of biomass R&D, including bioenergy

Despite much effort by the government to promote commercialisation of local R&D outputs, uptake and success rate is still low due to many negative factors concerning both the RIUs and private sector. There is also no market-focused integrated centers for private sectors to source for appropriate technologies for commercialisation

B. Non-Technical

B.1.

Competing uses of biomass causing availability and pricing issues

The opportunities for non-energy high-value utilization of biomass increasing the demand for the feedstock. Various policies and initiatives by different government agencies are also creating competition for the biomass feedstock for uses in different sectors such as RE, biotechnology, furniture etc.

No. Barrier Description

B. Non-Technical

B.2.

Current subsidies on fossil-fuel depresses the prices of energy, making biofuels non-competitive

Removal of fossil-fuel subsidies is a major economic, social and political issue in Malaysia. Moreover, subsidizing for biofuels may increase uptake but costly to the government

B.3.

Access to financing for bio-energy projects

Financing from banks and financial institutions are not readily available to project developers as it is a relatively new sector with high perception of risk. Moreover, the RE market is very much driven by subsidies from the government. Financial institutions also lack the know-how and capacity to evaluate these projects without sufficient information available.

Chapter 8: Conclusion Malaysia has demonstrated its firm commitment to develop the renewable energy sector via the passing of laws to promote and regulate the industry as well as specific programmes and mechanisms to encourage the participation of the private sector into the industry. Various forces come into play that drives the country towards this direction; these include the need to gradually shift towards a more sustainable economy; the need to reduce dependency to fossil-based energy resources; creation of new business, investment and employment opportunities with a new sector; as well as stimulating the nation’s economic development in general. Bioenergy is one part of the whole RE sector, which also includes solar and hydropower. Similar efforts are also being made to promote and facilitate the utilization of the latter resources. Nevertheless, challenges within and outside the country are abound. The economic downturn and recession taking place in different parts of the world, the fluctuating global prices of fuel and other commodities, technological changes as well as the social, economic and political changes in the country are among some of the dynamical interplay of forces that can derail the nation’s pursuit of a more sustainable economy as well as its responsibility as a global citizen.

References 1. Website www.indexmundi.com 2. Website www.iea.org 3. Economics of Climate Change for Malaysia - Inception Workshop

25 – 26 January 2011, Marriott Putrajaya, ADB, EPU, UNDP 4. Refuse Derived Fuel – Case Study of Waste as Renewable Resource

S.S.Chen, Isnazunita Ismail, Abdul Nasir Adnan, Puvaneswari Ramasamy SIRIM, Core Competencies Sdn. Bhd.

5. World Palm Oil Supply, Demand, Price and Prospects: Focus on Malaysian &

Indonesian Palm Oil Industry, Ramli Abdullah, Datuk Dr. Mohd. Basri Wahid; Malaysian Palm Oil Board

6. Bioenergy and Sustainability - Prof. Ir. Dr. Wan Ramli Wan Daud, Fuel Cell Institute, Universiti Kebangsaan Malaysia, The 2nd Malaysian International Conference on Trends in Bioprocess Engineering

7. National Biomass Strategy 2020: New Wealth Creation for Malaysia’s Biomass

Industry, Version 2.0, 2013 – Innovation Agency of Malaysia

8. Directions in the Utilization of Crops for Bioenergy in Malaysia in Response to Climate Change – Ghizan Saleh & N. Rajanaidu, Universiti Putra Malaysia, 2011

9. Malaysia Biofuels Annual Report 2009

10. Impact of Biodiesel Blend Mandate (B10) on the Malaysian Palm Oil Industry -

Dr. Shri Dewi A/P Applanaidu, Anizah Md. Ali, Prof. Dato’ Dr. Mohammad Haji Alias, Universiti Utara Malaysia, 2013

11. A Perspective of Oil Palm and Its Wastes - Fauziah Sulaiman, Nurhayati

Abdullah, Heiko Gerhauser and Adilah Shariff, Universiti Sains Malaysia