Green Technology Policy On Energy In Malaysia

GREEN TECHNOLOGY POLICY ON ENERGY IN MALAYSIA

By
NOOR SHAHIWAN BIN ISMAIL

Research Project Submitted to the Faculty of Environmental Studies, Universiti
Putra Malaysia in Fulfillment of the Requirements for the Degree of Master of
Environment
May 2011

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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
May 2011

Supervisor : Associate Professor Mohd Bakri Ishak, PhD
Faculty : Environmental Studies

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

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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.
Keywords: policy, green technology, energy, Malaysia

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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
Mei 2011

Penyelia : Profesor Madya Mohd Bakri Ishak, PhD
Fakulti : Pengajian Alam Sekitar

Kemajuan polisi teknologi hijau untuk tenaga adalah sangat perlahan dan masih di
peringkat awal. Malah, ketika ini tiada rancangan jelas ataupun gerak kerja bagi kerajaan
untuk mengaplikasikan teknologi hijau dalam sektor tenaga. Pencapaian dalam tenaga
boleh diperbaharui baru-baru ini amat tersasar dari sasaran yang dicanang dalam Polisi
Lima Diversifikasi Tenaga. Objektif utama kajian ini adalah untuk menyiasat progres
terkini polisi teknologi hijau untuk tenaga di Malaysia. Kitaran polisi digunakan sebagai
kaedah kajian. Kaedah ini member kelebihan kerana idea asas bagi integrasi polisi bukan
sahaja berkaitan dengan birokrasi, namun juga menyebabkan perubahan yang penting di
dunia sebenar. Ada lima polisi tenaga hijau yang diperkenalkan selepas tahun 2000
yang mana Polisi Tenaga Boleh Diperbaharui Kebangsaan 2010 adalah yang terkini.
Kesemua polisi tahun 2000 dan seterusnya adalah masih relevan dan masih perlu
dilaksanakan sepenuhnya. Pencapaian tujuh program di bawah teknologi hijau bagi
tenaga adalah di bawah paras sebenar dengan dua program mengalami kegagalan.
Program yang berjaya adalah “Malaysian Industrial Energy Efficiency Improvement
Project” (MIEEIP) walaupun tidak melibatkan modifikasi teknologi major. Ada enam
penambahbaikan yang boleh dilakukan ke atas perlaksanaan teknologi hijau ke atas

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tenaga terutama di dalam bidang biomas. Pembangunan mesti difokuskan ke atas bidang
minyak sawit kerana ia bukan sahaja membekalkan tenaga malah mengurangkan
pembebasan gas rumah hijau serentak. Dengan polisi teknologi hijau ke atas tenaga yang
berfungsi, Malaysia mesti menekankan program yang terbukti membuahkan hasil dan
focus ke atas penambahbaikan ke atas bidang yang berpotensi dan kritikal.

Kata kunci: polisi, teknologi hijau, tenaga, Malaysia

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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 his
knowledge, patience, guidance and precious time in completing this project. I attribute
the completion of my master’s degree to his encouragement and wisdom.

My top appreciation to all parties involved in providing me inputs and sufficient
data 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 me
throughout the process. Their prayers, understanding and support are essential and
desirable. Only Allah can pay back all your good deeds.

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TABLE OF CONTENTS

Pages
ABSTRACT ii
ABSTRAK iv
ACKNOWLEDGEMENTS vi
APPROVAL vii
DECLARATION viii
TABLE OF CONTENT ix
LIST OF TABLES xii
LIST OF FIGURES xiii
LIST OF ABBREVIATIONS xiii

CHAPTER

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

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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 51

REFERENCES 53
APPENDICES 60

viii

A Renewable Energy Bill 2010 (Front Page)
B Sustainable Energy Development Authority
Bill 2010 (Front Page)

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LIST OF TABLES

Tables Page

3.3.3 Raw Data 14
3.4.1 Inclusion Criteria Analysis 15
3.4.2 Consistency Criteria Analysis 16
3.4.3 Weighting Criteria Analysis 17
3.4.4 Reporting Criteria Analysis 18
4.3.1 Focus in the NGTP by sectors 24
4.3.2 The Proposed Feed-in-tariff 37

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LIST OF FIGURES

Figures 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) KeTTHA's Low Energy Office Building 34
b) Malaysian Green Technology Zero Energy Office building 35

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LIST OF ABBREVIATIONS

GHG - Green house gases
SEDA - Sustainable Energy Development Authority
RE - Renewable Energy
MIEEIP - Malaysian Industrial Energy Efficiency Improvement Project
MBIPV - Malaysian Building Integrated Photo Voltaic
BEEP - Building Energy Efficiency Program
GBI - Green Building Index
CDM - Clean Development Mechanism
CO2 - Carbon Dioxide
MW - Megawatt
UNFCC - United Nation Framework on Climate Change
DOE - Designated Operational Entity
CER - Certified Emission Reduction
FiT - Feed-in-Tariff
LEO - Low Energy Office
ZEO - Zero Energy Office
GTFS - Green Technology Financing Scheme
REPPA - Renewable Energy Power Purchase Agreement
EFB - Empty Fruit Bunch
UNDP - United Nations Development Programme
GEF - Global Environment Facility
FiAH - Feed-in Approval Holder

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CHAPTER 1

INTRODUCTION

1.1 Background of Study

Green technology is an alternative way that reduces fossil fuels and demonstrates
less 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 reducing
waste. Green technologies include such area as renewable energy sources, waste
management, and remediation of environmental pollutants, sewage treatment, and
recycling and water purification.

According to Malaysian Green Technology Corporation official website,
green technology refers to products, equipment or systems which satisfy the
following 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 per
capita consumption of energy is often used as a barometer to measure the level of
economic development in a particular country. The accomplishment of civilization
has largely been accomplished due to the increasing efficient and extensive
harnessing of various forms of energy to extend human capabilities and
inventiveness. Energy is thus one of the indispensable factors for continuous
development and economic growth (Rogner and Popescu, 2001). Realizing the
importance of energy as a vital component in economic and social development, the
government of Malaysia has been continuously reviewing its energy policy to ensure
long-term reliability and security of energy supply through green technology policy.
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Even though the term „Green Technology‟ was only used late 90s, Malaysia has
already started the plan and implementation towards it as early as 1974 through
concentrated hard work are being undertaken with the common goal of ensuring the
sustainability of energy resources, both finite and renewable. The energy
consumption is expected to accelerate rapidly in developing countries. Their growth
is 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 is
guided. They must have declared objectives which a government seeks
to achieve and preserve in the interest of national community. The main focus will be
based on Malaysian Policy starting from 8th Malaysian Plan year 2000. It will
encompass not only policy makers but also the implementation and stakeholder‟s
participation. However, the latest policy on Renewable Energy and SEDA Act, the
main entity in National Renewable Energy Policy is still in Parliament tabling.

1.2 Problem Statement

After a series of energy policy introduction since 1975, Malaysian intention to
promote green technology on energy became obvious when the Five-Fuel
Diversification 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 to
contribute 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 slow
and still at its infancy. The contribution in 2009 is only at 2.9% of the total
renewable energy mix with 617MW electricity produced, even though the fifth fuel
policy had been announced more than 10 years ago (Figure 1.2).

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Figure 1.2. Generation Mix Plant in 2009
(Source: Suruhanjaya Tenaga)

Furthermore, National Biofuel Policy was introduced in 2006 to promote
palm oil based biofuel. However, until today it is still not fully utilized after a few
false starts. Malaysia again introduced National Green Technology Policy in 2009
and Renewable Energy Policy in 2010 to give further boost green technology
especially in energy. Occasionally, there are many doubts on the direction of these
policies as there is no clear plan or roadmap on how the government wants to
implement green technology on the energy sector.

1.3 Objectives

The main objective of this study is to determine the current progress of green
technology 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
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1.4 Significance of Study

All of the green technology policy related to energy adopted by Malaysia will be
outlined in this study. Therefore, the direction of green technology on energy
industry in Malaysia can be determined. Based on achievements and
implementations, it will reveal weakness and the real problem that merit amendment
to the present policy and its implementation. Results of this study may help policy
maker in amending current policy or drafting future policy.

The policy implementation has been given ample of time and resources to
succeed despite of the poor results it produced. For example, the recent achievement
in renewable energy shows that the set target was way far from achievement in the
Fifth Fuel Policy. This study will show the best ongoing program that needed to be
prolonged and below performance programs that needed to be improved. The best
program does not necessarily require high capital of resources. It might need less
resource but yield the best result over the investment if it is applied on the target
subject effectively.

Besides that, in drafting and implementing the green technology policy on
energy, it is important to adapt the current situation in Malaysia. Model policy from
other country does not necessarily will do well in Malaysia. This study will view the
policy from the best perspective of Malaysia in order to identify the true potential of
Malaysian energy sector in implementing green technology. The framework and
policy structure of model country may be used, but with modifications to suit
Malaysia‟s condition.

1.5 Organization of the study

The study was started with Chapter 1 of introduction. This section consists of
definition of green technology, and policy whereas the importance of energy was
explained. The objectives of this study were outlined to address the problem
statement and the benefit of this study was explained in the significance of study.

4

Next, the Chapter 2 is Literature Review. The literature review consists of
similar local and international study on policy. The focus will be on similar study of
policy 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 explained
together with the raw data presentation. The policy cycle analysis was used to
analyze the energy policy accordingly.

Later, the Result was revealed in Chapter 4. It is according to the stated
objectives. In the discussion section, the results were further elaborated. It included
the policies involved, program implementations and also potentials of green
technology on energy in Malaysia. Finally in Chapter 5, the Conclusion was made
and several Recommendations were suggested for future study. The
recommendations are based on the next missing gap that needed to be filled with
further study to extend the result and discussion.

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CHAPTER 2

LITERATURE REVIEW

2.1 Introduction

In 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 can
be identified. There were four similar studies related to energy policy reviewed in
this section. The findings can be used as reference to differentiate the findings of this
study to one another. Furthermore, two methodologies used in international study on
energy policy were listed. The methodologies used in policy study were outlined and
analyzed. Finally, the best methodology was chosen and used in this study.

2.2 Review of Literatures on Green Technology Policy on Energy

A study by Zamzam et al. (2003) examined the intricacy of energy policies, issues
and challenge woven into the development of the energy sector in Malaysia. Their
title of the study is “Greener energy solutions for a sustainable future: issues and
challenge for Malaysia”. As highlighted in the Third Outline Perspective Plan
(OPP3) and the Eighth Malaysia Plan (8MP) unveiled in April 2001, efforts will be
intensified to moderate the growth of energy demand and to develop renewable
energy as the fifth fuel in electricity generation. Whilst the general energy policy
thrust for the next ten years remains unchanged, concerted efforts will be made to
usher the energy sector development on a greener path. With a projected average
economic growth rate of 7.5% per year in the 2001–2005 period, resource rich
Malaysia 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 in
the same period. Against the backdrop of a growing need for coal and piped natural
gas imports and Malaysia becoming a net crude oil importer in 2008, greater
challenge lie ahead for the energy sector. Higher utilization rate of natural gas as the
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„green‟ fuel will be encouraged in electricity and non-electricity sectors.
Furthermore, fiscal incentives in Budget 2001 to promote renewable energy and
energy efficiency provide a timely boost for implementation of the new fifth fuel
strategy.

Not long after that, sustainable energy policy was studied using the Bakun
dam as a subject. Energy demand, economic growth, and energy efficiency- the
Bakun dam-induced sustainable energy policy revisited (Choy, 2003) is the title of
the study. In the course of harnessing a truly sustainable energy policy, the question
at issue is no longer the flow of energy per se, but the nature and source of energy
flow that is renewable, cost-effective, socially and environmentally sustainable.
Although the Bakun energy policy is able to answer to the increasing needs of the
Malaysian energy demand scenario, it has failed to fulfill the social, ecological, and
environmental dimensions of sustainable development. Consequently, it cannot be
regarded as truly sustainable. In other words, hydroelectricity must be harnessed in
such a way that it produces less or minimum social and ecological impact on the
indigenous population and environment. As analyzed in this study, it is suggested the
Murum project, which is less socially, ecologically and environmentally destructive
should be optimized in lieu of Bakun.

The Malaysian energy policy was further studied with a title: Energy for
sustainable development- Energy policy and alternative policy (Abdul and Keat,
2005). Their findings suggested that the Malaysian energy sector is still heavily
dependent on non-renewable fuel such as fossil fuels and natural gas as a source of
energy. These non-renewable fuels are finite and gradually depleting and also
contribute to the emission of greenhouse gas. While it is recognized that the world,
including Malaysia is not ready to displace non-renewable energy with renewable
fuels, the implementation of various policies and programs by the government of
Malaysia has increased the awareness of the importance of the role of renewable
energy in a sustainable energy system. Apart from that, this study emphasized that
close cooperation within the countries in this region is needed to further promote the
use of renewable energy.

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The study by Oh et al. (2009) with a title: Energy policy and alternative
energy in Malaysia- Issues and challenge for sustainable growth, focused on an over-
dependence on non-renewable fossil fuels in Malaysia energy sector. Among policy
being analyzed in the study also is newly introduced then the National Green
Technology Policy 2009. Results again suggest that the country extremely vulnerable
to volatile prices and interruptions to the fuel supply, especially since Malaysia is
expected to become a net oil importer by 2030. Concerted efforts undertaken by the
government so far are slowly gaining momentum with concerns about skyrocketing
oil prices and higher feed-in tariff, and they have definitely increased the public
awareness on the importance of the renewable energy in the country's sustainable
energy system as a whole, although being met by countless obstacles from numerous
parties. Generally, it is quite obvious that Malaysia is not ready to embrace
renewable energy totally and replace non-renewable energy with renewable energy
in the near future. Therefore, it needs a proper policy in place with an emphasis on
green technology on energy.

2.3 Research methodologies on policy

2.3.1 MARKAL-MACRO

In 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 of
the policies of the Italian energy–environment system. MARKAL is not a model, but
a generator of economic-equilibrium programming models of energy systems and
their time development. Contrary to most economic equilibrium models,
supply/demand curves of commodities are not represented by means of analytic
functions with econometrically estimated parameters, but are specified by stepwise
linearised functions. The extension of the MARKAL methodology used in this study
combines the energy model built with MARKAL with the long-term macroeconomic
growth model called MACRO, to provide a dynamic, neoclassical, applied general
equilibrium model (Hamilton et al., 1992). The integrated model, which
simultaneously solves energy and economic components using non-linear

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optimisation, is able to analyse separately price-induced energy conservation and
autonomous energy efficiency improvements.

Formulating economic equilibrium models of the energy systems with the
MARKAL methodology has several advantages. When all equations are linear, the
solution of very large size models (approaching one million variables and equations)
requires an hour or little more in normal PCs if recent powerful linear programming
solvers are used. Till the number of non-linear functions remains low, the solution of
the 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 set
of technologies or fuel sources that makes the equilibrium feasible.

2.3.2 Policy Cycle Instrumentation

Paula K. and Per M. (2006) in their study: The challenge of greening technologies-
Environmental policy integration in Finnish technology policies, have used the
policy cycle to evaluate the integration of environmental policy. In policy analysis
and evaluation, the policy cycle is often used as a tool to conceptualise key aspects of
policy formation and implementation (Pollitt and Bouckhaert, 2000). It is earlier
developed a conceptual model of the policy cycle that can be used as a basis of
evaluating policy integration. The model illustrates that policy integration could, in
principle, take place at many levels of the policy cycle. Assuming that there is a
perception that policies should be integrated, this should be reflected at the level of
policy strategies as well as at the level of the instruments by which these are
implemented. Policy cycle give 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, although challenging, to extend the examination to include policy outputs
and outcomes. If environmental concerns are integrated into technology policies,
projects funded and technologies developed should become environmentally sounder
and this should be reflected in the state of the environment.

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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 is
drafted by the government with the assistance of appointed consultants. It decides on
the direction of the country by setting the vision and mission. Secondly, the next
level is policy implementation. Many programmes and projects will be organized in
order to execute the policy and yield results. Each of the programmes has specific
objective in certain area. Some of the programmes might cover a policy or more
during implementation. Finally, the last level is policy outcomes. The main entity in
this level is the stakeholders. All the programmes implemented will be involving the
stakeholders including industry player, client and consumer. The end results are
expected 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 Method

The selected methodology is Policy Cycle Instrumentation. Theoretically, policy
cycle can be used to examine the green technology implementation in Malaysia‟s
energy. Policy cycle consists of 3 levels namely policy strategies, policy instruments,
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and policy outcomes. Each level will be evaluated using four criteria. First evaluation
criteria used is inclusion, followed by consistency, then weighting, and the last one is
reporting. Each of the criteria used will be further explained in the methodology
section.

2.5 Summary

Related study on energy and policy were reviewed. Generally, all of the
studies are focusing on the problem of implementing energy policy. None of them is
focusing on green technology except for environmental aspects that are being
emphasized. There are two relevant methodologies from previous study that are
suitable to be used. Policy cycle instrumentation was chosen to provide results of
policy not only according to bureaucracies, but also according to the real situation.
The examination will also include policy outcomes. Thus, this study was focused on
policy development starting from year 2000 using Policy Cycle Instrumentation.

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CHAPTER 3

METHODOLOGY

3.1 Introduction

In this chapter, a methodology has been set based on Policy Cycle Instrumentation.
Eventually, the accomplishment of results will be completed using analysis of the set
criteria that will be further explained in the data analysis section. The methodology
will create a research framework for a better understanding and show a flow of
direction. Towards the achievement of the stated objectives, the extended research
framework is utilized. Finally, the outputs will be used as results and to be discussed
in 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

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3.3 Data Collection

3.3.1 Study Area

Malaysian government establishes energy policy to address issues of energy
production, distribution, and consumption. Policy declared by the government is
enforced all over Malaysia including Sabah and Sarawak. Policy maker and the
secretariat base are at the administrative capital of Malaysia, Putrajaya and also
capital city of Malaysia, Kuala Lumpur. The Department of Electricity and Gas
Supply acts as the regulator while other players in the energy sector include energy
supply and service companies, research and development institutions and consumers.
Petroliam Nasional Berhad and Tenaga Nasional Berhad are the major players in
Malaysia's energy sector. Other government organizations involved are Malaysia
Energy Commission and Ministry of Energy, Green Technology and Water. The
Malaysian Green technology Corporation was later developed to assist the
implementation of green technology policy.

3.3.2 Data Collection

Green technology policy on energy was evaluated in by collecting strategy
documents produced and policy inputs, such as people and financial resources
allotted to energy issues in Malaysia. Eight policies of energy in Malaysia introduced
after year 2000 were collected. The strategy documents were evaluated using the
criteria stated in literature review. Green technology policy on energy that was
collected is focused on the objectives of different technology programmes and on the
allocation of financial resources to different types of programmes including project
funding decisions. Other technology programme-related documents are including
final reports and evaluations. In addition, five thematic interviews were made among
the actors in Malaysian energy policy to provide background information on the
policy outcomes. Malaysian Energy Commission web-site information on project
applications and funding criteria were also sourced.

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3.3.3 Raw data

Table 3.3.3. Raw Data

Policy Cycle Data Collected Subjects
Instrumentation

Policy 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 Diversification
Implementation descriptions ii. Small Renewable Energy Plant
 Final report iii. Biofuel
iv. MIEEIP
v. MBIPV
vi. BEEP
vii. GBI
viii. Incentives

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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 Corporation

3.4 Data Analysis

3.4.1 Inclusion Criteria

The first evaluation criteria is the inclusion of green technology aspects to determine
to what degree green technology aspects are covered in policy, either in general or by
highlighting specific environmental outputs. Different policy instruments are
consistent with each other in addressing the green technology. Green technology on
energy policy should be matched with a commitment to minimize contradictions.

Table 3.4.1. Inclusion Criteria Analysis
Level Inclusion Criteria Analysis
Policy 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

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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
objectives
Policy 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 allocations

3.4.2 Consistency Criteria

The second evaluation criteria, the consistency of the green technology aspect in
relation to other aspects, is used to assess the role policy documents give to the issue
of consistency when they address green technology matters. The criteria is not used
to evaluate consistency in the documents, but to assess whether the policies
themselves take the issue into account. Some degree of inclusion is thus a
prerequisite for the consistency criteria. It has been argued that, from a normative
viewpoint, green technology aspects should take priority in situations where
contradictions between different policy objectives emerge.

Table 3.4.2. Consistency Criteria Analysis
Level Consistency Criteria Analysis
Policy 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 organizations
Policy 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

and between the objectives are separated by target subject
Policy 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 Criteria

Without engaging in the debate of the pros and cons of such a prioritisation, the third
criteria is used for weighting of the green technology aspect with respect to other
aspects, to assess the importance given to green technology issues in policy
documents. This criteria also requires some inclusion criteria.

Table 3.4.3. Weighting Criteria Analysis
Level Weighting Criteria Analysis
Policy 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

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3.4.4 Reporting Criteria

The fourth criteria, reporting is based on the importance of feedback for policy
consistency and effectiveness. Regarding policy documents, the fourth criteria
addresses the degree to which strategies include specifications about how the green
technology aspects are to be followed up and reported and the degree to which
assessments of technology programmes/projects include environmental aspects.

Table 3.4.4. Reporting Criteria Analysis
Level Reporting Criteria Analysis
Policy 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 themselves

3.5 Summary

Methodology section has been completed with results to be discussed. Starting with
data 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 policy
strategies, policy implementation and policy outcome. The analyzed data will be
used to determine the results on the next section.

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CHAPTER 4

RESULTS AND DISCUSSSION OF THE RESULTS

4.1 Introduction

In 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 discussed
individually. Furthermore, in policy implementation, the completed and ongoing
programs during the policy duration were also discussed. The achievement was
explained for each specific program. Lastly, the policy outcomes will be discussing
the improvements to be highlighted in the policy. Most of them are the left out matter
in the policy and implementation. These potentials are also critical in determining the
suitable program to support the policy.

4.2 Results

The 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 sector

4.3 Discussion of the results

4.3.1 Policy Strategies

Starting from the 8th Malaysia Plan (2001-05) energy policy was formulated by
including aims for a safe, cost-effective, secure energy supply which means
19

promoting renewables, cogeneration, diversification, efficiency and using auditing,
financial and fiscal incentives, technology development, and labeling. The 8th Plan
includes several incentive mechanisms for the promotion of environmental measures
and the use of renewables in the private sector.

i. Five-fuel Diversification Policy 2000

Originally 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 policies
for long term impacts. The fuel diversification policy is reviewed constantly
according to the energy status of the country. In the 8th Plan, it was broadened to
include renewable energy as a fifth fuel in the new Five Fuel Strategy. In the 9th
Malaysia Plan (2006-10) the energy policy of the 8th Plan has been continued while
providing a more conducive environment to support renewable energy projects.

The direct result from the fuel diversification strategy saw the drastic drop of
oil 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 coal
respectively (Razak and Ramli, 2008). In addition to the five-fuel policy, the
government has endorsed the Kyoto Protocol in September 2002 and being a non-
Annex 1 country, Malaysia can utilize the CDM to reduce domestic CO2 emissions
as well as transfer advanced technologies from developed countries.

Additionally, the 9th Plan announced a target of 350 MW of grid-connected
renewable electricity generation by 2010. The five-fuel policy has targeted to
contribute 5% of the country energy mix with RE by year 2005 and mitigate 70
million tonnes of CO2 over a span of 20 years (Lau et al., 2009). Subsequently, when
the Five-Fuel Diversification Policy replaced the four-fuel policy back in 1999, RE
was added as the fifth source of energy with the target to contribute 5% of the energy
sources mix ture by 2010. The intended development progress of RE in Malaysia
turned to be very slow and still at its infancy. The current contribution at around
2.9% only of the total energy mix, even though the fifth fuel policy had been
announced more than 10 years ago.
20

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 such
as such as palm oil, rice, sugar cane, timber/sawmill, paper recycling, municipal
waste, and biogas are not even half utilized. The most promising potential for
renewable 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 is
covered by this single crop alone. It is estimated that the country has the capacity to
produce up to 2000 MW using biomass and biogas alone.

ii. Kyoto Protocol

At present, most of the developed countries are committed to cap their CO2
emissions as stipulated under Kyoto Protocol as well as the recent declaration during
the recent 2009 Climate Summit. In this respect, developing countries are still
lacking behind most of the developed countries, but are catching up quickly.
Malaysia as one of the fastest growing countries in Southeast Asia is continuously
combating global warming with aggressive efforts. The cutback on GHGs emissions
can be accomplished by restructuring company operations and processes to
physically reduce emissions and through purchases of carbon credits to meet the
carbon emission reduction deficits.

The reduction can be achieved through financial exchanges by supporting the
CDM or simply by buying carbon credits from companies or developed countries
that have excess allowances. Carbon credits are awarded to projects in a country by
the Designated Operational Entity (DOE) after grilling through the stringent and
complex procedures adopted by the United Nation Framework on Climate Change
Convention (UNFCCC) to be certified as having reducing a real and quantifiable
amount of GHGs. Since Certified Emission Reduction (CER) can be traded and used
by developed countries to comply with emission reduction targets, hence this shall
create a win–win situation between developing and developed nations (Lau et al.,
2009).

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Malaysia government has been very supportive and instrumental in the CDM
participation and has established the machinery and mechanisms for smooth
implementation to tackle the GHGs emissions and the promotion of carbon trading in
the country. To encourage corporations to go green, the Malaysian government has
exempted carbon credit income from tax from 2008 to 2010. From a corporation's
perspective, the main incentive to go green would be that such practices make good
corporate social responsibility as well as its cost recovery potential. In the
announcement of the country's Budget 2008, an additional 10-year pioneer status
were granted to companies involved in energy conservation, on top of a 3-year tax
exemption for income derived from carbon credits trading.

iii. National Biofuel Policy 2006

Implementation of the National Biofuel Policy is spearheaded by the Minister of
Plantation Industries and Commodities. This initiative is in line with nation‟s Five-
Fuel Diversification Policy, a national policy to promote renewable energy (RE) as
the fifth fuel along with fossil fuels and hydropower. The strategis thrusts of this
policy are including transportation, industry, technologies, export, and cleaner
environment. As a start, the Government is promoting a 5%-mix of processed palm
oil with petroleum diesel (B5 diesel) by applying to a fleet of government vehicles
on a trial basis and by establishing B5 diesel pumps at selected stations. The
justification is that biofuel production has the potential to generate new jobs, raise
palm oil prices through increased demand, hence boost farm incomes, and as a tool
for rural economic development by promoting value-adding activity. Thus, biofuel
production 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 biodiesel
plus 95% petroleum biodiesel is used at all sector in selected government agencies.
Followed by nationwide implementation in 2010, the mandatory blend of B5 is
expected substantial amount of demand for high supply in the market. The Malaysian
Biofuel Industry Act 2007 (Act 666) was enacted with the purpose of providing
legislation for the mandatory use of biofuel, licensing of activities relating to biofuel
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and for matters connected therewith and incidental thereto. The Act was enforced on
1 August 2008, while the licensing activities under the Act as stipulated under the
Malaysian Biofuel Industry (Licensing) Regulations 2008 was enforced on 1
November 2008. Government stopped issuing new licensing as of July 2006 – and
the total capacity has reached 3,000,000 tons/year, which is six times larger than the
projected biodiesel demand for the domestic transportation sector.

iv. National Green Technology Policy 2009

The Ministry of Energy, Communications and Multimedia is replaced by the
Ministry of Energy, Green Technology and Water to in early 2009. It reflects
Malaysia's commitment in spreading the message that „clean and green‟ is the best
way towards generating economy that is based on sustainable solutions. Malaysian
government also has launched the National Green Technology Policy (NGTP) on 24
July 2009 to promote low-carbon technology and ensure sustainable development
while conserving natural environment and resources. The policy has five strategic
thrusts as follows: (i) Strengthen the institutional frameworks, (ii) Provide conducive
environment for green technology development, (iii) Intensify human capital
development in green technology, (iv) Intensify green technology research and
innovations, and (v) Promotion and public awareness. The aim is to generate
improvements in major sectors of energy, buildings, water and waste management
and transportation towards fulfilling its goals as shown in Table 4.3.1.

Besides that, government restructured the Malaysia Energy Centre as the
National Green Technology Centre tasked with formulating a green technology
development action plan. This Centre will function as the focal point to set standards
and promote green technology. To intensify green awareness activities and practice
environmental-friendly lifestyle, an allocation of RM20 million has been provided.
In line with the new focus on green technology, the Malaysian Government had
launched the RM1.5 billion Green Technology Financing Scheme on 26th January
2010. This move is intended to attract the private sector to participate in Green
Technology entrepreneurship. It is hoped that this fund will be able to facilitate and
fast track efforts by companies that are now pursuing green technology businesses.
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Table 4.3.1. Focus in the NGTP by sectors

Sector Focus

 Construction,
 Management
Buildings
 Maintenance
 Demolition

 Infrastructure
 Vehicles
Transportation
 Biofuels
 Public road transport

 Energy efficiency
Energy utilization
 Demand management

 Power generation
 Supply management
Energy supply
 Co-generation by the industrial and commercial
sectors

 Water resources management
Water and waste
 Waste water treatment
management
 Solid waste and sanitary landfill

v. National Renewable Energy Policy 2010

With the vision of enhancing the utilization of indigenous renewable energy
resources to contribute towards National electricity supply security and sustainable
socio-economic development, the new RE policy is intended to transform Malaysia
to become a leader in renewable energy applications. This will ensure that Malaysia
will develop into a nation that is able to satisfy its own energy needs from indigenous
resources, be independent from fuel imports, and able to conserve its natural

24

environment so that it can also be enjoyed by the future generation. A big local RE
industry could ensure that the power generation from fossil fuel or nuclear be
minimized while creating a new source of economic activity for the country. A more
informed and committed Malaysians in utilizing RE can ensure that such aspiration
and vision would be achieved.

Among the significant transition in this policy is the creation of Renewable
Energy Bill & Sustainable Energy Development Authority Bill. During the
Parliament sitting in December 2010, the Energy, Green Technology and Water
Minister, Datuk Peter Chin Kah Fui tabled the Renewable Energy Bill 2010 &
Sustainable Energy Development Authority Bill 2010 for the first reading. The
second and third reading already being carried out in the next Parliamentary sitting in
March 2011, and thereafter Malaysia‟s first Renewable Energy Act is expected to
come into effect in the early second half of 2011. Besides that it also means that the
formation of Renewable Energy Fund will be initiated. These bills are seen as a
catalyst for renewable energy generation and it is aligned with Malaysian
government‟s aims to achieve 5.5% renewable energy in Malaysia‟s total energy mix
by 2015.

vi. Renewable Energy Bill 2011 (Approval Stage)

The essence of the RE bill is a proposed feed-in tariff (FiT) mechanism. The FiT
mechanism allows electricity produced from renewable energy sources to be sold to
utilities companies at a premium rate for a specific duration. The government hopes
that this could be the answer to the slow implementation and take up of renewable
energy generation in the country, a task in which the 5th Fuel Policy and the Small
Renewable Energy Program haven‟t been successful so far. Under the FiT, up to
30MW of electricity generated from four renewable sources, solar photovoltaic,
biogas, biomass, and small hydro, are eligible to apply to connect its power generator
to the national grid, and sell the power back to utilities companies (TNB in
Peninsular, SESCO in Sarawak, and SESB in Sabah).

25

Applications for the sales will be handled and approved by SEDA, and when
approved, the successful applicant will be paid by FiT using funds available in the
Renewable Energy Fund. The FiT rate and effective period varies based on the
different renewable energy sources and methods, and is subjected to an annual fixed
degression rate. The degression is intended to be common in the renewable energy
industry, and its aim is to be part as a means for gradually eliminating the premium
paid to renewable energies relative to the so-called market price. The degression is
intended to account for lower costs to generate renewable energy as production
volumes increase and the technology moves down the learning curve.

When the cost of electricity produced from the renewable source becomes
cheaper than the electricity produced from the grid, FiT will cease to be paid using
the Renewable Energy Fund. Instead the utilities companies will assume the payment
because the cost to buy from the renewable energy generator will be cheaper than the
cost of producing its own electricity.

vii. Sustainable Energy Development Authority Bill 2011 (Approval Stage)

The Sustainable Energy Development Authority Bill 2010 will establish the
Sustainable Energy Development Authority (SEDA), where its main function is to
spearhead the development of renewable energy in Malaysia. It will also act as the
focal point to assist the Minister on climate change matters relating to energy. SEDA
will be led by a chairman, a chief executive officer, and a team of not more than nine
members. The membership of SEDA will be appointed by the minister. They will
have the authority to employ employees or committees to perform its functions.

The operational expenses of SEDA, including the remunerations of its
employees, will be borne by the Sustainable Energy Development Authority Fund,
which derives its income from various means, including funds provided by the
Parliament. As such, SEDA and its employees are deemed to be civil servants whose
salaries are paid partly using the tax payers‟ money. One specific function of SEDA
is to implement and manage the Feed-in Tariff (FiT) mechanism, which forms the
essence of the Renewable Energy Bill 2010.
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viii. Renewable Energy Fund 2011 (Proposed)

The Renewable Energy Fund will be established and administered by SEDA. This
fund will derive its income from various legal means, two of which, are sums
provided 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 from
our electricity bill by the utilities companies. At press time, it is still unsure whether
the tariff paid will translate into an increase in our electricity bills, or it will be taken
from the utilities companies‟ income. The utilities company will recover from this
fund, the difference between the FiT it pays out to renewable energy sources and the
normal cost it incurs to purchase electricity from traditional sources.

4.3.2 Policy Implementation

There are several programmes being implemented under current policies. Most of the
policies served as foundation of legal structure and government stand on any
particular matter. In order to produce achievable results, these programmes have to
be organized to ensure the ultimate goal is also shared by all level of society. All the
programmes outlined here are initiated after year 2000. Some of them have already
completed the implementation period and others still ongoing. Therefore, the
achievement of each programme will be analyzed according their respective plan and
target.

i. Small Renewable Energy Plant (SREP)

In 2001, the Small Renewable Energy Power (SREP) Program was launched to
produce 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 of
all types of RE under SREP is meant to generate electricity which will be sold to the
utility through the country's distribution grid system. 10 MW is the maximum
capacity of small RE plant. Subsequently, Special Committee on Renewable Energy
(SCORE) has been set up under the then Ministry of Energy, Communications and
27

Multimedia to regulate the program. Plus, it will also functions as secretariat at the
Energy Commission (EC) to facilitate industry activity in the program.

Report from Malaysian Green Technology Corporation shows 55 projects have
been approved as in 2009 from 60 projects in 2005, using various types of renewable
energies (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 a
maximum of 10 MW, manage to generate a total of 309.3 MW energy and
285.7 MW connected back to the national distribution grid whereas in 2005 a total of
375 MW and 325 MW respectively. It shows declination of 17.5% in energy
generated and 12% in energy connected back to grid. This is due to cheap tariff given
for energy contributed back to the grid. The escalating cost of maintenance and
operation is the major contributor of the plant inefficiency. Plus, based on experience
during early years of SREP, many potential applicants are not convinced with the
return on investment and the long payback period.

Although the SREP has targeted to generate 5% or 600 MW of the Malaysian
electricity sources from RE by 2005, only 0.3% was achieved. Until 2009, the
achievement is only more than half of its target at 2.7%. Obviously, the progress in
bringing RE generation into the mainstream is time-consuming due to several
reasons and limitations. Even though fossil fuels will remain the dominant source of
energy 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 be
around 5.9% of the total energy demand by 2030.

The main obstacles throughout this year to RE development in Malaysia are the
lack of a policy framework and a financial mechanism before Green Technology
Policy being introduced. Without a legal and financial framework, the promotion of
RE usage is often difficult. Moreover, the exorbitant price of RE gives households
and businesses less incentive to adopt the technology, on top of the limited loans
allocated for RE development. Beyond this, a lack of consulting services and access
to the information on RE are also hampering its development (Shigeoka, 2009).
28

Another key stumbling block is the high capital cost of RE implementation and the
low sales price of electricity (17 cents/kWh) make the production of RE considered
as uneconomical (BioGen, 2005).

ii. Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP)

MIEEIP is organized to address such barriers to energy efficiency and energy
conservation in the country‟s industrial sector. The Government of Malaysia initiated
the Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP) in 1999
to improve the rational use of energy in the industrial sector. Support and funding
has been provided by the Global Environment Facility (GEF), the United Nations
Development Programme (UNDP) as well as the Government of Malaysia and the
private sector. UNDP is the project‟s implementing agency on behalf of the GEF.
The Ministry of Energy, Water and Communications (MEWC, formerly known as
Ministry of Energy, Communications and Multimedia, during the initial
implementation of the project) was appointed the project‟s executing agency,
whereas Pusat Tenaga Malaysia (PTM) (now Malaysian Green Technology
Corporation) is the designated implementing agency. It is formed to achieve this by
eradicating barriers to industry energy efficiency with initiating institutional capacity
in policy management and implementation of sustainable energy projects.

Despite the low cost of energy, the MIEEIP project has managed to
demonstrate the feasibility and achievability of energy saving measures and has
managed to entice managers in industrial companies as well as some financial
institutions to get involved in energy efficiency and conservation. While such
voluntary participation is laudable in an initial phase, energy efficiency promotion
and implementation needs to be an integral part in the Government‟s long-term
public policy. The sustainability of MIEEIP and the eventual impact depend much on
whether the Government decides to put an energy efficiency policy in place with
effective policy instruments backed up by substantial resources. The analysis of this
Evaluation Report suggests that if similar energy efficiency projects are implemented
in future they should be predicated on the expectation that appropriate regulations
and substantial government funding will subsequently be available.
29

iii. Mandatory blend of B5 in Biofuel

Malaysia‟s once-vaunted biofuel industry has seen production grind to a halt since a
March announcement that the government‟s mandatory switch to the green energy
will be delayed to June 2011 originally from February 2009. Malaysian Palm Oil
Board figures show that the production of biodiesel, a mixture of diesel with 5
percent processed palm oil (B5), dropped 99 percent from 12,640 metric tons in
March to just 137 metric tons in July 2010. The country had the capacity to produce
2.6 million metric tons of biofuel annually but that demand had completely dried up.

The local biodiesel sector reached a standstill last year with zero production
as many players were unable to maintain operations due to the high cost of
production as well as the lack of incentives from the Government, according to
Malaysian Biodiesel Association (MBA). MBA, which represents 22 biodiesel local
and international companies with operations in Malaysia, reported that they were
churning out fewer than 100,000 tonnes compared with their combined installed
capacity of 2.6 million tonnes. It was reported that the Government would subsidise
palm oil-based biofuel at the pump to keep the price at the same level as diesel which
is now selling for RM1.80 per litre The Government would be paying between four
and six sen per litre for a 5% blend of palm-based biofuel with diesel. However, the
feedstock cost of palm methyl ester is quite high. Palm oil-based biofuel production
cost is about 15 sen per litre and the Government is only willing to subsidise up to 7
sen.

60 biodiesel manufacturing licenses had been issued by government at end
February 2011 but only less than one fifth has started production. Only 10 biodiesel
plants were operating last year, despite some 29 biodiesel plants having been
established with total production capacity of 3.37 million tonnes per year (the
Malaysian Palm Oil Board). In 2010, biodiesel exports more than halved in both
quantity and earnings, compared with 2009. Biodiesel plants produced 117,173
tonnes of palm biodiesel, with only 89,609 tonnes exported, bringing in RM266.53
million in earnings for the year. The country's biodiesel production will be more than
30

enough to cater for the needs of the central region of Peninsular Malaysia, once the
mandatory use of palm oil biodiesel (B5 programme) is implemented come June
2011. Five states have been chosen to be pioneer in term of logistics to support this
programme which are Selangor, Kuala Lumpur, Putrajaya, Negri Sembilan and
Malacca.

In a move to promote the usage of biodiesel, the government has committed
to funding the price differential between diesel and biodiesel through Automatic
Pricing Mechanism. Petroliam Nasional Bhd (Petronas), Shell, BHP, ExxonMobil
and Chevron have been allocated with a start-up fund worth RM1mil each by the
Malaysian Palm Oil Board (MPOB) to set up infrastructure for B5 biodiesel blending
facilities including pipes, tanks and automation system to blend B5 biodiesel at the
designated depots.

iv. Malaysia Building Integrated Photovoltaic Technology Application
(MBIPV)

The Malaysia Building Integrated Photovoltaic (BIPV) Technology Application
Project, was launched by PTM and administered by the KeTTHA on 25th July 2005
and completed on 31st December 2010. It was intended to induce the long-term cost
reduction of the non-emitting GHG technology integration of the PV technology
within building designs and envelopes. It is aimed at creating a sustainable BIPV
market in Malaysia that will generate widespread BIPV applications. Over the
lifetime of the expected installed BIPV capacity from the project, the energy
generated 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 BIPV
technology, and creating the national capacities on three major areas: (a) policy and
education; (b) technical skill and market implementation; (c) technology
development support. The project will encourage BIPV technology acceptance
among the public, policy makers, financiers and building industry, which ultimately
will lead towards a stable BIPV industry beyond the completion of the project. The
31

project objectives will be achieved via a multipronged approach: (1) BIPV
information services, awareness and capacity building programs; (2) BIPV market
enhancement and infrastructure development; (3) BIPV policies and financing
mechanisms program; (4) BIPV Industry Development and R&D enhancement
program. As at 31st December 2010, the total capacity installed and commissioned
under this program is 1,516 kWp.

The core entity of MBIPV is the SURIA 1000 programmes which were
implemented via a bidding process in which the bidding process. Those who
requested 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 kWp
in PV capacity is achieved from the target of 450 kWp, (ii) Payment capability of the
bidders increases from 46.7% in the first call to 59.9% in the fifth call of total PV
system installed (iii) the PV system pricing (per kWp) shows fluidity of prices, from
first call around RM 28,000 to around RM 24,000 in the fifth call. By latest, the price
as in March 2010 was recorded at RM19,210 per KWp. However, the bidding
mechanism had given a wrong perception that the solar technology is only for those
from upper class of the society. If we go through the list of participant especially the
residential 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 installation
have shown return on investment or even achieve break even given that if the price is
without subsidies and external fund.

v. Building Energy Efficiency Programme (BEEP)

From the national perspective, implementation of energy efficiency measures will
not only discourage wasteful energy consumption but will also bring economic
benefits such as possible export of energy on the portion saved and reduction of
negative environmental impact from decrease in fuel combustion. „Development of
Energy Efficiency Strategy in Malaysia‟ study done by the Government in 2000
revealed that if the industrial and commercial sectors were to improve their energy
use efficiency by 10%, there would be an economic benefit of more than RM 5.8

32

billion in five years. In addition, the benefits will continue to accrue over the life of
the equipment.

Building Energy Efficiency Programme (BEEP) emphasizes on Energy
Efficiency in buildings. It promotes optimal use of energy in heating, cooling and
lighting which can be achieved by several strategies that optimize and regulate
energy use in the building envelope such as insulating, windows glazing, and energy
usage regulations. The Malaysian Green Technology Corporation will service the
energy audit of EE buildings and as technical advisory on EE of new buildings,
standard development and industry linkages with suitable technology providers. The
current examples are low energy office and zero energy office.

a) Low energy office (LEO) building

Ministry of Energy, Green Technology and Water (KeTTHA) utilized its own
building in Putrajaya (Figure 9). The cooperation of Danish International
Development Assistance (DanIDA) with local consultants has produced a design for
LEO building and a showcase for EE. It is set with goal of 50% savings of energy of
through energy efficiency and reduction of 10% from the construction cost to
provide 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 and
awarded with ASEAN Energy Awards 2006 for the best practice in the new energy
efficient building category.

33

Figure 4.3.2. a) KeTTHA's Low Energy Office Building.

b) Zero energy office (ZEO)

Malaysian Green Technology Corporation building project officiated on July 2009
in Bangi, Malaysia as a ZEO building. ZEO‟s specification is the electricity
consumption of the building must not exceed the electricity than is produced using
RE sources on site. As shown in Figure 10, BIPV systems with a total 92 kWp
capacity were installed in various parts of the building including solar PV and wind
turbine. This building is a model building for EE in Malaysia with a designed energy
index of 65 kWh/m2/year compared to typical conventional office building in Kuala
Lumpur of 250–300 kWh/m2 year It also serves as foundation of Malaysian
construction industry towards energy efficiency and self-powered constructions. The
BIPV panels integrated into the building design including the parking lots provided
electricity for the building. The excess electricity is fed back to TNB grid which help
shaves the peak power demand during the peak hours. Almost 50% of everyday
electricity needs is provided by the system. Costing up to RM 20 million, it is the
first in Malaysia and also Southeast Asia.

34

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 assessment
in terms of energy efficiency, indoor environment quality, sustainable site
management, materials, water efficiency, and innovation. It is similar label to the
Green Star from Australia and Green Mark from Singapore. The GBI was launched
in 2009 and it was initiated by Malaysian Institute of Architects and the Association
of Consulting Engineers Malaysia. The main objective of the rating system is to
enable green grading and certification of Malaysian buildings. Malaysian Green
Technology Corporation building is the first green rated building in Malaysia.

In Malaysia Budget 2010 announcement, the GBI is given a further boost as
incentives will now be given to owners/buyers of buildings with GBI certificates. An
owner of a building who incurs capital expenditure to obtain a GBI certificate will be
granted an allowance equivalent to 100% of the capital expenditure incurred which
may be offset against 100% of its statutory income. Buyers of buildings and
residential properties which have GBI certificates will be entitled to stamp duty
exemptions in respect of the additional costs incurred to obtain the GBI certificate. It
is unclear at this stage as to how the mechanism of this exemption will operate, but
this will presumably require the developers to indicate the additional costs incurred
to obtain the GBI certificates. These incentives will apply in relation to costs
incurred per building purchased between 24 October 2009 and 31 December 2014.
35

vii. Feed-in-Tariff

Incentives are mostly welcome to spur the green technology growth in Malaysia. As
green technology is still yet to achieve acceptable price compared to current
technology, incentives from government can ease the burden and decrease the break
even period. Furthermore, it will nourish the side industries which mainly depending
on market trend that influenced by government incentives.

Malaysia is currently in the process of updating its energy policy by means of
the 10th Malaysia Plan (2011-15) with a new National Renewable Energy Policy and
Action Plan. The Malaysian government included a comprehensive FiT programme
to be part of the 10th Malaysia Plan (Renewable Energy World.com, 2009). It is
expected to be enacted in June 2011. The Malaysian proposal includes all renewable
energy technologies, differentiates tariffs by technology, and derives the tariffs based
on the cost of generation. In the proposal it is also suggested that the FIT programme
would add 2% to the average electricity price in the country. However, an exemption
for this rise in electricity costs is available for low-income consumers. The
Malaysian government acknowledges that some basic non-economic barriers will
need to be overcome in order for the scheme to be successful such as guaranteed grid
access and legal obligation for utilities to purchase renewable electricity, streamlined
(local) procedures, FITs preferably to be fixed for 20 years and implementation by a
competent agency that includes constant monitoring and progress reporting. It also
acknowledges as a critical factor for success the installation of a renewable energy
fund manager.

Renewable energy feed-in tariffs (FITs) are price-driven policies which
historically have been designed to support renewable electricity. Under such a
system, electricity generated from renewable energy sources (RES) is paid a
premium price for delivery to the grid. In many countries the scheme functions
without using state budget: the government sets the price per kWh and utilities are
obliged to purchase a given amount of this energy at this premium price which they
then pass on to consumers. Another advantage of FITs is their guarantee of actual
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output since premiums are only paid for renewable electricity produced. Feed-in
tariffs are also expected to accelerate cost reductions of renewable energy
technologies, speeding up cost competition with conventional technology (Mendonça
and Jacobs, 2009). FITs are growing in popularity as one of the most effective
mechanisms of promoting renewable energy development. Where they started in
Western, mainly European countries, FIT schemes are now being introduced all over
the 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 policy
for encouragement of renewable electricity, the specific design of this policy is
crucial for its success. In developing countries, the design of a feed-in tariff scheme
might have to be adjusted to local circumstances due to the vulnerability of
electricity consumers, especially the poorest, to price increases and the
characteristics of monopoly or oligopoly electricity markets. As example of
Malaysia, these factors must be realized in order for FiT to work. Among of them are
the access to the grid must be legally guaranteed with 20 years of price certainty. The
payment capability in that period must be guaranteed with adequate fund. Most
importantly, the implementation by a competent agency must be effective and
progressive.

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The basic differences between Malaysian proposed FiT as compared to the
European/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 exemption

In Malaysia, companies that undertake environmental oriented activity namely forest
plantation projects or energy conservation measures or use energy from renewable
biomass, mini-hydro or solar are eligible for Pioneer Status with a tax exemption of
100% of the statutory income for 10 years; or Investment Tax Allowance of 100% on
the qualifying capital expenditure incurred within five years, which can be offset
against 100% of the statutory income for each year of assessment.

For the energy related measures, companies can also qualify for higher
exemptions or allowances if the activities take place in the promoted areas. Import
duty 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 to
solar PV systems used by third parties.

Most of the SME companies in the industry already received pioneer status
from Malaysian Industry Development Authority (MIDA) even before the National
Green Technology Policy was introduced. Import duty exemption for them are
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insignificant because the volume acquire is relatively small and often involving
distributors. They prefer subsidy rather than tax exemption as with this government
can control the price of the equipments.

ix. Financial Facilities (Green Technology Financing Scheme)

Prior to National Green Technology Policy, government also launched RM1.5 billion
soft loan under Green Technology Financing Scheme. Maximum financing up RM50
million (US$ 14.3 million) for suppliers and RM10 million (US$ 2.9 million) for
consumer 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 financing
amount, with the remaining 40% by banking institutions. So far, until March 2011,
12 projects had been financed with accumulated of more than RM150 million worth
of soft loan facility (GTFS, 2011). In order to be qualified for this scheme, a
company must be certified as green projects. Having provided the catalyst for green
businesses to grow in the country, it is envisaged that the initiatives that the
Government had implemented so far will generate impressive economic multiplier
effects. 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, financial
facility is crucial to ease the burden especially in start up phase. Furthermore,
commercial banks lack interest in green technology as this industry is classified as
high risk and expected long term Return on Investment (ROI). Among other
comment is on the strict regulations imposed by Credit Guarantor Corporation
(CGC) as a government guarantor. The lacking financial means in developing
countries results in limited possibilities for introduction of capital cost grants.

4.3.3 Policy Outcomes-Improvement

Unfortunately, there are some limitations in the green technology policy particularly
in Renewable Energy Policy that need further analysis. This is an important policy
having far fetching effects because it involves public financial support for long-term
39

contracts the government will be engaging with the private sector. The fund is
expected to be raised through higher electricity rates to the public. The most obvious
shortcoming is that the Renewable Energy Policy has not set efficiency standards for
harnessing renewable energy. This is a fundamental requirement because renewable
energy must meet certain objectives such as environmental sustainability and energy
security through diversity. The reason that RE low efficiency is not acceptable is
because then it does not contribute to net carbon footprint reduction and therefore
does not comply with the duty to contribute towards environmental sustainability, in
particular Climate Change. The Renewable Energy Policy has overlooked this
fundamental 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 8th
Malaysia Plan, which introduced renewable energy for the first time. This should be
plenty of time to grasp the state of affairs and requirements and sufficient
opportunity for this purpose. The framework appears to be satisfactory perhaps for
solar photovoltaic, where efficiency is not much of an issue. It is easy to implement
solar photovoltaic systems where no special knowledge or skills is required. It can be
considered a technician‟s job whether small or large capacity is involved.
Unfortunately, it is not the same with other forms of renewable energy, especially
where biomass and biogas are concerned, which require some innovative thinking for
its success. The government is moving in the right direction, but it seems to have
stopped short. Even though the government uses productive policy from Germany as
a model, it does not necessarily will produce the same results like in Germany.

We are aiming for environmental sustainability by reducing harmful
greenhouse gases and enhancing energy security because we want independence
from fossil fuel and diversification in fuel supplies. Solar energy may be in
abundance but its harnessing technology is not affordable at the present time. On the
other hand biomass and biogas are scarce resources in the renewable energy mix but
there are dire urgent needs to exploit them for several pressing reasons, main reason
being if biomass and biogas are left unutilized they will emit enormous amounts of
lethal greenhouse gas, far more than when fossil fuel is burned, affecting climate
change even more adversely.
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i. Biomass

Biomass and biogas can offer carbon emission reduction when they displace fossil
fuels, but only if they are used efficiently and this is established science. Renewable
energy regulations must reflect the scarcity of the resource and findings of the
science. Unbelievably, the Renewable Energy Bill sets no minimum efficiency for
biomass energy resource. Unless it is corrected early we are going to be burdened
with 16 to 21 year contracts with the damaging mistake. Surprisingly, the new
regulations give private biomass energy plants special status to receive public
subsidy for their energy under the community feed-in tariff without attention to
efficiency.

In Malaysia, biomass and biogas are predominantly from the Oil Palm
industry. Other sources of biomass are timber industries, rice mills, and sugar mills
but 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 move
the industry towards environmental sustainability. This pressure comes from several
fronts, one from their own conscience of Corporate Social Responsibility (CSR) and
the other from Western Environmental NGO‟s which continue to pursue relentless
campaigns against unsustainable Oil Palm industry activities. All these are
influencing European Community trade policies. The Americans are pacified for the
moment but they are watching us too.

In actual fact the industry has the means to reduce carbon footprint by a
whopping 30 million tonnes of Carbon Dioxide per year that would contribute
significantly towards global environmental sustainability in respect of Climate
Change. This amounts to CO2 emission equal to almost half the coal burning in the
UK. The good news is the Oil Palm industry has the capacity to provide up to 2,000
MW of Green Energy to the national power grid and another 4,000 million litres of
fuel 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 electricity
export and market access for its biofuel.
41

Presently this amount of renewable energy is shamefully left wasted to
pollute the environment. In another perspective, 2,000 MW of electricity generating
capacity is the capacity of three nuclear power plants that is currently under review
by the government. Weird enough the Oil Palm industry has never asked for any
public subsidy but instead local market access for the excess energy. They
need Feed-in-Grid to harness the renewable energy in the biomass and biogas to
move the industry forward to environmental sustainability. Only about 25% of the
palm oil mills are located within 5 kilometres from the nearest power grid access
point and laying electric cables to carry the power to the grid cost about RM 1
million per kilometre. Presently the conditions imposed for export of electricity to
the power grid are too stringent for a process industry.

The market for solid biofuel is yet to be established. As far as the Oil Palm
industry is concerned, the present electricity purchase price provided in Renewable
Energy Power Purchase Agreement (REPPA) is satisfactory for undertaking
investment into efficient energy generation for export. This is because the mills
already can have good profits but they are unable to develop it further because of
problem with power grid access. The REPPA electricity purchase price is set at 21
sen 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 REPPA
are too stringent for a process industry. It is very hard for a process industry to meet
the 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 renewable
energy agenda cannot be accomplished, unless the power grid infrastructure and the
appropriate 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 purchase
the Empty Fruit Bunches (EFB) from the mills and set up cheap low efficiency
power plants. These operators are in desperate need for higher tariff subsidy to show
their 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

renewable energy as the operation does not reach net carbon footprint reduction,
neither does it meet the vision for “enhancing the utilization of indigenous renewable
energy resources”. Further, the investments are not viable without high purchase
price and soft loans. It is therefore unconscionable to tax the public to subsidize for
someone‟s inefficiency. In contrast, energy produced at the mills will be by means of
cogeneration at above 80% efficiency. Further, the mills have a greater stake at
running the integrated power plants reliably as it has a bearing on their core-business
of milling the palm oil fruits. Therefore, a scientifically proven minimum efficiency
level for green energy will keep at bay undesired consequences.

Our experience have shown when the United Nations Development
Programme (UNDP) and The Global Environment Facility (GEF) came forward in
2002 to support the UNDP/GEF Biomass Power Generation & Demonstration
(Biogen) Project to assist in implementing a high efficiency renewable energy
cogeneration plant for the Oil Palm industry with technical assistance and substantial
combined funding from UNDP/GEF and the Malaysian Government. The project
was implemented as the Asia Biomass Power Plant in Negeri Sembilan and
undertaken jointly with the Ministry of Energy, Green Technology and Water.

It is to be noted that the project was originally conceived as a high efficiency
renewable energy cogeneration combined between heat and power project
specifically to integrate with a palm oil mill to serve as a showcase or demonstration
project for the Oil Palm industry in view of the vast amount of biomass available in
the industry. However, it turned out to be a tragedy and a disaster that the project
ended up as just a standalone low efficiency empty fruit bunch incineration plant that
failed to live up to its purpose. There is no evidence to show that anyone from the Oil
Palm industry was consulted on the project.

It is now reported that the project developer has abandoned after a last
drawdown of a government guaranteed loan from a local bank even before
completing the commissioning. How did UNDP/GEF an international trusted body
get hoodwinked into the project when the funding was originally allocated to
showcase and demonstrate a cogeneration project to the Malaysian Oil Palm
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Green Technology Policy On Energy In Malaysia

Green Technology Policy On Energy In Malaysia

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