POLICY SYNTHESIS PAPER ON ENERGY SECURITY ON DEMAND SIDE

1. POLICY SYNTHESIS PAPER ON ENERGY SECURITY ON DEMAND SIDE ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA by MURTADZA KASSIN DIRECTOR, ENERGY COMMISSION Siam City Hotel Bangkok, Thailand 7 June 2004

2. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA NATIONAL ENERGY SITUATIONS

3. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Energy Demand • Demand for commercial energy ~ 1980s - 7.5 percent ~ 1990s - 7.7 percent • GDP growth • ~ 1980s - 5.9 percent • ~ 1990s - 7.0 percent • Demand for energy • ~ 1980 - 267.3 PJ • ~ 2000 - 1,167.1 PJ • ~ 2005 - 1,699.8 PJ

4. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Final Energy Demand by Source, 1990-2005 (ktoe)

5. NATIONAL SYMPOSIUM ON SCIENCE AND TECHNOLOGY: STRATEGIC RESEARCH AND INNOVATION TOWARDS ECONOMIC DEVELOPMENT Primary Energy Supply by Source, 1990-2005 (toe) • 2005 ~ 2,374.8 PJ

6. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA ENERGY SECURITY POLICY ON DEMAND SIDE

7. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Energy Conservation Policy • Malaysian Government conscious efforts towards energy conservation represent in: • ~ The National Depletion Policy, 1980 • ~ The Four Fuel Strategy, 1981 • ~ The Five Fuel Strategy, 2001 • The Government began developing EE and RE as a Fifth Fuel.

8. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA • Focus of EE policy is major consumers of energy i.e. industrial and commercial sectors. • Among measures introduced i.e. introduction of EE regulation, extension of financial and fiscal incentives and demonstration projects. • Intensified the implementation of demand side management which will change the energy usage pattern and appliance labelling. • Encourage the establishment of new integrated complexes and townships.

9. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Energy Efficiency Regulation • Scheduled to be introduced in 2004. • Initially will cover activities related to energy management in building. • EE equipment (rating and labelling schemes) regulation will be incorporated into the existing Electricity Regulation, 1994. • Government will cooperate closely with the industry to implement the programs. • Industrial EE initiatives implemented: • ~ energy audit program • ~ energy service companies support program • ~ technology demonstration program

10. 2001 Budget ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Energy Conservation Measures • Companies which incur capital expenditures for conserving energy for own consumption: • i. Accelerated Capital Allowances on Investments in related equipment to be written off within a period of three (3) years; and • ii. Import duty and sales tax exemption for equipment used in energy conservation, which are not produced locally. Equipment purchased from local manufacturers is given sales tax exemption. 2003 Budget – Incentive (i) be accelerated from three (3) to one (1) year.

11. 2001 Budget 2003 Budget ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA • Companies providing energy conservation services: • i. Pioneer status with income tax exemption of 70% on statutory income for a period of five (5) years, or Investment tax Allowance of 60% on the qualifying capital expenditures incurred within a period of five (5) years with the allowance deducted in each year of assessment be set-off against 70% of the statutory income; and • ii. Import duty and sales tax exemption for equipment used in energy conservation, which are not produced locally. Equipment purchased from local manufacturers is given sales tax exemption. • The incentive be extended for a period of three (3) years until • 31 December 2005. • The company is required to implement the project within one year from the date of approval of the incentive.

12. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA • Incentives program is managed by the MIDA in collaboration with: • ~ Ministry of Energy, Water and Communications (MEWC) • ~ Inland Revenue Board (IRB) • ~ Ministry of Finance (MoF) • ~ The Royal Custom and Excise Department

13. Overall Objective To integrate and coordinate the efforts in the process towards sustainable energy production and consumption patterns to bring down the elasticity between energy consumption and GDP. • Purpose To coordinate the planning and implementation of the EE activities and projects by the stakeholders. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Targets and Outcome Energy Efficiency Plan, 2003 - 2006 • Target To reduce the growth in final demand at an annual saving of 106MWh.

14. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA • Total Socio Economic Savings from EE • From an investment amounting to RM111 million, savings is estimated to be around RM247 million over the 2003 – 2006 period. • Malaysian Industrial Energy Efficiency Improvement Projects (MIEEIP) • Undertaken by the Malaysia Energy Centre (PTM). • Objective – to reduce energy consumption in 8 manufacturing sub-sectors by 10% by 2004. • Expected saving from RM2.5 billion investment – RM6 billion over 2000 – 2004.

15. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA • Success of the EE programme – Malaysian Securities Commission (ASEAN Energy Efficient Building Award 2001) • Other EE projects: • ~ District Cooling Project – Universiti Kebangsaan Malaysia • ~ New Administrative Centre – Putrajaya • ~ Multimedia Super Corridor – Cyberjaya • ~ Kuala Lumpur City Centre – Petronas Twin Towers • ~ Kuala Lumpur International Airport (KLIA) • EE retrofit: • ~ Sultan Zanariah Library – Universiti Teknologi Malaysia • ~ Energy Management Project – Takeuchi MDF Sdn. Bhd. (Factory producing medium density fibre board)

16. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Malaysian Energy Management Programme (MEMP) • Developed by the Government to demonstrate the commercial viability of energy efficient and energy management. • Will also implement Energy Management in government buildings and EE Procurement of Office Equipment and Appliances. Ministry of Energy, Water and Communications • Built an energy efficient building or ‘Low Energy Office’ (LEO) in Putrajaya. Public Work Department • Adopted EE features in their new design guidelines i.e: • ~ architectural treatments to reduced solar heat gain • ~ improve ventilation systems • ~ ensure selection of high efficiency equipment in new government buildings

17. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Energy Commission • Capacity building program under EE/DSM project • Enable to prepare: • - EE plans and standards; • - draft relevant regulations and guidelines; and • - implement specific EE programmes in all sectors of economy. • Involvement of stakeholders – advisory boards and working groups • Current initiatives: • - formulate EE standards and labelling for end-use products. • - established 8 work groups and task force • - priority areas – high energy efficient motors and refrigerators.

18. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Problems and Obstacles

19. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA RENEWABLE ENERGY PROMOTION POLICY

20. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Renewable Energy Policy • Initiatives as stated in OPP3 and 8MP. • Biomass (palm oil and wood residues), rice husks, municipal wastes and solar energy account for more than 90% of RE potential. • RM10 billion p.a. in equivalent energy content – immediately available from biomass (palm oil and wood residues).

21. CONFERENCE ON ENERGY EFFICIENCY AND RENEWABLE ENERGY HELD IN CONJUNCTION WITH ELENEX MALAYSIA 2003 EXHIBITION Small Renewable Energy Programme (SREP) • Launched 11 May 2001. • Power generation plants – 10 MW and below which utilize RE. • Can sell electricity to TNB and SESB via distribution grid. • The implementation of SREP is coordinated by SCORE at MEWC. • A secretariat at ST – a one stop centre facilitating new investment in RE. • SCORE & ST have jointly published a guidelines on the development of grid-connected small RE plant.

22. 2001 Budget ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Renewable Energy Measures • Companies generating energy using biomass are given the following tax incentives: • i. Pioneer status with tax exemption of 70% of statutory income for a period of 5 years or Investment Tax Allowance of 60% on the qualifying capital expenditure incurred within a period of 5 years with the allowance deducted for each year of assessment to be set off against 70% of statutory incoming and; • ii. Import duty and sales tax exemption for equipment used in the project and are not produced locally. Equipment purchased from local manufacturers is given sales tax exemption.

23. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA 2003 Budget • The incentive be extended for a period of three (3) years until • 31 December 2005. • The company is required to implement the project within one year from the date of approval. • The use of other sources of RE was also extended to: • ~ hydro power (not exceeding 10MW); and • ~ solar power

24. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Targets and Outcome • Current Status of SREP Projects (as at November 2003) • ~ 52 projects approved and 6 licenses issued • ~ Estimated capacity 317.95 MW (if fully implemented) • ~ Biomass – 69.1%, landfill gas – 3.2%, mini hydro – 27.7% • Off-grid RE utilization projects in Malaysia includes palm oil mills, sawmills, solar system (thermal and photovoltaic panel) and mini hydro schemes have been in commercial operation for decades. • 320 palm oil mills – cogeneration systems utilizing RE. • Palm oil waste (mesocarp fibre and palm kernel shells) – to fire up boilers. • New aspect of RE in palm oil mills – improved efficiency in generating steam and electricity using all waste generated in the mill. • Excess electricity can be exported to the distribution grid.

25. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Other RE Projects • Cogeneration • ~ Ban Heng Bee rice mill (rice husks) • ~ Awana Kijal Golf & Bach Resort (solar water heating) • ~ Solar drying on commodities and products I.e. paddy coffee noodles, fish by Malaysian Agriculture Research and Development Institute (MARDI. • Solar energy • ~ Solar Energy Research Park – Universiti Kebangsaan Malaysia • ~ PV systems – rural areas where supply of grid electricity is not available. • ~ Government spent RM144 million to install these systems in remote areas of Sabah and Sarawak.

26. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA • Mini hydro • ~ Imexa (M) Sdn. Bhd. – 13MW • ~ Gopeng Berhad – 1.2MW • Total electricity generated from cogeneration is 3,432.6 GWh which 826,385 MWh is RE.

27. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Problems and Obstacles Renewable Energy is promoted because: • it is strategically important in the long term to contribute to the sustainability of energy supply; • it helps to address the environmental concerns that emerge due to the emission of green house gasses; and • it acts as a pollution control whereby industrial waste such as wood residues, palm oil waste and agriculture waste could be converted into usable forms of energy.

28. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Insufficient utilization of RE due to: • the emergence of new technologies that compete for the same raw material used for RE, particularly biomass; • the risk of selling to a single buyer and the bankability of RE projects; • the uncertainty with respect to the technological development to convert RE into usable forms; • the economically unattractiveness of the generation of energy from RE because of the availability of cheaper alternative energy, high cost of generation and the inability to supply to the international grid; • little public demand for energy from RE; and • a lack of reliable information on the potential supply of RE at the national level.

29. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA POLICY RECOMMENDATIONS

30. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Future Challenge – Energy Conservation To promote Energy Conservation there is a need to: ~ introduce a clear and transparent policy on energy conservation; ~ promote greater general public awareness on energy conservations and its benefits to the current and future generation so that they can be the catalyst in the promotion of energy conservation programmes and projects; ~ increase the capacity and capability of the public and private sectors in formulating, planning and implementing energy conservation policy, strategies, programmes and projects; ~ promote a coordinated approach to energy conservation; and ~ promote greater and active private sector participation in energy conservation programmes and projects.

31. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA Future Challenge – Renewable Energy To increase the share of RE in power generation, there is a need to: ~ ensure the supply of fuel in particular, palm oil is enough for power generation. The uncertainty of fuel supply has been one of the reasons the financial institution is reluctant to finance the RE programmes; ~ ensure the price of RE fuels, particularly biomass, are competitive so that the cost of producing electricity from these sources can be competitive; ~ increase the general public awareness on the benefits of RE so that the public will demand for electricity from RE sources and will be willing to pay more for it because of their benefits. It may also facilitate the introduction of green tariff if required; and ~ provide incentives to the financial institutions to finance more RE projects.

32. ENERGY CONSERVATION AND RENEWABLE ENERGY PROMOTION IN MALAYSIA THANK YOU www.st.gov.my