Refresh and renew: Government policy and market forces are driving growth throughout the renewables segment

Malaysia’s development strategy for 2015-20, the 11th Malaysia Plan (11MP), continues to stress previous commitments to “pursuing green growth for sustainability and resilience”, a concept that in power terms involves full support for the development of renewable energy (RE) projects nationwide.

Indeed, the 11MP sets a target of 2080 MW of RE capacity by 2020, the plan’s final year. This will be some 7.8% of total installed capacity for the peninsula and Sabah –a major leap up from the 344.32-MW total of 2016. In terms of the types of RE, the 2020 projection is composed of 38% biomass, 17% solid waste, 12% biogas, 24% mini-hydro, and 9% solar photovoltaic (PV). In contrast, the 2016 figure comprises 68% solar PV, 17% biomass, 5% mini-hydro, 4% solid waste, and 2% biogas, as per figures from the Sustainable Energy Development Authority (SEDA). Therefore, the next few years are set to see not only a major expansion of RE, but also a major shift in the composition of the resource mix. New projects and technologies are also being investigated, while the 11MP also promises a major enhancement of the human resources behind RE, as well as new ways of organising the payment for generation, with a switch from a feed-in tariff (FIT) to net-energy metering (NEM) system.

Renewables Take Off

These developments come as the next stage of an RE programme that has already received a major legislative and structural boosts under the previous national plans, the Ninth Malaysia Plan (9MP) and 10th Malaysia Plan (10MP).

On the legislative side, the 9MP (2006-10) saw the passing of the National RE Policy and Action Plan, which set up the priorities for the 10MP period ( 2011-2015). This plan saw the RE Act brought in for 2011, which was amended six times in the following four years. Virtually its only provision, however, was the establishment of a FIT system, to be administered and implemented by a new body, SEDA. This was also set up via its own act in the same year. The FIT system selected guaranteed access to the grid for producers of four types of RE: biomass, biogas, solar and mini-hydro. Under these procedures, SEDA issues approval certificates to generators for projects up to 30 MW in size. These generators then sell their output to distributors – Tenega Nasional Bhd (TNB) and NUR Power on the peninsula, and Sabah Electricity Sdn Bhd (SESB) in eastern Malaysia.

SEDA also calculates the FIT rate, with different sources of RE being paid different rates for the energy supplied. The energy also must be generated within Malaysia. The type of source also determines the duration of the supply agreement, with biomass and biogas resources receiving 16 years, while small hydropower and solar PV are given 20. There is also a cap on the number of FIT approval certificates issued every six months for each type of RE, to ensure funds are available to make all the payments to suppliers.

Solar Rising

The scheme has boosted the country’s solar PV panel industry (see Industry chapter) and attracted generators, as it offers a long-term contract at a fixed price and guaranteed off-take of whatever is supplied. “Of the four main technologies targeted under the FIT – biomass, biogas, solar and mini-hydro – solar has comfortably received the most applications from both individuals and non-individuals alike,” Catherine Ridu, CEO of SEDA, told OBG.

Some areas in Malaysia are particularly well-suited for solar power, with northern regions such as Kedah on the peninsula and Kudat in Sabah particularly favourable for hours of sunshine. The country has average solar radiation of 400-600 megajoules per sq metre per month, with a higher amount during the north-east monsoon period and less during the south-west monsoon. The sunniest urban areas are Kota Kinabalu in Sabah and Georgetown on Penang.

FIT has been made available to individuals, households, and larger businesses, with proposed projects divided between those less than or equal to a kilowatt peak of 72 and larger projects. The latter group has to undertake more rigorous inspections and meet local and national regulations. Banks were initially cautious about financing PV systems, but over time, loans have become more widely available for their installation, as FIT revenues can be assigned to the bank, providing the lender with a reassuring income stream.


The era of FIT is coming to an end. As of 2016-17, no new applications will be processed, with the RE industry now moving on to what advocates hope will be a much larger-scale system. In August 2015, the Ministry of Energy, Green Technology and Water (MEGTW) announced that in 2016, it would be developing 500 MW of capacity for NEM in solar PV. This programme is set to run up until 2020.

Under NEM, RE power generators are able to generate electricity for their own consumption. In periods of surplus, the generator can supply power to the grid – running the meter backwards – while in periods of deficit, the generator can pull electricity from the grid. At the end of the payment period, the net balance is read off the meter and either a bill paid to the distributor, or a fee paid to the generator – although in Malaysia, as in most systems, the generator is likely to be simply given a zero bill, if there is a negative reading, rather than refunded any difference.

SEDA is the main implementing agency, working closely with the Energy Commission, MEGTW and industry bodies such as the Malaysian PV Association to produce a set of guidelines and regulations. These guidelines will likely draw on earlier experiences with this model. In 2006, the Malaysian Building Integrated PV (MBIPV) project used NEM for its PV systems, installed under the Suria 1000 programme and other demonstration projects. These programmes were aimed at developing expertise and interest in PV in the country and drawing investors into the sector. MBIPV ended in 2010, with some success, as the PV industry then began to gain ground.

NEM tends to favour large-scale projects, undertaken by industrial and commercial enterprises, which can use RE to cut their total electricity bills. A 2014 survey showed 43 countries worldwide using NEM – up from just 13 in 2010. One reason for this growth in NEM is that it reduces costs, while the FIT system can become expensive. Furthermore, some argue that NEM tends to mean that generators tailor their RE provisions more to their own needs, as businesses or households, thus reducing the load on distribution and transmission networks.

Sustainable Energy

The major readjustment in the resource mix of the RE sector means significant investment in biomass is to be expected in the coming years. In Malaysia, there are eight main types of biomass: oil palm byproducts, rice husks, sugarcane bagasse, manure, sawdust, grass crops, forest residues, and municipal solid waste.

However, with the rapid growth of the oil palm plantation industry, the Malaysian Biomass Industry Action Plan 2020 notes that the main source of biomass is the palm oil industry, with 46.53% of annual biomass availability from oil palm fronds, 6.63% from oil-palm trunks, 22.43% from empty fruit bunches (EFB), and 5.61% from oil palm kernel shells. Bio-energy is one of the main areas where these waste products are currently being used. Figures from 2013 showed that 76% of the 60.84 MW of capacity in the biomass segment was generated by oil-palm biomass.

A waste product of palm oil processing, palm oil mill effluent (POME), emits large amounts of methane during its anaerobic process. Bio-compressed natural gas (BioCNG) is one of the ways this waste can be utilised as a renewable fuel, and the world’s first commerical BioCNG plant using biogas from POME was launched in October 2015 in the state of Selangor.

Palm oil itself is also in demand from the energy sector, with Malaysia now aiming to raise its current 7% palm oil blend in diesel oil for the transport sector to 10% – although at time of writing, this was under debate over potential performance effects. The biofuel segment of palm-oil sector was also coming under increasing pressure from lower oil and gas prices – a factor which has impacted RE as a whole, as it becomes relatively more expensive.

According to Prime Minister Najib Razak, approximately 50% of Malaysia’s biomass is generated in Sabah and Sarawak, where plantations have been expanding rapidly in recent years. The Sabah and Sarawak Biomass Industry Development Plan, launched in February 2016, hopes to leverage this growth, building on an already accelerating level of interest. In 2014, 12 biomass projects worth a total RM82.9bn ($20.5bn) had been approved, up from 11 projects worth a total RM54.6bn ($13.5bn) in 2013.

However, increasing the role of biomass does have its challenges. Logistics can sometimes be difficult: EFB, for example, must be collected and then taken to an often distant collection and processing point, before being sent to the plant – which may itself be some distance away and often across difficult terrain.