Electricity generation from oil palm biomass in Malaysia: A policy framework

Palm oil production is one of Malaysia’s major industries. There is considerable controversy about its environmental impacts and many efforts are underway to make it sustainable. One approach to this objective is to minimise the waste from this industry by converting it into useful products. At present, the oil palm crops produce around 85.5% of available biomass wastes in the country, which technically offers great potential for large-scale power generation in Malaysia. The renewable energy (RE) industry in Malaysia began in 2001 when the Small Renewable Energy Power (SREP) Programme was introduced to drive the development of the industry, based on the abundance of oil palm biomass reserves and other identified renewable energy resources. Due to its poor performance, the SREP was scrapped and replaced by the Feed-in Tariff (FiT) scheme in 2011. The new regime sets an ambitious 2080MW national capacity target for the year 2020 and includes proposals for economic reform of the industry. Oil palm biomass waste alone is projected to contribute 800MW of grid-connected capacity towards this target, a huge step up from the 40MW capacity reached during the SREP period. However, despite a major overhaul of the market structure, the sustainability of the grid-connected oil palm biomass renewable energy industry downstream components under the new scheme remains questionable. By considering the flaws of the previous regime, this study examines the sustainability of three main components that constitute the downstream value chain under the FiT policy framework. These include: the adequacy of biomass resource supply; the efficiency of the bio-energy conversion system; and alternatives to grid extension. In order to understand the market behaviour and other industry problems, this study uses a mixed methodology approach involving a combination of market survey and regulators‟ interviews. The aggregated results from these techniques were later discussed by focus group experts representing both industry and government stakeholders before arriving at a final consensus. All 417 oil palm power producers across the country participated in the survey activity, in which 289 of them were involved in the electronic mail (e-mail) survey and the remaining 128 respondents were approached via the postal mode. Overall, the study received eighty-five (85) returned questionnaires or a 20.4% industry response rate. Later, in-depth interviews were conducted involving key decision makers representing four major Ministries that have direct or indirect control of the industry. Equal numbers of representatives from industry and government then further deliberated on the findings from these earlier methods to find final solutions. The numerical and narrative data of the study were analysed by using two main tools, a computer-based Statistical Package for the Social Sciences (SPSS) version 17 software and a computer-aided NVivo Version 8 respectively. Deriving from the evaluation of the current policy settings and a market based appraisal, this work outlines a policy framework and industry roadmap for the Government’s consideration. Overall, there are sixteen suggested initiatives, and these have been categorised into short-term, mid-term and long-term strategies for execution. Amongst the main strategies deriving from this research are options to diversify boiler fuels and maximise the use of discarded and underutilised wastes in the field, such as large fibre and palm frond, and converting bulky feedstock into pellets and briquettes. Centralising a collection and technology hub facility offers a promising approach to reducing and stabilising resource supply pressure, while encouraging conversion to low carbon technology at the existing mills. More effort is also needed to develop local technology and increase technical expertise. Smart-partnership collaboration for building a large scale biomass plant is worth consideration as it lowers the business risks and enhances economies of scale. Finally, off-grid solutions involving decentralised generation would help to avoid further grid infrastructure investment.