Rethink FiT scheme for biomass, create value and deliver NetZero — Ahmad Ibrahim

Malay Mail

3 days ago

JULY 30 — Agricultural biomass is an underdeveloped resource. Undeniably it has significant economic potential. Malaysia has set ambitious targets for renewable energy in her efforts to reduce carbon emissions and diversify its energy mix. Biomass is part of the mix. The country aims to achieve 31 per cent renewable energy capacity by 2025 and 40 per cent by 2035 under the National Energy Transition Roadmap (NETR). Biomass is a key component of this strategy. The Feed in Tariff policy, FiT, introduced by the government is a scheme to incentivise the conversion of biomass into grid electricity. There have been challenges. Success has been mixed. Improvements to the scheme are needed.
Raw material availability is a big challenge. Malaysia's biomass potential is heavily tied to the palm oil industry, which generates significant amounts of residues like empty fruit bunches (EFB), palm kernel shells (PKS), and palm oil mill effluent (POME). However, over-reliance on a single industry poses risks if production fluctuates. This has been shown to be the case under FiT 1.0. Despite the reality that achieving economy of scale is critical, many palm oil mills hesitate to subscribe to collection centres. Many still resort to the uneconomic strategy to process their own. It is not sustainable. Furthermore, the practice of blending the low quality EFB oil with good CPO has attracted negative publicity.
Malaysia's biomass potential is heavily tied to the palm oil industry, which generates significant amounts of residues like empty fruit bunches, palm kernel shells, and palm oil mill effluent. — Picture by Ahmad Zamzahuri
Biomass materials are also used for other purposes, such as animal feed, fertilisers, and biofuels, creating competition and potentially driving up costs. While Malaysia has made progress in biomass energy, the efficiency of conversion technologies needs improvement. More R&D must be invested here. Integrating biomass energy into the national grid requires upgrades to infrastructure and grid management systems to handle variable and decentralised energy sources. The upfront costs of setting up biomass plants and related infrastructure can be prohibitive. This explains why many licensees under FiT 1.0 failed to execute their quota. No wonder it was recently reported that the MW targets set under FiT 1.0 were miserably under achieved, as highlighted under the Audit Report.
There are financial barriers to the scheme. Biomass energy production is less competitive without subsidies or incentives. FiT schemes are meant to address that. Securing sufficient investment for biomass projects remains a challenge, particularly for the less efficient licensees. While feed-in tariffs (FiTs) and other incentives exist, their effectiveness in driving large-scale adoption of biomass energy needs to be evaluated. Inconsistent or unclear policies can hinder long-term investment in biomass energy projects. Strict regulations on environmental protection, while necessary, can slow down the development of biomass projects. Effective collaboration between government agencies, private sector players, and local communities is essential but often challenging to achieve.
There are social and logistical issues. Limited public awareness can slow down its adoption. Efficient collection, transportation, and storage of biomass materials are critical but can be logistically challenging. There are however opportunities to overcome the challenges. R&D is key. Investing in advanced technologies, such as gasification and anaerobic digestion, can improve efficiency and reduce costs. Strengthening partnerships between the government and private sector can attract more investment and expertise. Training and capacity-building programmes can enhance local expertise in biomass energy production and management. Leveraging international expertise and funding through partnerships with global organisations can accelerate progress.
While Malaysia has significant potential to achieve its biomass-based renewable energy targets, overcoming the challenges will require coordinated efforts across multiple fronts. Addressing resource sustainability, improving technology and infrastructure, providing financial incentives, and ensuring supportive policies will be critical to realising these goals. With the right strategies and investments, Malaysia can position itself as a leader in biomass energy in the region. As the FiT tariff rate, under 30 sen per KWh, is deemed not viable for business, the government has just introduced FiT 2.0 at a higher rate of 46sen. The only issue with FiT 2.0 is that, for reasons known only to the policy makers, existing biomass players are not encouraged to bid without surrendering their current quota. It is common knowledge that surrenderring their current contract would incur them more losses. This is rather odd since under FiT 1.0 they proved to be the genuine ones. Unless the genuine players are automatically included in the FiT 2.0 scheme, we may see another round of mistargets.
* The author is affiliated with the Tan Sri Omar Centre for STI Policy Studies at UCSI University and is an associate fellow at the Ungku Aziz Centre for Development Studies, Universiti Malaya. He can be reached at [email protected].
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.