Strengthening the palm oil biomass Renewable Energy industry in Malaysia

The palm oil industry contributes 85.5% of the total biomass production in Malaysia, hence offering great potential for large-scale power generation. Despite being a tool that was designed to steer renewable energy development, the Small Renewable Energy Power (SREP) scheme has failed to stimulate the growth of the industry. To assist the industry, a new Feed-in Tariff (FiT) regime was introduced in 2011 with an ambitious 2080MW national renewable energy target by the year 2020. Palm oil biomass 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. This study investigates whether the current downstream value chain mechanism under the new policy system is capable of supporting such a high capacity goal. The main objective of this study therefore is to evaluate the sustainability of components that constitute the value chain, including the availability of palm oil biomass supply, bio-energy conversion technology and the costs and alternatives to grid extension. In order to understand the 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. Potential future strategies deriving from this research include options to explore the potential use of less sought after large fibre and palm frond. Centralising a technology hub facility offers an alternative approach to encourage conversion to a low carbon technology at the existing mills. 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 decentralized generation would help to avoid further grid infrastructure investment