Renewable Energy in Malaysia

INTERNATIONAL ISLAMIC UNIVERSITY MALAYSIA

ASSIGNMENT AUP 6432 ENVIRONMENTAL LAW & POLICY

DR RUSTAM KHAIRI ZAHARI

NUR NABILA AHMAD AZAM

G 1016160

AUP 6432 ENVIRONMENTAL LAW & POLICY

1.0 INTRODUCTION

Rapid depletion of fossil fuel reserves as well as climate change has driven the world towards

renewable energy sources which are abundant, untapped and environmentally friendly

(Salsuwada Selamat and Zulzikrami Abidin, u.d.). The renewable energy sector is fast gaining

ground as a new growth area for many countries worldwide with the vast potential it presents

environmentally and economically. Renewable energy sectors are all about using natural sources

to create energy. These natural sources usually include the sun, water, wind, and geothermal

sources. The science and technology are constantly developing so it is logical to expect even

more renewable energy sources in years to come, as well as the highly improved efficiency of

existing ones (Habjanec, 2009). Renewable energy plays a major role in meeting a country’s

energy needs, enabling businesses to reap energy cost savings and revenue while combating

global warming. Also, renewable energy is seen as a growth sector that will help propel the

country into a high-income economy. Using renewable energy sources is not only highly

beneficial from energetic point of view but also from ecological point of view because by

utilizing the renewable energy we can save our environment for our future generations

(Habjanec, 2009).

2.0 RENEWABLE ENERGY IN MALAYSIA

In Malaysia, oil and gas have been the main energy sources. However, with its gas reserves

estimated to last for another 33 years and oil reserves another 19 years, the Malaysian

government is trying to strengthen the role of renewable energy [RE] as the fifth cornerstone of

energy generation. As a matter of fact, previously Malaysia has already started to promote RE in

the Third Outline Perspective Plan [OPP3] (2001-2010) which has given emphasis on the

management of RE resources & encouragement of RE utilization (Hassan Ibrahim, 2002).

Besides, there was also a national project which called the Biomass-based Power Generation and

Co-generation in the Malaysian Palm Oil Industry [BioGen] which has been executed by the

Ministry of Energy, Water and Communication [MEWC] in 2002 (UNDP, 2006). This national

project aims to reduce greenhouse gas emissions from the power sector by catalyzing the

implementation of biomass technology in the palm oil industry using palm oil wastes (UNDP,

2006).


Today, the Minister of Energy, Green Technology and Water, Datuk Seri Peter Chin has clarified

that the government has underlined the role of renewable energy in the framework of 10th

Malaysia Plan (2011-2015) which emphasized the use of such energy that can help to reduce the

high dependency on fossil fuels (Yee, 2010). Also, the RE solutions and sustainable practices

have been included in the Malaysian budget with the purpose to promote greater use of

renewable energy to supplement the nation’s depleting oil and gas reserves (Yee, 2010). Apart

from that, another effort which has been taken by the government of Malaysia in promoting

renewable energy is through the formulation of legislation. There are two legislations which have

been introduced, namely the Renewable Energy Act 2011 (Act 725) and Sustainable Energy

Development Authority Act 2011 (Act 726). These two legislations have been marked as major

milestone in the development of renewable energy in Malaysia (Saiful, 2011). The two

legislations will be further elaborated below:

i. Renewable Energy Act 2011 (Act 725)

―The implementation of Renewable Energy Policy and Action Plan is anticipated to

accelerate the development of renewable energy in Malaysia because the adoption of the

Feed in Tariff (FiT) mechanism has an incentive structure to encourage the growth of

renewable energy.‖ - Datuk Seri Peter Chin (Minister of Energy, Green Technology and

Water)

Renewable Energy Act (2011) described renewable energy as means electricity generated or

produced from renewable resources. Renewable Energy Act 2011 which has been enforced on

1st December 2011 is comprises of 9 Parts and 65 clauses. It has been defined as an act to

provide for the establishment and implementation of a special tariff system to catalyse the

generation of renewable energy and to provide for related matters (Renewable Energy Act,

2011). As been mentioned by Datuk Seri Peter Chin, the Renewable Energy Act was an

important piece of legislation that would create an environment conducive for renewable energy

to grow in an effective and sustainable manner (Borneo Post Online, 9 November 2011).

Under the Renewable Energy Act 2011, a feed-in tariff (FiT) mechanism has been introduced by

the Government of Malaysia (Chua, Oh and Goh, 2010). The FiT is believed as one of the most

suitable forms to support renewable energy (Yee, 2010). FiT, according to the Renewable


Energy Act 2011, means the special tariff payable to feed-in approval holders in consideration

for renewable energy generated and sold to a distribution licensee. For the purpose of FiT, Datuk

Seri Peter Chin elaborated:

―…a feed-in tariff (FiT) mechanism is established to enable interested parties to develop

renewable energy in a safe and secure manner as the generated electricity can be sold to

utility companies over a guaranteed period,‖

In other words, FiT is a mechanism that allows electricity produced from indigenous renewable

energy resources to be sold to power utilities at a fixed premium price and for specific duration.

The establishment of FiT has enabled interested parties to develop renewable energy in a safe

and secure manner as the generated electricity can be sold to utility companies over a guaranteed

period. Under the FiT, up to 30 MW of electricity generated from four renewable sources – solar

photovoltaic, biogas, biomass and small hydro – can be connected to the national grid and sold

back to utilities companies (Saiful, 2011). As such, the Renewable Energy Act 2011 can be

considered as a catalyst for renewable energy generation and it is also aligned with Malaysian

government’s aim to achieve 5.5 per cent renewable energy in Malaysia’s total energy mix by

2015 (Saiful, 2011).

Feed in Tariff (FiT) mechanism in Malaysia:

According to Badriyah Malek (2011), FiT is a mechanism that allows electricity that is produced

from indigenous RE resources to be sold to power utilities at a fixed premium price and for

specific duration. She further elaborated that FiT system provides a conducive and secured

investment environment which will make financial institutions to be comfortable in providing

loan with longer period (more than 15 years). The FiT system can be described as follows:

1. Provides fixed revenue stream for installed system

2. Only pays for electricity produced which promotes system owner to install good quality

and maintain the system

3. With suitable degression rate, manufacturers and installers are promoted to reduce prices

while enhancing quality

According to SEDA Malaysia (u.d.), there are four steps of how the FiT system is funded. For

the first step, electricity consumers will pay electricity bills to Distribution Licensees, Tenaga


Nasional Berhad for instance. Step two, 1% of electricity revenue will be channeled from

distribution licensees to RE Fund which is managed by SEDA Malaysia. Step three, the

Distribution Licensees (DL) will make FiT payment to Feed-in Approval Holders (FiAHs). For

the last step, DL will claim from RE Fund, the positive sum of the differential between FiT

payments and the prevailing displaced cost, including an administrative fee.As been claimed by

Datuk Seri Peter Chin:

―With the FiT, it will be easier for everyone, whether individual consumers or companies

to generate renewable energy and sell their excess power back to Tenaga Nasional

Berhad or regional utility companies such as Sarawak Electricity Supply Corporation

and Sabah Electricity Board,‖ (Bernama, 15 July 2010).

In brief, FiT system in Malaysia obliges Distribution Licensees (DLs) to buy from Feed-in

Approval Holders (FIAHs) the electricity produced from renewable resources (renewable

energy) and sets the FiT rate. The DLs will pay for renewable energy supplied to the electricity

grid for a specific duration. By guaranteeing access to the grid and setting a favorable price per

unit of renewable energy, the FiT mechanism would ensure that renewable energy becomes a

viable and sound long-term investment for companies industries and also for individuals.

ii. Sustainable Energy Development Authority Act 2011 (Act 726)

― Sustainable Energy Development Authority Malaysia Act 2011 would enable the

establishment of SEDA Malaysia, a statutory body equipped with powers to enforce the

Feed in Tariff (FiT) system under Renewable Energy 2011 which would be tasked with

ensuring that FiT was implemented successfully in the country‖ Datuk Seri Peter Chin

(Borneo Post Online, 9 November 2011)

Sustainable Energy Development Authority Act 2011 (Act 726) has been enforced on 1st

September 2011. It comprises of 6 Parts and 49 Clauses. Sustainable Energy Development

Authority Act (2011) defined Sustainable Energy Development Authority Act 2011 as an act to

provide for the establishment of the Sustainable Energy Development Authority Malaysia

(SEDA Malaysia) and to provide for its functions and powers and for related matters.


SEDA Malaysia is the authority to spearhead renewable energy development in Malaysia

(Environmental Development in Malaysia, 2011). Generally, the key role of SEDA is to

administer and manage the implementation of the FiT mechanism which is mandated under the

Renewable Energy Act 2011 [Act 725] (The Sun Daily, 15 August 2011; SEDA Malaysia,

2011). Under Section 15 of Sustainable Energy Development Authority Act 2011 (Act 726),

functions of SEDA Malaysia include:

1. Advising the Minister & Government Entities on all matters relating to sustainable

energy

2. Promoting and implementing national policy objectives for RE – to promote, facilitate &

develop sustainable energy

3. Implementing, managing, monitoring & reviewing the Feed-In Tariff system

4. Implementing sustainable energy laws including the Renewable Energy Act &

recommend reforms

5. Promoting private sector investment in sustainable energy sector

6. Establishing measures to improve public awareness

7. Act as focal point on matters relating to sustainable energy & climate change matters

relating to energy

Tan Sri Dr Fong Chan Onn further clarified that SEDA Malaysia is responsible to ensure the

implementation of a systematic research and development (R&D) programme leading to

innovative products and services. To achieve such feat, SEDA is working with other

stakeholders including public research institutions such as universities on the R&D action plan,

which includes articulation of research areas and identifying potential market for

commercialisation of renewable energy (RE) researches that have been conducted. SEDA is

working with Ministry of Science Technology and Innovation which is responsible monitoring

the R&D efforts financed by the Government (The Star, 12 May 2012).

3.0 DISCUSSION

As been mentioned before, Renewable Energy Act 2011 and Sustainable Energy Development

Authority Act 2011 are the initiatives by the government of Malaysia towards the growth of

renewable energy in the country. Basically, the Renewable Energy Act 2011 focused on

furthering the renewable energy sector through the introduction of a FiT on energy consumption.


Meanwhile, the Sustainable Energy Development Authority Act 2011 covers the functions and

powers of the authority, SEDA Malaysia, in the enactment of renewable and sustainable energy

in Malaysia.

The Ministry of Energy, Green Technology and Water had conducted a thorough study on the

effectiveness of major RE policy instruments practiced globally. The findings of the study

showed that FiT is the most effective RE policy mechanism in promoting and sustaining RE

growth. The findings were drawn from past experiences learnt from other countries and studies

from international energy policy experts. These renowned experts have studied and concluded

that the FiTs have been proven to be the best support mechanisms to rapidly increase the share of

renewable energy production and use.

It has been acknowledged that the idea of FiT system is promoted through the Renewable Energy

Act 2011 which has been established by the Malaysian Government. According to KeTTHA

(2011), FiT system will give advantages to the nation in terms of economic, environment, social

and also political. Firstly, in the aspect of economic, through FiT system, there will be more

green jobs opportunities created. Besides, the system will also drive the economic development

by creating stable conditions for market growth. Secondly, FiT system will give benefits to the

environmental aspect through reducing dependency on fossil fuels and also declining of carbon

emission and pollutions. Next, in terms of social, FiT system can help to increase the awareness

of the citizen towards renewable energy and consequently, it will encourage citizen and

community engagement in activities of protecting climate and environment. Meanwhile, in

political aspect, Fit system can create mechanism for achieving RE and emissions reduction

targets as well as promotes a more decentralized and democratized form of electricity system.

According to Datuk Seri Peter Chin, with the commencement of the Renewable Energy Act

2011, feed-in-tariff system, and the setting up of SEDA as the central authority for the RE

industry, it was expected that by 2020, the renewable energy capacity for Malaysia would reach

2,080 MW or approximately 11 per cent of the total peak electricity demand capacity (The Star

Online, 21 March 2012). Meanwhile, in terms of greenhouse gas emissions, Datuk Seri Peter

Chin clarified that an accumulated 42 million tonnes of carbon dioxide could be avoided due to

renewable energy generated during the period. (Borneo Post Online, 9 November 2011). From


the statement given, it shows that the establishment of FiT system offers positive impact towards

the country.

From the arguments that have been discussed before, it shows that the formulation of two

legislations - Renewable Energy Act 2011 (Act 725) and Sustainable Energy Development

Authority Act 2011 (Act 726) - by the Malaysian government, will not only assist Malaysia in

promoting the environmental protection, but also help in generating economy of the country.

Eventually, the promotion of renewable energy will assist Malaysia towards achieving

sustainable development.

4.0 RENEWABLE ENERGY IN GERMANY

Germany has been acknowledged as one of the world’s major renewable energy economy. The

country has been a center of innovation in renewable energy technologies for many years

(Burgermeister, 2009). Since year 2002, the German government has been closely involved in

supporting the global dissemination and transfer of technologies for renewable energies, under

the banner ―renewables - Made in Germany‖ (German Energy Agency, u.d.). The Federal

Environment Minister of German, Jürgen Trittin clarified that a decisive breakthrough in the

development of sustainable energy provision has been achieved with the adoption of the

Renewable Energy Sources Act. The success of the German Renewable Energy Sources Act in

promoting the use of renewable energy sources for electricity generation is widely acknowledged

(Krewitt and Nitsch, 2002).

Basically, the German Renewable Energy Sources Act promotes renewable energy mainly by

stipulating feed-in tariffs that grid operators must pay for renewable energy fed into the power

grid. The purpose of the law is to facilitate the sustainable development of energy supply,

particularly for the sake of protecting the climate and the environment, to reduce the costs of

energy supply to the national economy, to conserve fossil fuels and to promote the further

development of technologies for the generation of electricity from renewable energy sources. To

this end, the act aims to increase the share of renewable energy sources in the German electricity

supply.

According to statistical data from the Working Group on Renewable Energy-Statistics, the

electricity generation from renewable energy sources in Germany which consist of hydropower,


wind energy, biomass, biogenic share of waste, photovoltaics and geothermal energy, is

increasing every years. In year 1990, the total of electricity generated was 17,086 GWh and it

has reached 121,939 GWh in year 2011 (Federal Ministry for the Environment, Nature

Conservation and Nuclear Safety, 2012). The huge gap between the two years shows the great

efforts done by the government and also the contribution from the citizens. It has proved that the

economic benefits of renewable energy sector in Germany are impressive. For instance, by 2010,

the field of renewable-energy-related jobs employed around 340,000 people, most of them in

biomass, wind power, and solar.

Renewable Energy Sources Act promotes renewable energy mainly by stipulating FiT that grid

operators must pay for renewable energy fed into the power grid. Germany’s feed-in tariff was

implemented in 2000. It has been a huge success and is generally regarded as the best example of

an effective FiT law (Wörlen, 2009). Basically, FiT policy is embedded in a climate and energy

policy framework that promotes renewable energy and efficiency technologies, including laws to

encourage combined-heat-and-power plants, a cap and trade system, the energy tax reform and

several additional measures (Federal Ministry for the Environment, Nature Conservation and

Nuclear Safety, 2012). The formulation of FiT has contributed to the development of the solar

sector in Germany. Today, Germany is one of the largest solar heating producers in the world

with a 47% share of the global market. There are now over 40 companies in Germany that

produce solar system components, and the industry employs more than 20,000 people, and has a

turnover of €1.7 billion per year.

It has been acknowledged that renewable energies do not suffer from scarcity problems such as

oil, gas and uranium. In fact, they create new jobs, new industrial opportunities and benefits the

national economies. Burgermeister (2009) further added that renewable energy holds the promise

of reducing pollution, creating jobs and diversifying the market while providing a long-term,

secure, local energy supply to fuel the economy. Also, based on the report finding on the

Germany country’s Renewable Energy Sources Act in 2006, it has shown several significant

advances in Germany’s renewable sector (Worldwatch Institute , 2006):

1. The share of electricity from renewable energy sources nationwide has increased from

6.3 percent in 2000 to 12 percent in 2006.


2. The Act resulted in the avoidance of 45 million tons of carbon dioxide (CO2) emissions

in 2006, up from 37 million tons avoided in 2005.

3. All renewable energy used in Germany—for electricity, heat, and transport fuel—avoided

the release of more than 100 million tons of CO2 in 2006.

4. Approximately 240,000 people in Germany were employed in the renewable energy

sector in 2006, representing a 40-percent increase over 2004. More than half of these jobs

were created by the Renewable Energy Sources Act.

Currently, Germany is accelerating its efforts to become the world's first industrial power to use

100 percent renewable energy by 2050. The discussion has showed that the German Renewable

Energy Sources Act has significantly given positive impacts to the country. As been clarified by

Hans-Josef Fell, Germany’s Renewable Energy Sources Act has given Germany a large internal

market and brought about a series of innovative developments in wind energy, photovoltaics,

biogas, wood generated electricity and vegetable oil-fired district heating plants (MGCC, 2010).

In brief, there is no doubt that renewable sources play a major role in providing secure and clean

energy in Germany. The positive impacts of renewable energy promotion in Germany have

proven the effectiveness approaches that have been taken by the government and the support

from the public which can be referred by other countries.

5.0 RECOMMENDATION AND CONCLUSION

Malaysia is amply endowed with an abundance of energy resources, both depletable and

renewable resources. This notwithstanding, there has been an overdependence on depletable or

conventional sources of energy, hence the potential of renewable energy has not been fully

exploited (Hitam, 2000). The RE capacities are grossly under-utilized, particularly from biomass

and solar energy (Siti Mustapha, Peng and Amir Hashim, 2010). The Malaysian Government

recognizes the potential of RE as an alternative to ensure the sustainability of energy resources.

For the past 60 years, Malaysian government has formulated quite a number of energy-related

policies to ensure sustainability and security of energy supply (Islam, Saidur, Rahim and Solangi,

2009). It has been acknowledged that the government of Malaysia has adopted and adapted the

Renewable Energy Sources Act from Germany in enacting the Renewable Energy Act 2011 and

Sustainable Energy Development Authority Act 2011. As such, Hans-Josef Fell, the


spokesperson on the Energy Policy for the Green Parliamentary Group in the German Bundestag

commented on the situation of renewable energy in Malaysia. He stated:

―What makes renewables hard to compete in Malaysia is the high subsidies for fossil

energies which make the price of oil, uranium or coal seem cheaper. Even today, the

prices for generating power using wind is cheaper than using coal and nuclear energy if

a new power plant is constructed‖ As been claimed by Fell, Spokesperson on the Energy

Policy for the Green Parliamentary Group in the German Bundestag‖ (MGCC, 2010).

As such, Fell suggested that in order for Malaysia to successfully follow Germany’s footsteps in

the renewable energy sector, all subsidies for fossil energies have to be stopped (MGCC, 2010).

Apart from that, since the act which concerned renewable energy in Malaysia has been

formulated based on the Germany’s act, the government of Malaysia should take an initiative to

study or organize a discussion or seminar with the Germany’s respective authority in order to

acquire their experience, knowledge and technologies. Therefore, the Malaysian government can

improve the system in Malaysia to be as competent as Germany.

Also, as one of the developing countries, the development and economic growth in Malaysia

continue to affect the growing demand of energy consumption. The crucial challenge faced by

power sector in Malaysia currently is the issue of sustainability (Ong, Mahlia and Masjuki,

2010). Thus, Malaysia needs better access to stable and affordable energy supplies, as well as

new technological solutions enabling efficient use of traditional and renewable energy sources.

More consistent support for climate-friendly development on the basis of renewables in the

countries of the South is needed. The same holds true for international assistance packages for

developing countries involving technology-sharing and renewable energy (Hennig, 2007).

Next, according to Tan Sri Dr Fong Chan Onn, the major difficulty to pursue RE growth in

Malaysia is gaining public’s acceptance of RE. A successful RE deployment in a country

requires a paradigm shift because the current infrastructure and mind set is for conventional

power generation like electricity and we have been comfortable with this for more than 50 years.

The public is also slow to accept RE because the Government has kept the price of electricity

low by subsidizing gas from Petronas (The Star, 12 May 2012). Due to this matter, the

government of Malaysia should organize various programs which can increase the awareness of


non-government agencies and public towards the importance of the role of renewable energy in a

sustainable system. Therefore, they can take a more proactive step to coordinate, promote and

use energy generated based on renewable resources before we can see a wider utilization of

renewable energy in Malaysia

Minister of Energy, Green Technology and Water Datuk Seri Peter Chin claimed the renewable

energy prospects were bright in Malaysia as it had very rich resources which could be readily

tapped, such as solar, biogas, biomass and hydro (Saiful, 2011). However, he said as our way of

using energy was not sustainable, there was a need to change our lifestyle and use less energy.

For that reason, the Malaysian should have to discard bad habits of wasting energy, resort to

energy saving electrical appliances wherever possible, design and build more energy efficient

homes and commercial buildings, and most importantly, find alternative sources of energies.

As a conclusion, the use and production of renewable energy can bring about many positive

benefits (Piebalgs, 2007). It helps to secure the energy supply, reduce CO2 emissions, slows

down the negative global temperature trend and proposes a feasible model for sustainable energy

strategies. Besides, renewable energy sector also offers more business opportunity. Therefore,

there is a need to have Acts like Renewable Energy Act 2011 and Sustainable Energy

Development Authority Act 2011, which can govern and accelerate the development of

renewable energy in Malaysia. The key roles played by the acts will help to bring the nation

towards achieving sustainable development.


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Documents

Renewable Energy in Malaysia