Malaysia - SETatWork - Sustainable Energy Technology at Work

COUNTRY REPORT 

MALAYSIA 

To: 

T@W 

‘Sustainable Energy Technology at Work on the Market Generated by the 

EU Emission Trade Scheme and the Linked CDM and JI Markets’ 

Prepared by 

Policy Analysis and Research Management Division 

Pusat Tenaga Malaysia

TABLE OF CONTENT 

1 General Country Overview ................................................................................. 1 

1.1 Malaysia Energy Policy ............................................................................... 2 

1.2 Malaysia Energy Supply ............................................................................. 2 

1.3 Malaysia Energy Consumption..................................................................... 4 

1.4 Fuel Mix in Power Generation ...................................................................... 5 

2 Legislation....................................................................................................... 7 

3 CDM in Malaysia ............................................................................................... 8 

3.1 CDM Project Development in the Host Country .............................................. 8 

3.2 National Institutional Arrangement .............................................................. 8 

3.3 CDM Requirements.................................................................................... 9 

4 SET Opportunities........................................................................................... 14 

4.1 CDM Potential in Malaysia......................................................................... 15 

4.1.1 Biomass Fuels ............................................................................ 16 

4.1.2 Biogas and Landfill Gas................................................................ 16 

4.2 Potential of CDM to Assist SREP Projects..................................................... 17 

5 SET/CDM Options in Malaysia ........................................................................... 19 

5.1 Biomass Energy Plant .............................................................................. 19 

5.1.1 Setting:..................................................................................... 19 

5.1.2 General description: .................................................................... 19 

5.1.3 Technical details: ........................................................................ 20 

5.1.4 Energy data: .............................................................................. 20 

5.1.5 Environmental data:.................................................................... 20 

5.1.6 Economic data: .......................................................................... 21 

5.1.7 Additional information: ................................................................ 21 

5.1.8 Photo library: ............................................................................. 22 

5.1.9 Contact information: ................................................................... 22 

5.2 Replacement of Fossil Fuel by Palm Kernel Shell Biomass in the Production of 

Portland Cement ..................................................................................... 23 

5.2.1 Setting:..................................................................................... 23 

5.2.2 General description ..................................................................... 23 







5.3 Krubong Melaka LFG Collection and Energy Recovery CDM Project.................. 27 

5.3.1 Setting:..................................................................................... 27 








5.4 Factory Energy-Efficiency Improvement Project in Malaysia (MAPREC, PRDM, 

PSCDDM, PAVCJM,PCM) ........................................................................... 31 

5.4.1 Setting:..................................................................................... 31 







5.4.8 Contact information: ................................................................... 33

5.5 Kim Loong Methane Recovery for Onsite Utilisation Project at Kota Tinggi, 

Johor, Malaysia ....................................................................................... 35 

5.5.1 Setting:..................................................................................... 35 







5.5.8 Photo library: ............................................................................. 39 


6 SET/CDM Financing Concepts ........................................................................... 41 

6.1 Malaysia Govenrment Programme on Energy Efficiency and Renewable Energy 41 

6.1.1 Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP) 41 

6.1.2 Biomass Power Generation and Cogeneration Projects in Palm Oil 

Industry (BIOGEN)...................................................................... 41 

6.1.3 Small Renewable Energy Power Programme (SREP) ......................... 42 

6.2 Financing Initiative from Government......................................................... 43 

6.2.1 Renewable Energy Business Facility ............................................... 43 

6.2.2 Energy Efficiency Incentives ......................................................... 44 

6.2.2.1 Companies providing energy conservation services:......................... 44 

6.2.2.2 Companies which incur capital expenditure for conserving energy for 

own consumption........................................................................ 44 

6.2.2.3 Incentives for the use of renewable energy resources ...................... 44 

6.2.2.4 Accelerated capital allowance on equipment to maintain quality of 

power supply.............................................................................. 45 

6.2.2.5 Renewable Energy Power Purchase Agreement (REPPA) ................... 45 

6.3 Main Player and Target Groups for CDM Porject ........................................... 46 

7 Financing Schemes ......................................................................................... 47

1 General Country Overview 

Malaysia is made up of two distinct geographical parts; Peninsular Malaysia (on mainland 

Asia) and the states of Sarawak and Sabah on the island of Borneo which are physically 

separated by the South China Sea, about 600 km apart. To the north of Peninsular 

Malaysia is Thailand while its southern neighbour is Singapore. Sabah and Sarawak are 

bounded by Indonesia while Sarawak also shares a border with Brunei 1 . Political stability 

and sustainable economic development with equity are important in multi-ethnic, multicultural 

and multi-religious Malaysia, which has different stages of regional development. 

Malaysia has a tropical climate with many sunny days due to its location near the 

equator. Malaysia’s temperature range from 22 to 33 0 C is consistent throughout most of 

the year. There are two monsoon seasons (April to October) and (October to February) 

bring consistent rainfall. Malaysia is relatively high humid throughout the year. 

Malaysia experienced a sustained economic growth with an average annual GDP growth 

of over 8 per cent between 1990 to 1997. The economic turmoil, which began in July 

1997, led to economic contraction with GDP growth registering – 7.5% per cent in 1998. 

The Government as a result began to undertake measures to strengthen the economy 

and the financial systems to prevent a severe contraction of the economy. In 2000, the 

Malaysian economy rebounded strongly recording an average growth rate of GDP of 

4.5%. Based on 9 Malaysia Plan, Malaysia GDP for the period of 2006 – 2010 will grow 

at the average of 6%. 

1 http://www.tourism.gov.my 

1

1.1 Malaysia Energy Policy 

Energy has contributed significantly towards the rapid growth of the Malaysian economy. 

Today, about 80% of Malaysia’s total population lives in Peninsular Malaysia, the hub of 

the country’s economic activities. As Malaysia progresses towards becoming a developed 

country, energy consumption will correspondingly increase. In meeting increasing energy 

demand, concerted efforts have been undertaken to ensure greater security and 

sustainability of energy supply. Consumption of energy however produces some 

undesirable impacts on the environment and climate. Hence, sustainable use of energy is 

being given attention in Malaysia. 

Malaysia energy policy came in the 70’s, a time of rising crude oil prices and discovery of 

new oil sources in the Peninsular Malaysia. A Petroleum Development Act (PDA) was 

enacted in 1974 and followed by the National Petroleum Policy in 1975. However, a more 

comprehensive national policy on energy came in 1979. This National Energy Policy 

contains three principal policy objectives to guide future energy policy sector 

development. They are as follows: 

• Energy Supply: Assurance of adequate energy supply through the reduction of 

the dependence on oil, and through the development and utilisation of 

alternative sources of energy. 

• Energy Utilisation: Promotion and encouragement of the efficient use of 

energy and the elimination of wasteful and non-productive patterns of energy 

consumption. 

• Environmental Conservation: Minimisation of environmental degradation in 

realising the supply and utilisation objectives. 

In relation to the reliability and security of energy supply, Four-Fuel Diversification Policy 

was introduced in 1981, focusing on four main sources of fuel, namely oil, hydro, gas 

and coal which was also aimed to reduce the dependency on oil in the energy 

consumption, particularly in the power sector. This policy is then expended in the year 

2005 to include renewable energy (RE) as the fifth fuel to supplement energy supply 

from conventional energy resources. 

1.2 Malaysia Energy Supply 

For almost 20 years, Malaysia successfully diversified its energy consumption by taking 

advantage of domestic energy resource endowments. Malaysia total oil reserves stood at 

5.28 billion stock tank barrels (Bstb) (as at 1 st January 2006) with the remaining oil 

reserves and current national oil production target of 600,000 barrels per day (bdp). 

2

Gas reserves are also significant at about 85.2 trillion standard cubic feet (as at 1 st 

January 2006). To ensure adequate gas supply, the country will supplement domestic 

gas supply with gas from the Malaysia – Thai Joint Development Area (MTDJA) and West 

Natuna. The gas pipeline inter connections will forma part of the Trans-ASEAN gas 

pipeline network. 

The country’s coal reserves (as at 1 st January 2006), mainly in Sarawak and Sabah, were 

estimated at 1,483.06 million tones. The lack of economies of scale and competition 

from bigger coal producing countries are reasons why development of domestic coal 

reserves has not been aggressively pursued. 

With a projected average economic growth rate of 6% per year in the 2006 – 2010 

period, resource-rich Malaysia would have to cater for the 6.3% yearly increase in final 

energy demand. Total primary energy supply is projected to grow at an average of 4.4% 

per year in the same period (Economic Planning Unit, 2006). 

In 2004, oil and petroleum products accounted for 47% or 25.9 Mtoe of 55.2 Mtoe total 

primary commercial energy supply compared to 63% or 12.4 Mtoe in 1990 or ~88% or 

8.2 Mtoe in 1980. A significant drop in market share of oil and petroleum products 

attribute to the success of the four fuel diversification strategy. As shown in Figure 1, the 

share of gas grew rapidly from just 7.4% or 0.7 Mtoes in 1980 to 38.8% or 21 Mtoe in 

2004. This also implies that there is significant change in the share of hydrocarbon 

resources (oil and gas) in 1980 (95%) and 2004 (86%). 

Figure 1: Share of Energy Input in Commercial Energy Supply 

100% 

80% 

60% 

40% 

20% 

0% 

1980 

1985 

1990 

1995 

1996 

1997 

1998 

Year 

1999 

2000 

2001 

2002 

2003 

Crude Oil Petroleum Products Natural Gas Coal & Coke Hydropower 

2004 

Source: National Energy Balance 2004 

3

1.3 Malaysia Energy Consumption 

Figure 2 indicates that the industrial and transport sectors were the largest energy 

consumers in the 1990 – 2004 period. In 2004, share of transport and industrial sectors 

in the total final energy use were 41% and 40% respectively. 

Figure 2: Final Energy Use by Sectors (1990 – 2004) 

40.0 

35.0 

30.0 

25.0 

Agriculture 

Non-energy Use 

Residential & Commercial 

Transport 

Industrial 

Mtoe 

20.0 

15.0 

10.0 

5.0 

0.0 

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 

Year 


Final energy patter is explained by Table 1 which shows energy consumption by types of 

fuel. Over the 1995 – 2004 period, the country’s final energy consumption grew by 6% 

per year to reach 37,323 ktoe in 2004. In 1998, energy demand, however, contracted by 

2% as a consequence of the 1997 Asian financial crisis but rebounded by 7% in 1999 

due to renewed confidence in the economy. In terms of share of energy sources to final 

energy demand, the contribution of petroleum products declined from 66% in 2000 to 

61% in 20004 while the shares of natural gas increased from 13% and 17% respectively 

in 2004 (see Table 1). 

Table 1: Final Use of Commercial Energy by Types of Fuel (ktoe) 

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2004 

Share 

(%) 

Petroleum 

products 16,142 17,189 18,578 17,488 18,782 19,582 20,323 20,638 21,175 22,886 61.3 

Electricity 3,375 3,777 4,384 4,577 4,815 5,263 5,594 5,922 6,313 6,642 17.8 

Natural Gas 1,935 2,474 2,465 2,726 3,023 3,863 4,621 5,643 5,886 6,490 17.4 

Coal and 

Coke 712 727 740 767 608 991 977 1,086 1,212 1,305 3.5 

TOTAL 22,164 24,167 26,167 25,558 27,228 29,699 31,515 33,289 34,586 37,323 100.0 


4

The decrease in the share of oil and petroleum products in energy mix again reflects the 

success of the 4-Fuel Strategy. Although the electricity sector has successfully decoupled 

from oil dependency, the transport sector still relies heavily on petroleum products. The 

increase in private and commercial vehicles and the expansion of road networks have 

contributed to the high energy demand growth in the transport sector. Success of the 

rural electrification programme introduced by the government also contributed to an 

increase in electricity demand. 

1.4 Fuel Mix in Power Generation 

The increased share of gas in primary energy supply can be attributed to its very 

significant penetration as the fuel of choice for electricity generation. As shown in Figure 

3, the bulk of fuel for electricity generation in Malaysia came from natural gas (59%) 

followed by coal (30%), hydropower (8%), fuel oil and diesel (1.5%) in 2004. 

Figure 3: Share of Energy Input in Power Stations in Malaysia 

80% 

60% 

71.1% 

59.4% 

74.5% 

1980 

1999 

2004 

(Total: 2.76 M toe) 



40% 

30.0% 

20% 

0% 

13.9% 

10.4% 

11.7% 

9.3% 

6.7% 

7.5% 

1.2% 

1.5% 0.0% 

1.2% 1.5% 

Natural Gas Fuel Oil Coal Diesel Hydropower 


In terms of the overall electricity production, Malaysia electricity supply industry is 

dominated by three integrated utilities; Tenaga Nasional Berhad (TNB) serving Peninsula 

Malaysia, Sabah Electricity Sdn. Bhd. (SESB), Sarawak Electricity Supply Corp. (SESCo) 

and is complimented by various independent power producers (IPPs), dedicated power 

producers and co-generators. The Ministry of Energy, Water and Communications, 

through the Energy Commission is responsible in regulating the power industry to the 

extent that the industry achieves the National Energy Policy objective of meeting 

electricity supply that is adequate, efficient and gives minimal impact to the environment. 

5

In consonance with the growth of the economy in 2005, peak demand was recorded to 

be 13,779 MW with the installed capacity of 19,217 MW which increased the reserve 

margin to 39.5%. The value of this peak demand is projected to grow at an average rate 

of 7.9% per annum to reach 20,087 MW in 2010. With the expected installed capacity of 

25,258 MW, the average reserve margin is expected to decline to a more efficient level 

of 25.7%. In 2004, fuel mix in power stations consists the following percentage; natural 

gas (59.4%), coal (30%), diesel (1.5%), fuel oil (1.5%) and hydro (7.5%) which leads 

to consumption of 17,747 ktoe. 

6

2 Legislation 

The Energy Law in Malaysia consists of the following:- 

• Electricity Supply Act 1990 and its subsidiary legislation 

• Energy Commission Act 2001 

• Electricity Supply (Successor Company Act 1990) 

The Electricity Supply Act 1990 is an Act to provide for the appointment and functions of 

a Director General of Electricity Supply, the supply of electricity at reasonable prices, the 

licensing of electrical installation and the control of electrical installation, plant and 

equipment with respect to matters relating to safety of persons and purposes connected 

therewith. A licensee shall upon being required to do so by the owner or occupier of any 

premises in giving a supply of electricity to those premises and so far as may be 

necessary for that purpose, provide supply lines or nay electrical plant or equipment 2 

The Energy Commission Act 2001 is an Act to provide for the establishment of the 

Energy Commission with powers to regulate the energy supply activities in Malaysia, and 

to enforce the energy supply laws, and for matters connected therewith. This Act applies 

throughout Malaysia. Under this Act draws the functions and powers of Commission 

which among them are to implement and enforce the energy supply laws, to regulate all 

matters relating to the electricity supply industry, to promote the use of renewable 

energy and the conservation of non-renewable energy and etc. 

There is no specific regulation related to climate activities however the National Policy on 

the environment shows the support from Malaysia Governments on energy conservation 

and technology transfer. 

The National Policy on the Environment 3 aims at continued economic, social, and cultural 

progress of Malaysia and enhancement of the quality of life of its people, through 

environmentally sound and sustainable development. The Malaysia Green’s Strategies is 

adopted to promote environmental soundness research and programmes. Through these 

Green’s Strategies, energy conservation and the use of energy-efficient technology is 

emphasised. Investments in research and development for the development of clean and 

renewable sources of energy are encouraged. 

2 Energy Supply Act 1990, Part VI Supply by Licensee 

3 National Policy on the Environment, Ministry of Science, Technology and the Environment, Malaysia 

7

3 CDM in Malaysia 

3.1 CDM Project Development in the Host Country 

This section briefly discusses on the steps to be taken in order to develop a CDM project 

in Malaysia. Annex 1 below illustrates these various stages that the project developer 

will have to go through before the final Certified Emission Reductions (CERs) that 

generate the actual revenues can be issued. The stages involved in the CDM 

formalisation process include project development and design, national approval, 

validation, registration, monitoring and verification/certification. The last two are 

performed during the implementation of the project, whereas the other stages are 

implemented during the project design phase. 

Annex 2 and 3 show a more detailed CDM process that is applicable in Malaysia. 

The project developer will start the process of developing the CDM project by carrying 

out a screening on the CDM eligibility of the project. The Project Idea Note (PIN) needs 

to be submitted to the Designated National Authority (DNA) of Malaysia, which is the 

Conservation and Environmental Management Division (CEMD) of Ministry of Natural 

Resources and Environment. The DNA is the official institution that has been appointed 

as the focal point for CDM. For the DNA the PIN is the preliminary screening document 

based on which they carry out the initial screening on whether the submitted project 

activity meets the national sustainability criteria and whether the project involved an 

improvement of technology. Based on the PIN, the DNA can already provide a first 

judgement of the project and give a Conditional Letter of Approval. 

After getting the Conditional Letter of Approval, the PDD must be submitted to the DNA 

in order to received host country letter of approval. The project developers may be 

asked to provide more detailed information and/or clarification on the project if 

requested by members of the NCCDM. 

As for the time preparing the report, 7 CDM projects were registered by EB with about 

574,179 tCO 2e /yr emission reduction generated. The project includes the biomass and 

fuel switching project. This project consists of the consumption of efficient boiler and 

state-of-the-art technology system. 

3.2 National Institutional Arrangement 

The national institutional arrangement for the CDM is already in place. On 31 May 2002, 

the National Steering Committee on Climate Change (NSCCC) chaired by the Secretary 

General of the Ministry of Natural Resources and Environment (NRE) agreed on the 

8

establishment of a two-tiered organisation for CDM implementation in Malaysia (refer to 

Figure 5.3). The role of National Steering Committee on Climate Change is to formulate 

and implement climate change policies including mitigation of GHG emissions and 

adaptation to climate change. 

The two-tiered institutional set-up comprises of: 

• The National Committee on CDM (NCCDM); and 

• Two Technical Committees. 

The NCCDM is chaired by the Deputy Secretary General of the Ministry of Natural 

Resources and Environment (NRE). The role of this committee is to evaluate and endorse 

recommendations made by the Technical Committees regarding CDM project proposals. 

In addition, this Committee provides policy direction and guidelines for implementation 

of CDM projects at the national level. 

The Technical Committee for Energy is chaired by the Ministry of Energy, Water and 

Communications and the Technical Committee for Forestry is chaired by Ministry of 

Natural Resources and Environment. The role of these committees is to carry out 

technical and financial evaluation if the VFM project proposals using the 

recommendations provided by the Secretariat resulting from the first evaluation of the 

projects. 

The main roles of PTM and FRIM as the CDM Secretariat are (i) to recommend 

evaluated CDM project proposals to the TCCDM (ii) to provide inputs to the 

formulation of the CDM and marketing strategy on the request from DNA and (iii) 

to create awareness on CDM and disseminate information. 

3.3 CDM Requirements 

The priority areas for CDM projects in Malaysia are renewable energy (RE) and energy 

efficiency (EE) projects. Regardless the level of prioritisation, the approval of each 

project is obliged to the revised National CDM Criteria which was approved by the 

National Committee on CDM on 8 August 2006 providing a set of specific requirements 

for small-scale and normal-scale CDM projects. According to the criteria, CDM projects 

must comply with the 5 (five) following criteria: 

Criterion 1: Project must support the sustainable development policies of Malaysia 

and bring direct benefits towards achieving sustainable development 

9

Criterion 2: Implementation of CDM projects must involve participation of Annex I 

Party/Parties 

Criterion 3: Project must provide technology transfer benefits and/or 

improvement in technology 

Criterion 4: Project must fulfil all conditions underlined by the CDM Executive 

Board 

Criterion 5: Project proponent should justify the ability to implement the 

proposed CDM project activity. 

Each of the criteria will be discussed in further in the sections below 4 . 

Criterion 1: Project must support the sustainable development policies of 

Malaysia and bring direct benefits towards achieving sustainable development 

Sustainable development is a very important aspect for CDM project development. The 

proposed CDM project will be assessed based on the overall impact of the project and its 

contribution to sustainable development. Therefore, CDM projects must bring direct and 

indirect sustainable development benefits to the sector concerned and the economy as a 

whole. Benefit is defined as benefits of implementing CDM activities which are related to 

the three dimensions of sustainable development, namely, social, economic and 

environmental. A series of sustainable development aspects and indicators are developed 

for the purpose of project assessment. 

Apart from the sustainable development indicators, the proposed CDM project, 

particularly for energy related project shall also be screened for other aspects with 

respect to the following: 

1. Efficiency of resource utilization: 

2. Sustainable use of natural resources 

3. Local community 

4. In line with national energy policy 

Besides, the project should be linked to the focal policy area of the energy sector. 

Reference should be made to strategies laid out in the 9 Malaysian Plans such as: 

4 For more detail information, kindly refer to Malaysia CDM Information Handbook. 

10

! ensuring sufficiency, security, reliability, quality and cost-effectiveness of energy 

supply; 

! improving the productivity and efficiency of energy suppliers and promoting 

market-based approach in determining energy prices; 

! reducing the high dependence of petroleum products by increasing the use of 

alternative fuels; 

! promoting greater use of renewable energy for power generation and by 

industries; 

! intensifying energy efficiency initiatives in the industrial, transport and 

commercial sectors as well as in government buildings; 

! expending rural electricity coverage, particularly in Sabah and Sarawak; and 

! developing new sources of growth in the energy sector including participation of 

local companies in energy-related industries and services abroad. 

Criterion 2: Implementation of CDM projects must involve participation of 

Annex I Party/Parties 

In relation to Malaysia Government’s stand on bilateral CDM cooperation, the 

implementation of CDM projects must involve participation of Annex I Party/Parties in 

any of the following cases: 

1. Participation of an Annex I party as buyer, provider of equity and technology 

2. Participation of an Annex I party as buyer and provider of equity; 

3. Participation of an Annex I party as buyer and technology provider 

A buyer is considered to be involved if a Letter of Intent is signed between the owner of 

the CDM project and an Annex I party for sale of the generated Certified Emission 

Reductions (CERs) before host country approval is given. 

The share of equity of foreign direct investment in the project should be in compliance 

with the general investment guidelines for the sector in question. 

Criterion 3: Project must provide technology transfer benefits and/or 

improvement in technology 

Apart from that, CDM projects must involve technology transfer and/or improvement in 

technology which should include the transfer or improvement of both ‘soft’ and ‘hard’ 

elements of the technology. The project should lead to the transfer of environmentally 

sound technologies and know-how or improvement in technology which implies that the 

project applies a technology that is more efficient and less carbon intensive. In addition 

11

to that, the technology transfer and/or improvement in technology involved should also 

enhance the indigenous capacity of Malaysians to apply, develop and implement 

environmentally sound technologies. 

Technology transfer and/or improvement in technology should also support the 

sustainable objectives of Malaysia. As such, CDM projects should lead to reduced 

depletion rate of non-renewable energy resources through the adoption of technologies 

with higher energy efficiency or renewable energy technologies which increases the 

deployment of renewable energy resources. Technologies that reduce GHG emissions 

significantly through other Greenhouse Gases listed in Annex A of the Kyoto Protocol 

should also be considered. 

In order to ensure effective transfer of technology and/or improvement of technology 

employed in the energy sector, the relevant indicators should measure the following: 

! Impact of the project on indigenous capacity to apply, develop and implement 

environmentally sound technologies; 

! Impact on increased use of renewable energy resources and/or increased energy 

efficiency and/or reduction of greenhouse gas emissions; 

! Demonstration and replication potential of the technology; and 

! Impact on domestic energy-related industries and services (increased local 

content of skills and equipment in energy projects). 

Criterion 4: Project must fulfil all conditions underlined by the CDM Executive 

Board 

Getting a National Host Country Approval is a requirement for registration with CDM EB 

however in order for a proposed CDM projects to get a National Host Country Approval, 

the project is also required to fulfill all conditions underlined by the CDM Executive board. 

The conditions are as follows: 

! Voluntary participation; 

! Real, measurable and long-term benefits related to mitigation of climate change; 

and 

! Reductions in emissions that are additional to any that would occur in the 

absence of the certified project activity. 

12

Criterion 5: Project proponent should justify the ability to implement the 

proposed CDM project activity. 

Finally, the project proponent of a proposed CDM project should justify their ability to 

implement the proposed project based on the following: 

! Locally incorporated company; 

! Minimum paid-up capital of RM 100,000; and 

! Likely sources of financing the project 

13

4 SET Opportunities 

Malaysia is well endowed with both conventional (non-renewable) and non-conventional 

(renewable) sources of energy. The renewable energy resources in Malaysia includes 

biomass, solar, wind and geothermal. The status and trends in the potential of these 

renewable energy technologies transferred to Malaysia and the potential of the 

renewable energy projects for the status of Clean Development Mechanism will be 

discussed in the later section. 

In the year 2001, the Ministry of Energy, Water and Communications (formerly known as 

the Ministry of Energy, Communications and Multimedia) launched the Small Renewable 

Energy Power (SREP) programme to facilitate the implementation of grid-connected 

power generation utilising renewable energy resources. The launch of the SREP is among 

the steps taken by the Government to encourage and intensify the utilisation of 

renewable energy in power generation. This is in line with the government’s decision to 

intensify the development of renewable energy as the fifth fuel resource under the 

country’s Fuel Diversification Policy, as stipulated in the objectives of the Third Outline 

Perspective Plan for 2000 – 2010 (OPP3) and the Eight Malaysia Plan. 

Small power generation plants which utilise renewable energy can apply to sell electricity 

to the Utility through the Distribution Grid System. Project developers are required to 

negotiate directly with the relevant Utility on all aspects relating to the Renewable 

Electricity Purchase Agreement, including the selling price on a “willing-seller, willing 

buyer” and “take and pay” basis. The Renewable Energy electricity producers will be 

given a licence for a period of 21 years, which will be effective from the date of 

commissioning of the plant. Under this Small Renewable Energy Power Programme, the 

utilisation of all types of Renewable Energy, including biomass, biogas, municipal waste, 

solar, mini-hydro and wind, are allowed. 

Maximum capacity of a small renewable energy plant designed for sale of power to the 

grid must be 10 MW. A power plant can be more than 10 MW in size, but the maximum 

capacity that will be allowed for power export to the distribution grid must not be more 

than 10 MW. 

In order to co-ordinate the implementation of the Government’s strategy to intensify the 

development of Renewable Energy as the country’s fifth fuel resource, a Special 

Committee on Renewable Energy (SCORE) has been set up under the Ministry of Energy, 

Water and Communications. 

14

For most of the SREP projects, sustainable energy technology (SET) is used to generate 

energy from the RE resources, particularly biomass. The main technology involved 

includes boiler and fuel handling system which should reduce the moisture content of the 

biomass for optimised combustion. Most of these boilers and fuel handling systems are 

originated from developed countries, but manufactured locally under certain agreement 

between the developed countries and local boiler manufacturers; initiating technology 

transfer participation between countries. 

4.1 CDM Potential in Malaysia 

Malaysia has abundant waste resources consists of forestry, agricultural crops, trees, 

plant, organic waste and residue as well as agricultural effluence, agro-industrial and 

domestic origin i.e. sewage and municipal solid waste. It is expected the overall of 665 

MW capacity from about 20.8 millions tonne of biomass residues from palm oil, wood 

and agro-industries and 31.5 millions m 3 of palm oil mill effluent (POME) is used for 

power generation and cogeneration. If necessary, the unexploited biomass waste 

resources such as logging wood residues, rice straw, palm kernel trunks and other 

residues could supplement future biomass-based power generation in the country. 

The implementation of the environmental friendly projects leads to reduction of 

greenhouse gases. Malaysia ratified the Kyoto Protocol on 4 September 2002 and is thus 

a Party of the Kyoto Protocol. As present, as a developing country Malaysia is not 

subjected to any commitments towards reducing GHG emissions. However, as a Party of 

Kyoto, Malaysia can voluntarily participate in the CDM and benefit from investments in 

the GHG emission reduction projects. 

Under the international agreement, efforts in reducing greenhouse gases emissions 

promote cost-effective means of achieving the reduction commitments. The Clean 

Development Mechanism is the flexible financing tool designed to assist developed 

countries in the reduction of GHG emissions while assisting developing countries meeting 

sustainable development goal. The additional funding channelled through the CDM could 

assist Malaysia in reaching its sustainable development objectives, such as cleaner air 

and water, improved land use and in many cases, reduced dependence on fossil fuels. It 

is believed that CDM could stimulate the implementation of RE development in Malaysia. 

CDM can stimulate a capacity of up to 350 MW of small-scale renewable energy projects 

in Malaysia until 2010. Table 2 shows examples of the types of potential projects. 

15

Table 2: Examples of Potential Projects for CDM 

Sector 

Type of Projects 

Renewable Energy 

• Biomass power generation – on-grid and off-grid 

• Biogas 

• Solar: Solar water heating; solar photovoltaic systems 

• Hydro: Mini-hydro power 

Energy Efficiency 

• Improving efficiency in electricity production; improving 

Improvement 

combined heat and electricity production 

• Improved boilers; more efficient process heat and 

steam systems 

• Fuel switching 

Waste Management • Power and heat production from wastes 

• Gas recovery from landfills 

• Anaerobic waste water treatment 

Transportation 

• Efficiency improvements for vehicles 

• Switch to fuel systems with lower emissions 

Forestry 

• Afforestation projects 

• Reforestation 

Source: Malaysia CDM Information Handbook 

4.1.1 Biomass Fuels 

On national scale, biomass fuels contributes about 16% to today’s energy consumption, 

of which about 51% is palm oil biomass waste and about 22% is wood waste. The bioenergy 

is a conversion of biological waste matter into valuable energy source capable of 

taking the place of fossil fuels. The common practice of generating biomass fuels from 

palm oil solid residues is by using direct combustion system 5 . These conventional 

technologies operate at low pressure using horizontal fixed grate three-pass boilers. The 

industry is essentially energy self-sufficient using fibres and shells. Meanwhile, for the 

wood waste fuel system, direct combustion system is used for basic heat recovery for 

generation of saturated steam at low pressure for drying purposes. The bio-fuel is for 

direct combustion for power generation and liquid fuel transportation. Types of bio-fuel 

are bio-ethanol (made by carbohydrates) and bio-diesel (made from fats or oils). 

4.1.2 Biogas and Landfill Gas 

The anaerobic degradation of biomass waste resulted in methane emissions. Focus was 

placed on fast methane emitting sources where energy recovery from the projects can 

5 Technology Assessment Guide, Pusat Tenaga Malaysia 

16

e options for the renewable energy development in Malaysia. PTM with a support of 

DANIDA has conducted a study on ‘CDM Potential in the Waste Sectors’. The result from 

the waste resources assessment indicates that the total methane emissions from the 

waste sectors analysed is approximately 1.3 million metric tons (mT) per year 

(compared to total methane emission in Malaysia of 2.2 million mT estimated in 1994). 

The most significant methane emission sources are landfill gas from municipal solid 

waste (53%), followed by biogas from palm oil mill effluent (POME - 38%). Less 

significant sources in terms of total potential include swine manure (6%) and industrial 

effluent (3%). The total carbon dioxide (CO 2 ) equivalent for methane emissions is 

estimated to be around 27 million mT, approximately 19% of the total greenhouse gas 

emission in Malaysia at 1994’s level (total of 144 million CO 2 equivalent). 

The total potential certified emission reduction units (CERs) within the waste sectors 

analysed is between the ranges of 9 -10 million CERs per year. Among these potential 

CERs, POME biogas projects emerge as the most promising sector (52%) where landfill 

gas is second (38%). This is interesting since the baseline emissions from landfills are 

higher than POME but the recovery potential for CERs is proven to be less as compared 

to POME biogas. The study concludes that the potential of CDM within the waste sectors 

is especially high within the palm oil mills and municipal landfills in Malaysia. 

Based on PTM/DANIDA study on ‘Preliminary Assessment of Selected Renewable Energy 

and Energy Efficiency Technologies’, the actual amount of biogas derived from the 

treatment of POME will very much depend on the technologies used, and the efficiency of 

the such technologies. The actual biogas achieved will have significant impact on setting 

the baseline for greenhouse emissions for CDM. 

The open ponding systems are commonly practiced by most of the oil palm millers. 

There is no capture of gaseous emissions. With the potential of CDM in this field, closed 

anaerobic digestion systems can be introduced for the purpose of methane captured 

activity. 

4.2 Potential of CDM to Assist SREP Projects 

The saving of GHG emission stems from the fact that fossil fuels are replaced. For offgrid 

projects diesel for engines is often the replaced fuel. For grid-connected electricity 

producing projects the avoided emissions from the power stations connected can be 

calculated according to international standards. 

For combined heat and power projects, GHG emissions may also be saved from the 

production of heat. For palm oil mills – where many SREP projects are located – biomass 

17

would be used for heat production and thus no extra GHG savings accrue for the heat 

produced from biomass combustion. 

The results from a preliminary study of the CDM potential in Malaysia is summarised in 

the following table. Table 1 shows the expected potential for implementing CDM projects 

in Malaysia and the extent to which this could lead support for SREP-projects. It should 

be stressed that the results are still preliminary and also that the realisation of the 

potential for SREP project will depend upon the removal of other barriers for SREPprojects 

such as high costs for grid connection and difficult negotiations with TNB. 

Table 3: Potential Volume of CERs, MW for different types of SREP Projects and 

the power plant technologies 

Project type 

CERs per year in 

2010 

MW electricity as 

SREP 

Power plant 

technology 

Biogas POME + 

animal manure 

5,900,000 190 MW Gas Engine 

(40% efficiency) 

Landfill gas 3,700,000 45 MW Gas Engine 

(40% efficiency) 

Reduction of gas 

4,600,000 N/A N/A 

flaring from oil 

production 

Mini hydro 70,000 25 MW Turbine 

(60-90 % 

efficiency) 

Biomass CHP 380,000 90 MW Boiler and Steam 

Turbine (23% 

efficiency, 

40barg, 520degC) 

Other projects 6 3,150,000 N/A N/A 

Total 17,800,000 350 MW 

6 Including energy efficiency projects and biomass for industry and central power 

18

5 SET/CDM Options in Malaysia 

Malaysia DNA has approved 25 CDM energy project as of November 2007. Among these 

projects, there are 15 projects that have been successfully registered with CDM EB. 

There are 4 registered projects from different categories to be shown in the framework 

of the T@W Project. These 4 projects are: 

• Biomass Energy Plant 

• Replacement of Fossil Fuel by Palm Kernel Shell Biomass in the Production of 

Portland Cement 

• Krubong Melaka LFG Collection and Energy Recovery CDM Project 

• Factory Energy Efficiency Improvement in Malaysia 

• Kim Loong Methane Recovery for Onsite Utilisation Project at Kota Tinggi, Johor, 

Malaysia 

5.1 Biomass Energy Plant 

5.1.1 Setting: 

Title: 

Biomass Energy Plant-Lumut. 

Country: Malaysia 

Location: PGEO Edible Oils Sdn.Bhd. G4 & G5, Lumut Port Industrial Park, 

Jalan KG. Acheh, 32000 Sitiawan, Perak 

Start date: 6 th September 2004 

Technology Biomass 

keyword (s): 

Project type: Sectoral 1: Energy Industries (renewable -/non-renewable sources) 

5.1.2 General description: 

Summary: This project involves the installation of a modern, high efficient 30 

tonnes per hour capacity, 29 Barg biomass-fired cogeneration 

system to supply steam and electricity to the PGEO palm oil refinery 

in Sitiawan, Perak, Malaysia. Mesocarp fibres (MF), palm kernel 

shells (PKS) and Empty Fruit Bunches (EFB) are three types of 

biomass waste generated from the palm oil milling process. The fuel 

preparation technology of using flue gas to dry the EFB’s is a new 

technology in this project. The energy plant will be sourcing the 

biomass waste from neighboring 16 palm oil mills via fuel purchase 

agreements. 

Aims: 

Operation 

time: 

The project activity is to replace the existing electrically operated 

chiller system with a new absorption chiller system and provide 

steam for a steam turbine to produce electricity for own 

consumption and thereby displace electricity imports to the project 

site and thus reduce emissions from the power generation sources in 

the electricity grid system. 

The expected operational lifetime of the project is 21 years. 

19

5.1.3 Technical details: 

Technical 

details: 

The project will replace two units of oil fired boilers with one unit of 

biomass boiler with capacity of 30 T/h, 29 Barg, 240ºC). Biomass 

resources such as EFB, mesocarp fibres and palm kernel shells will 

be used as fuel input. Apart from supplying steam to the refinery the 

project will consume the excess steam in absorption chiller system. 

The existing refrigerant chiller has a capacity of 650 RT, at 420 kWe 

rated power. The new absorption chiller will be 750 RT to cater for 

future refinery expansion. This absorption chiller will displace power 

drawn from the grid by the old refrigerant chiller. 

The second stage of the project will be to install a steam turbine to 

generate 2 MWe electricity to supply to the refinery. Approximately 

400 kWe of electricity will be used for the biomass energy plant 

auxiliary use. This will be counted as project emission if the plant is 

unable to generate electricity. The fuel preparation technology of 

using flue gas to dry the EFB’s is a new technology in this project. 

5.1.4 Energy data: 

Energy 

generated: 

In the first stage, 15 t/h of steam will be generated for palm oil 

refinery process consumption and 3 t/h will be used to provide 

cooling through a new absorption chiller system. Second stage of 

the project will be optimizing the steam energy by installing steam 

turbine and generator to supply 2 MW of electricity for the refinery 

own use. 

5.1.5 Environmental data: 

Environmental 

data: 

According to the Malaysian regulations renewable energy projects 

below 10 MW are not required to prepare an Environmental Impact 

Assessment. As the plant is located in the designated industrial park 

approved by the Malaysian government, there will not be any 

significant impact on neighbours or environment. Instead, approval 

from Department of Environment was given on the 28 August 2004. 

The project will apply modern, efficient technologies and the 

environmental impact will be better managed compared to the 

existing situation, as the biomass waste will be used for energy 

production with an efficient combustion and emission control. There 

are therefore no significant environmental impacts of the project 

activity. 

Project GHGemissions: 

Calculation of the project GHG emission includes the following: 

! Baseline emissions for steam generation that displace fuel oil in 

the existing oil fired boilers. 

! Emissions for displacing grid electricity. 

Overall, the total project emissions are estimated to be 2,016 

tonnes of CO 2 /year for 2005 and 252 tonnes of CO 2 /year from 2006 

to 2011. 

20

GHG-emission 

reduction: 

“EAU, CER, 

ERU, AAU”: 

Methodology: 

Baseline: 

Monitoring: 

Contribution 

to sustainable 

development: 

Total GHG emission reduction of the project is approximately 

227,818 tonnes of CO2 equivalent and annual average over the 

crediting period of estimated reductions (tonnes of CO2 e) is 32,545 

tonnes CO2 equivalent /year. 

CER 

Type I category C that covers “Thermal energy for the user” as 

baseline methodology is applied to the project. 

The baseline for the project activity is the GHG emissions from 

continued use of oil-fired boilers to meet the steam demand of the 

PGEO refinery and GHG emissions from generation capacities in the 

Malaysia Peninsular electricity grid system to supply electricity to 

the refinery. 

The monitoring methodology “Thermal Energy for end User” type 

I.C is applied to the project. The necessary data and parameters 

shall be recorded as above. 

The project will contribute to the use of sustainable renewable 

energy sources in a highly efficient manner and is in line with the 

country’s development policy of renewable energy as a fifth fuel. 

This will lead to greater self-sufficiency of fuel for the energy sector 

as it will produce its own power and displace conventional power 

from the grid. Local manufacturing of high efficient biomass boilers 

will ensure local employment and reduce the dependency on foreign 

expenditures. 

5.1.6 Economic data: 

Financing 

The project will not receive any public funding that will result in a 

diversion of official development assistance. There will be 

cooperation between the local project participant with and Annex-I 

Party in term of CER buyer and technology provider. 

5.1.7 Additional information: 

Printed or electric reports or other literature available: 

Title: 

Methodology: 

Address for download of 

electronic document: 

Project document: 



BIOMASS ENERGY PLANT-LUMUT. (Version 02, 28th 

November 2005) 

AMS-III.E. ver. 8 - Avoidance of methane production 

from biomass decay through controlled combustion 

http://cdm.unfccc.int/Projects/DB/DNV- 

CUK1152303984.93/view.html 

http://cdm.unfccc.int/UserManagement/FileStorage/S 

ZF3C36NS2M5NFKUVTEC9ULT48VT6G 

21

5.1.8 Photo library: 

Figure 1: Project and system boundary of the project (Source: CDM –PDD of Biomass 

Energy Plant-Lumut Project) 

5.1.9 Contact information: 

Type of organisation: 

Organisation / Agency: 

Main contact: 

Host Company 

ENCO SYSTEMS SDN.BHD 

Ir Chee Teck Hee 

Address: 

Rawang Integrated Industrial Park, 48000, Rawang, 

Selangor, Malaysia. 

Tel: +603-60913223 

Fax: +603-60913222 

Email: 

enco@po.jaring.my 

Type of organisation: Project Participant 

Organisation / Agency: Royal Danish Ministry of Foreign Affairs 

Main contact: 

Mr Soren Kristofferson 

Address: 

Asiatisk Plads 2, Copenhagen K, DK 1448, Denmark 

Tel: +45 33 92 00 00 

Fax: +45 32 54 05 33 

Email: 

um@um.dk 

22

5.2 Replacement of Fossil Fuel by Palm Kernel Shell Biomass in the Production 

of Portland Cement 


Title: 

Replacement of Fossil Fuel by Palm Kernel Shell Biomass in the 

production of Portland Cement 

Country: 


Location: 

LMCB Cement Works, Rawang and Kanthan 

Start date: 1 st May 2000 

Technology Fuel Switching 

keyword (s): 

Project type: Sectoral Scope 4: Manufacturing Industries 

5.2.2 General description 

Summary: 

Lafarge Malayan Cement Bhd (LMCB) has exclusively developed the 

technology and skills to substitute a significant percentage of the 

coal used at its Kanthan and Rawang plants with Palm Kernel Shell 

(PKS) Biomass from the Oil Palm Industry. The manufacture of 

cement is a highly energy intensive activity. The vast majority of 

this energy is required to heat the raw materials to a level that 

brings about the necessary chemical change to create cement 

clinker. In Malaysia, the heating process is predominantly achieved 

through the firing of coal although some plants have in recent years 

also started consuming other fossil fuels such as e.g. pet coke. 

The substitution of biomass for fossil fuels in the cement 

manufacturing process in Malaysia has a significant contribution to 

make to the country’s sustainable development plans. LMCB 

currently sources all of its coal supplies from outside of Malaysia. 

The substitution of a locally arising biomass product for imported 

fossil fuels not only reduces Malaysia’s dependence on imports, but 

also gives rise to environmental benefits from preserving fossil fuels 

and utilising a waste biomass stream, which would otherwise be 

stockpiled and left to biodegrade, open to saturation by tropical 

rains and ultimately of no current use to any industry. 

23

Aims: 


time: 

Feasibility 

study: 

The project activity is to substitute around 5% of the total coal 

consumed by the plant with PKS, which is a renewable biomass 

residue. PKS is a waste product from the palm oil milling process 

and is used as a fuel in the palm oil mills together mesocarp fibres, 

which is another biomass waste product suitable for combustion. 

The palm oil mills prefer to use the fibres over the PKS and PKS will 

normally not exceed about a third of the total energy use in the 

boiler plants. 


The investment comparison analysis is based on the NPV for the 

project. The NPV is calculated based on a project lifetime of 10 

years and a discount rate of 13%. From the sensitivity analysis, the 

project is highly sensitive to fluctuations in the price of PKS. From 

this, the project seen to be economically additional to the baseline. 


Technical 

details: 

Technology to substitute PKS for coal in the pre-calciner was 

developed in cooperation with Blue Circle Industries in Europe, 

which was in 2001 bought over by Lafarge in Europe. In general 

terms the technology development consisted of the in-house 

design for a new and additional fuel feed system to sit along side 

the existing coal system. This new PKS system incorporates 

technologies for reception, sorting and material size reduction 

together with the necessary conveyors and hoppers to feed the 

PKS into the process at a point where optimum combustion 

conditions and residence time are available. 

The plant’s central control computer automatically manages the 

associated reduction in pulverized coal required to maintain 

process stability and product quality. The main technological 

input to this process is from Europe, and latterly from the 

Lafarge Asia Technical Centre in Kuala Lumpur. Their 

contribution has been in the following areas: research and 

management of trials on chemistry and process burning 

conditions to ensure complete combustion, sizing of the material 

handling equipment required, calculation and guidance on feed 

rates and mix ratios of PKS and coal critical to the efficiency of 

the operation and product quality. Initial issues related to 

material handling, high moisture content, high abrasivity and 

long burnout time have generally been accommodated through 

process adaptation, invention and modification. This knowledge 

and skills based technology transfer is very exclusive to Lafarge 

Malayan Cement. This project will be an excellent showcase to 

other cement industries in Malaysia and the region to use PKS in 

their cement manufacturing process. 

The physical equipment developed to allow the project activity to 

proceed is restricted to the fuel processing and feeding system 

and has no additional environmental impact. It allows reduced 

running hours of existing coal processing equipment and 

therefore efficiency can be maintained. 

24


Energy data: 



The manufacture of cement is a highly energy intensive activity. 

The vast majority of this energy is required to heat the raw 

materials to a level that brings about the necessary chemical 

change to create cement clinker. This will therefore require a 

greater heat input to produce the same quantity and quality of 

cement clinker. 

The method of firing PKS into the pre-calciner results in a higher 

in leak of air and increases the heat consumption. The high 

moisture content will not only reduce the lower heating value of 

the fuel, but also require additional heating of the moisture to 

the process temperature of 900 0 C. Therefore, it contributes to 

the need for a project specific penalty (moisture penalty). The 

energy consumption for fuel handling and crushing of coal and 

PKS is estimated to be about the same amount. PKS is not 

prepared to be as fine as coal in particle size. The emissions 

difference from the power consumption for the fuel handling 

system is therefore assumed to be negligible. 

The table below show the some of the number used in the 

calculations of emission reductions. 

Item Unit Value 

Amount of PKS 

Tonne/yr 68,000 

consumed annually 

Moisture penalty TJ/yr 237 

Heat value of PKS GJ/t 13.13 

Heat value of Coal GJ/t 25.75 

Amount of Coal to equal Tonne/yr 25,457 

the PKS 

Annual heat demand TJ/yr 17,857 


Environmental 


The environmental regulations that control emissions from 

cement plants does not abandon the use of any fossil fuel or set 

restrictions to the use of fossil fuel. Those cement plants already 

complied with the environmental regulations and standards of 

Malaysia regulations before the use of PKS. Thus, the use of PKS 

is not a mean to bring the emissions in compliance with the 

emission standards of Malaysia. 

The Malaysian DNA has adopted the National CDM Criteria of 

which one of the requirements is on the Sustainable 

Development, emphasizing among others the environmental 

impact of the project to its surrounding area. Key positive 

impacts of the project will include: 

! Replacing the fossil fuel used; 

! Reduced greenhouse gas emission; 

! Promoting the use of renewable energy. 


There is no leakage and insignificant GHG emissions from the 

combustion of PKS, the project activity emissions are zero. 

25

GHG-emission 

reduction: 

“EAU, CER, ERU, 

AAU”: 

Methodology: 

Baseline: 

Monitoring: 

Contribution to 

Sustainable 

Development: 

GHG emission reduction of the project is approximately 61,946 

tCO 2 eq/year. 

CER 

ACM0003: Emissions reduction through partial substitution of 

fossil fuels with alternative fuels in cement manufacture. 

The anthropogenic emission by sources of greenhouse gases of 

the baseline is the coal combustion in the cement manufacturing 

process. 

The monitoring methodology ACM0003: Emissions reduction 

through partial substitution of fossil fuels with alternative fuels in 

cement manufacture is applied to the project. The necessary 

data and parameters shall be recorded as above. 

The project is in line with the Malaysian sustainable development 

policies as follow: 

! Ensuring adequacy and security of fuel supply as well as 

promoting the utilization of gas and renewable energy 

! Developing the energy related industries and services as well 

as increasing local content 

! Promoting Malaysia as a regional centre for energy-related 

engineering services 

! Encouraging efficient utilization of energy, particularly in the 

industrial and commercial sectors 

! Giving due importance to environmental considerations in the 

sustainable development of the energy sector. 


Financing: 

Total project 

costs: 

There will be cooperation between the local project participant 

with and Annex-I Party in term of CER buyer and technology 

provider. 

RM 6.9 million 



Title: 

Replacement of Fossil Fuel by Palm Kernel Shell 

Biomass in the production of Portland Cement 

(Version 03 – Date: 21 st November 2005) 

Methodology: ACM0003: Emissions reduction through partial 

substitution of fossil fuels with alternative fuels in 

cement manufacture is applied to the project. Version 1, 

28 July 2006 






http://cdm.unfccc.int/methodologies/view?ref=ACM0003 

http://cdm.unfccc.int/UserManagement/FileStorage/XAA 

9WHLE6114PGNHY2CPYTN8E3ABM7 

26



Host Company 


Lafarge Malayan Cement Berhad 

Main contact: 

Mr Mohammad Dit 

Address: 

Jalan SS 21/39, Level 12, Bangunan TH Uptown 

3, 47400 Petaling Jaya, Selangor Darul Ehsan 

Tel: +603-7722 5200 

Fax: +603-7723 8332 

Email: 

mohammad.dit@my.lafarge.com 

Website: 

http://www.malayancement.com.my/ 


Project Participant 


Lafarge S.A. 

Main contact: 

Mr Bertrand Gaillard 

Address: 

61, rue des Belles Feuilles – BP 40, Paris 

Tel: +33 1 44 34 58 76 

Fax: +33 1 44 34 92 69 

Email: 

bertrand.gaillard@lafarge.com 

Website: 

http://www.lafarge.com 

5.3 Krubong Melaka LFG Collection and Energy Recovery CDM Project 


Title: 

Krubong Melaka LFG Collection and Energy Recovery CDM 

Project 

Country: 



Krubong Landfill, Melaka 

Start Date: 1 st January 2007 

Technology Landfill gas recovery and utilisation 

keywords: 

Project Type: Sectoral Scope 13: Waste Handling and Disposal 


Summary: 

The Krubong landfill site is located in an industrial area with total 

capacity of 3 million m 3 and receives 250,000 tones per year of 

domestic and non-hazardous industrial waste. The landfill site 

would be closed in 2006. 

The project activity is to install equipment for landfill gas (LFG) 

collection for fuel and energy recovery with gas engine 

generators. The plant will consist of gas collection pipeline 

system, a gas dryer, a gas holder and gas engine generators. 

All waste in Malaysia is deposited in anaerobic landfills, with the 

exception of only several experiments with ‘semi-aerobic’ 

landfills. Anaerobic landfills are deep enough to exclude air from 

permeating while the high rainfall, high MSW moisture content 

(about 55%) and consistent year-round high temperature (about 

30 0 C) create ideal conditions for anaerobic activity 7 . 

7 Study on CDM Potential in the Waste Sectors in Malaysia 

27

The project estimate the GHG reduction is approximately 57,830 

tCO2-equivalent yearly from the following project activities: 

• Destruction of methane by collecting landfill gas formed inside 

the accumulated waste in the landfill site; and 

• Reduction of carbon dioxide by emission replacing electricity 

from fossil fuel consumption to renewable energy. 

The collected LFG will be treated and used for power generation. 

The electricity will be sold to the local utility under the Small 

Renewable Energy Programme (SREP). 

Figure 1 Project Boundary 

Aim: 

The project is to ensure safe closure of the landfill site by 

eliminating the emission of landfill gas. 

Operation time: 10 

Feasibility 

The economic attractiveness of the project alternative without 

Study: 

the revenue from carbon credits using an IRR calculation was 

analyzed and the results were compared with a reasonable 

expected return on investment in Malaysia. The results show that 

the project is not an economically attractive course of action. 


Technical 

details: 

The project will involve a LFG facility which consists of the 

following: 

• LFG Recovery System. The landfill site of the project will be 

covered with density soil of thickness more than 0.5 m. The 

LFG is collected through gas recovery wells located at the 

landfill area and conveyed to LFG treatment system and power 

generation system by LFG collection pipelines. 

• LFG Treatment System. A gas dryer will be installed to reduce 

moisture content of the gas suitable to gas engine combustion. 

• LFG Power Generation System. The voltage of the generated 

electricity is stepped up from 380V to 11kV at the project site 

and transferred to the local utility sub-station. 

• Flare Combustion Facility. The excessive LFG will be flared. 

28

In summary, the following components are installed in the LFG 

recovery and power generation facilities: 

• Approximately forty vertical wells with perforated pipe casing 

• Horizontal pipeline system conveying the collected LFG 

• A gas dryer (dehumidification) 

• A compressor 

• Flare combustion facility 

• Gas engine generators 

• Step-up transformers 

• Transmission line to the grid 

• Monitoring equipment 



Monitoring: 

The LFG will be utilized as fuel to generate the electricity 

therefore when the captured CH 4 (m 3 /day) is decreasing from 

15,000 to 5,000 the yearly electricity generated (MWh) is 

decreasing from 12,866,000 to 4,289,000. A 2 MW gas engine 

will be installed. 

ACM0001 Consolidated Baseline Methodology for Landfill Gas 

Project Activities will be applied to the project activity. The 

monitoring plan consists of the following activities: 

• The future regulation and/or law applicable to collection and 

capture of LFG 

• Measurement of LFG 

• Methane collected and flared 

• Methane collected and used to generate electricity 


Environmental 


An environmental assessment report was prepared. The 

environmental assessment report is a detailed establishment 

plant describing the project components and specifications of the 

facilities which was to be submitted to the state department of 

environment. The report gave a description of the project 

activities, environmental laws and regulation, potential impacts 

considered in the project at each project phases and mitigation 

measures to be taken. 

The project brings the following environmental benefits: 

Project 

emissions: 

• Significant reduction of methane emission 

• Generation of green energy 

• Reduction of toxic gas emissions 

• Improvement of landfill cover, reducing leachate generation 

• Reducing risk of groundwater pollution by good quality cover 

soil 

• Reduction of nuisance odour 

As the project will have a closed landfill and all gas will be 

captured, there is no project emission. 

29

GHG emission 

reductions: 

‘EAU, CER, ERU, 

AAU”: 

Methodology: 

Baseline 

emissions: 



Development: 

The estimated GHG reduction is approximately 57,830 tCO 2 - 

equivalent/year. 

CER 

ACM0001 version 2 which applicable for landfill project which 

also claims emission reductions from electricity displacement. 

The anthropogenic emissions by sources of greenhouse gases of 

the baseline are the methane destruction and electricity 

displacement. 

The project will contribute to the sustainable development as 

follows: 

• The utilization of the LFG emitted to the air at the landfill site, 

which eliminate the fossil fuel consumption for electricity 

generation. 

• The collected LFG will be used for power generation to be 

transferred to the distribution grid of TNB. 

• The project possibly serves as a replication to other urban 

solid waste landfill sites in the country. 

• Small power generation services will be developed as well as 

increasing the local participation in manufacturing and 

constructing LFG system. 

• The project accompanies the safety closure of landfill. 


Financing: 

Total project 

costs: 

There will be cooperation between the local project participant 

with and Annex-I Party in term of equity participation and CER 

buyer. A special purpose company is to be established for the 

project. 

RM 26.7 million 


The PDD can be downloaded from 

Title: 

Methodology: 






Kim Loong Methane Recovery for Onsite Utilisation 

Project at Kota Tinggi, Johor, Version 2.3, November 

26 th 2006 

AM0022: Avoided Wastewater and On-site Energy Use 

Emissions in the Industrial Sector. Version 3, 28 July 

2006 

http://cdm.unfccc.int/methodologies/DB/BM4NZO7YA 

H9373G9P0UZHN6G1XM3IW/view.html 

http://cdm.unfccc.int/UserManagement/FileStorage/U 

4WDYI7HRUFY90HEVDG1JHVQBMA68A 

30


Type of 

Host Company 

organisation: 

Organisation: Southern Waste Management Sdn. Bhd. 

Address: 

No. 20, Jalan Wan Kadir 1, Taman Tun Dr. Ismail, 60000 Kuala 

Lumpur, Malaysia 

Tel: 603 – 7726 9619 

Fax: 603 – 7726 9062 

Email: 

hdl@swmsb.com 

Contact person: Mr. Ho De Leong 

Type of 

Project Participant 

organisation 

Organisation: KAJIMA Corporation 

Address: 

Shinjuku Park Tower 28F, 7-1 Nishishinjuku 3-Chome, Shinjukuku, 

Tokyo 163-1028, Japan 

Tel: 81 – 3 – 5324 – 5841 

Fax: 81 – 3 – 5324 – 5944 

Email: 

bandok@kajima.com 

Contact person: Dr. Kozo Bando 

5.4 Factory Energy-Efficiency Improvement Project in Malaysia (MAPREC, 

PRDM, PSCDDM, PAVCJM,PCM) 


Title: 

Factory energy-efficiency improvement project in Malaysia (MAPREC, 

PRDM, PSCDDM, PAVCJM, PCM) 

Country: Malaysia 

Location: The 5 factories are located in Johor and Malacca 

Start date: 1 st April 2007 

Technology Energy efficiency 

keyword (s): 

Project type: Sectoral Scope 4: Manufacturing Industries 


Summary: 

This CDM project activity is intended to bundle five project activities. 

Each project activity comprises energy-efficiency measures at a 

single industrial facility. This CDM project activity aims at only 

energy efficiency and does not involve fuel switching. 

The technologies to be used in the project activity incorporate 

environmentally safe and sound technology and know how. 

Adoption of the technologies leads to conservation of electricity and 

natural resources such as natural gas. 

Aims: 


time: 

The bundled project activity is intended to introduce 12 energyefficiency 

improvement measures in order to reduce electricity 

consumption. 

The project activity is to reduce GHG emissions through reduction of 

electricity and natural gas consumption, by introducing a total of 14 

specific measures from among seven different types of energyefficiency 

improvement measures at five factories in Malaysia: 


31





The annual energy saving of the bundled project activity is 

estimated to be 2.6 GWhe/year before 2010 and 1.8 GWhe/year 

after 2011 


Environmental 



Environmental impact assessments are not required for the project 

activity. The project activity complies with related environmental 

laws in Malaysia such as the Environmental Quality (Clean Air) 

Regulations 1978, Environmental Quality (Clean Air) (Amendment) 

Regulations 2000, Environmental Quality (Scheduled Wastes) 

Regulations 1989, and Environmental Quality (Refrigerant 

Management) Regulations 1999. 

The project activity is applied only to supporting facilities and would 

not affect GHG emissions from main manufacturing processes of the 

factories. However, GHG emissions related to existing equipment 

being transferred out to another activity, or energy efficiency 

equipment transferred in from another activity are the possible 

leakage effects in the project activity. 

Project emission is estimated to be 13,379tCO2/year. 

GHG-emission 

reduction: 

“EAU, CER, 

ERU, AAU”: 

Methodology: 

Total GHG emission reduction of the project is approximately 

13,119 tonnes of CO2 equivalent and annual average over the 

crediting period of estimated reductions (tonnes of CO2 e) is 1,312 

tonnes CO2 equivalent /year. 

CER 

Version 9 of AMS-I.D. “Grid connected renewable electricity 

generation” will be applied to the project. 

Baseline: Baseline emission is estimated to be 15,004tCO2/year before 2010 

and 14,503tCO2/year after 2011 facilities. 

Monitoring: 

Contribution 

to sustainable 

development: 

The monitoring methodology Version 7 of AMS-II.D. “Energyefficiency 

and fuel switching measures for industrial facilities” is 

applied to the project activity is applied to the project. The 

necessary data and parameters shall be recorded as above. 


follows; 

! reducing electricity consumption, which results in the 

conservation of energy resources such as oil and natural gas, as 

well as contribution to the stable electricity supply. 

! the project activity will result in more rapid penetration in 

Malaysia of the best energy-efficiency improvement technologies 

available and in capacity building for local engineers through a 

local staff training and education program (both of which are 

32

essential when operating and monitoring these technologies). 

! help to secure long-term stability in employment, an important 

issue as the country faces elevated labour costs in comparison 

with other competing countries in the region. 

! project activity is in line with energy strategies laid out in the 9th 

Malaysian Plan such as intensifying energy efficiency initiatives in 

the industrial, transport and commercial sectors as well as in 

government buildings. 


Financing 

There will be cooperation between the local project participant with and 

Annex-I Party in term of CER buyer and technology provider. 



Title: Factory energy-efficiency improvement project in 

Malaysia (MAPREC, PRDM, PSCDDM, PAVCJM, PCM), 

Version 2, 8 July 2005 

Methodology: 

AMS-II.D. ver. 7 - Energy efficiency and fuel switching 

measures for industrial facilities, Version 5, 21 

November 2006 



http://cdm.unfccc.int/Projects/DB/JQA1162873762.99 

/view.html 




http://cdm.unfccc.int/UserManagement/FileStorage/5 

FHRBA7ONG1A85EKOAFY0GGKQUA9CR 


Type of organisation: Host Company 

Organisation / Agency: Panasonic Electronic Devices Malaysia Sdn. 

Bhd.(PEDMA(MK)) 

Main contact: 

Mr Futoshi Murakami 

Address: 

No. 2,3 & 4, Batu Berendam FIZ III, 75350 Melaka, 

Malaysia. 

Tel: +606-283 4180 

Fax: +606-283 4202 

Email: 

futoshi.murakami@my.panasonic.com 


Organisation / Agency: Panasonic Refrigeration Devices Malaysia Sdn. 

Bhd.(PRDM) 

Main contact: 

Mr Osamu Yamamoto 

Address: Lot 2.3 to 2.10, Cheng Industrial Estate, Jalan TTC 1, 

75250 Melaka, Malaysia 

Tel: +606-335-5490 

Fax: +606-334-4522 

Email: 

osamu.yamamoto@my.panasonic.com 

33


Organisation / Agency: Panasonic Semiconductor Discrete Devices (M) Sdn. 

Bhd. (PSCDDM) 

Main contact: 

Mr Samsol Salamon 

Address: Lot 26 & 27, Batu Berendam FTZ II, 75350 

Melaka, Malaysia 

Tel: +606-284-3676 

Fax: +606-284-3571 

Email: 

samsol.salamon@my.panasonic.com 


Organisation / Agency: Panasonic AVC Networks Johor Malaysia Sdn. 

Bhd.(PAVCJM) 

Main contact: 

Mr Chun Hou Poon 

Address: 

1-E, PLO 460 Jalan Bandar, 81700 Pasir Gudang, 


Tel: +607-250-1124 

Fax: +607-252-7926 

Email: 

chunhou.poon@my.panasonic.com 


Organisation / Agency: Panasonic Communications Malaysia Sdn. Bhd.(PCM) 

Main contact: 

Mr Chee Kiong Pang 

Address: 

PLO No.1, Kawasan Perindustrian Senai, KB No.104, 

81400 Senai, Malaysia 

Tel: +607-599-1980 

Fax: +607-599-4221 

Email: 

cheekhiong.pang@my.pansonic.com 


Organisation / Agency: Matsushita Electric Industrial Co., Ltd.(MEI) 

Main contact: 

Mr Haruki Ogawa 

Address: 

1006, Kadoma, Kadoma City Osaka, Japan 

Tel: +81-6-6906-2036 

Fax: +81-6-6909-1163 

Email: 

ogawa.haruki@jp.panasonic.com 


Organisation / Agency: Matsushita Environmental & Air-conditioning 

Engineering CO., Ltd. (MEA) 

Main contact: 

Mr Haruki Ogawa 

Address: 

3-28-33, Tarumi-cho, Suita City, Osaka, Japan 

Tel: +81-6-6310-7752 

Fax: +81-6-6909-1163 

Email: 

dotsu@mea.mei.co.jp 

34

5.5 Kim Loong Methane Recovery for Onsite Utilisation Project at Kota Tinggi, 

Johor, Malaysia 


Title: 

Kim Loong Methane Recovery for Onsite Utilisation Project at 

Kota Tinggi, Johor, Malaysia 

Country: 



7 th Milestone Off Jalan Mawai, 81900 Kota Tinggi, Johor. 

Start date: 3 rd July 2006 

Technology Industrial Waste 

keyword (s): 

Project type: Sectoral Scope 13: Waste Handling and Disposal 


Summary: 

The use of anaerobic ponds is the most common technology for 

wastewater treatment in the palm oil sector in Malaysia. Roughly 

85% of the palm oil mills use this low-technology way of cleaning 

their organic rich wastewater. 

This project aims to reduce the methane emissions from the 

existing treatment of Palm Oil Mill Effluent (POME) from Kim 

Loong Palm Oil Mill at Kota Tinggi, Johor State of Malaysia. The 

methane emissions are being avoided by closing the existing 

anaerobic digester tanks to capture the methane for utilization in 

on-site heat and power generation. This project only covers the 

avoided methane emissions from closing the pond system. 

There is an ongoing expansion of the palm oil mill to incorporate 

facilities in downstream palm oil processing at the site. The 

expansion includes extraction of tocotrienols and other products 

from crude palm oil, and further recovery of oil from mesocarp 

fibre. The expansion will not increase the amount of effluent 

since the input of FFB will remain constant and the new 

production process does not produce wastewater. The new 

production facilities will increase the need for energy. The power 

needed will be 600 kW and 8-10 t steam per hour. With 300 

working days of 24 hours this transforms into an electricity 

demand of 4,320 MWh and a steam demand of 195 TJ (with 10 t 

steam/hour and 2.702 GJ/t steam. 

The increase in power requirement will be produced through the 

methane captured from the waste water treatment. 

Aims: 

This project aims to reduce the methane emissions from the 

existing treatment of Palm Oil Mill Effluent (POME) from Kim 

Loong Palm Oil Mill at Kota Tinggi, Johor State of Malaysia. The 

methane emissions are being avoided by closing the existing 

anaerobic digester tanks to capture the methane for utilization in 

on-site heat and power generation. This project only covers the 

avoided methane emissions from closing the pond system. 

Operation time: The expected operational lifetime of the project is more than 20 

years. 

Feasibility study: 

In the base case, the IRR of the project activity without financing 

35

incentives from CDM will be 0.5 percent for 10 years of financial 

projection. However, with CDM financing, the IRR can be 

increased to 25 percent. 

A sensitivity analysis is conducted for another two other 

calculations i.e. “reduced capital cost by 25 percent” and 

“increased value of energy production by 25 percent”. However, 

the sensitivity analysis shows that the project IRR in all cases is 

unattractive without the extra income from sale of CERs. 


Technical 

details: 

The project will replace the existing open anaerobic systems 

(open digester tanks and lagoons) with well-proven closed, 

anaerobic contact digesters. This closed anaerobic digester 

technology is well-proven globally for managing high organic 

waste and commonly referred to as biogas or anaerobic digestion 

technologies. 

The POME will be distributed into the closed digesters at 

appropriately spaced inlets at the bottom and flows to the top in 

an upward direction. The upward motion of the POME influent 

will improve the mixing in the digesters. The organic matters in 

the wastewater are decomposed under anaerobic process. The 

decomposition process leads to the formation of biogas 

containing CH4 and CO2. 

The new anaerobic tank will be build from 10 mm mild steel with 

a stainless steel top cover plate. The existing tanks will get a 3 

mm steel plate enforcement to prevent leakage and a new 

stainless steel cover plate. 

In order to prevent gas leakage from the enclosed digester 

tanks, an overflow tank will be constructed. The overflow tank is 

the device where biogas and anaerobic liquor are separated and 

the liquor can be discharged without escaping of the biogas. 

While the digested POME is channelled into aerobic ponds for 

further treatment, the captured biogas is pumped through a 

pipeline delivery system to the boiler for generating steam. 

A new biomass boiler delivering 52 t steam/hour is being built to 

replace an existing biomass boiler. The new boiler is designed to 

fire a mix of biogas, palm kernel shells, mezocarp fibre and 

empty fruit bunches. The residence time of the biogas in the 

boiler is long compared to a gas engine solution and that will 

secure that the methane will be fully oxidised into CO2. The 

environmental performance of the new boiler will be better than 

the existing boiler and will live up to all environmental 

requirements. The boiler will be equipped with an automated 

control system to improve performance and secure good 

combustion parameters at all times. The existing boiler is 

maintained for back up purposes. 

There is hardly any energy consumption of the project as it only 

includes pumping of the POME (which is also done in the 

baseline) and compression of the biogas before its is send to the 

boiler. The minimal project energy consumption is supplied from 

the biomass fired boiler and has thus no emissions of greenhouse 

36

gasses. 

The steam from the boiler will be fed into a steam turbine for 

electricity production for use at the palm oil mill and the new 

kernel crushing plants and other downstream projects. 





The new production facilities will increase the need for energy. 

The power needed will be 600 kW and 8-10 t steam per hour. 

With 300 working days of 24 hours this transforms into an 

electricity demand of 4,320 MWh and a steam demand of 195 TJ 

(with 10 t steam/hour and 2.702 GJ/t steam. 

A new biomass boiler delivering 52 t steam/hour is being built to 

replace an existing biomass boiler. 

However, this project only covers the avoided methane 

emissions from closing the pond system in its calculation of the 

emission reduction. 


Environmental 



GHG-emission 

reduction: 

Under Malaysian Environmental Quality Order 1987, projects 

involving the upgrading of existing wastewater systems are not 

listed under the 19 prescribed activities and therefore it is not a 

formal requirement to carry out an Environmental Impact 

Assessment. However, the installation of a boiler with stack 

emissions will require permission from the Department of 

Environment, Malaysia, and no problem in approval is 

anticipated. 

The Malaysian DNA has adopted the National CDM Criteria of 

which one of the requirements is on the Sustainable 

Development, emphasising among others the environmental 

impact of the project to its surrounding area. Key positive 

impacts of the project will include: 

! more efficient treatment, less land area required; 

! reduced greenhouse gas emission; 

! reduced odour and acid rain problems to surrounding and 

within the mill; and 

! promoting the use of renewable energy, cleaner exhaust 

compared to alternative such as the conventional biomass 

boilers or diesel generator set. 

Calculation of the project GHG emission includes the following: 

! Fugitive methane emissions from subsequent lagoons after 

new close tank digesters; 

! Fugitive methane from new closed tank anaerobic digesters; 

and 

! Methane emissions from boilers (inefficient combustion and 

flaring) and piping leakage. 

Overall, the total project emissions are estimated to be 2,009 t 

CO2-eq in the first year of the crediting period and no project 

emissions in the subsequent years. 

GHG emission reduction of the project is approximately 50,449 

tCO2 eq/year. 

37

“EAU, CER, ERU, 

AAU”: 

Methodology: 

Baseline: 

Monitoring: 



Development: 

CER 

AM0022: Avoided Wastewater and On-site Energy Use Emissions 

in the Industrial Sector. Version 3, 28 July 2006. 

The anthropogenic emissions by sources of greenhouse gases of 

the baseline is the methane generated from the open digester 

tanks and open anaerobic lagoon systems at Kim Loong Palm Oil 

Mill. 

The monitoring methodology AM0022: Avoided Wastewater and 

On-site Energy Use Emissions in the Industrial Sector. Version 3, 

28 July 2006 is applied to the project. The necessary data and 

parameters shall be recorded as above. 


follow: 

! Promote greater use of renewable energy by utilisation of 

methane captured from POME to produce power and steam for 

the on-going expansion in the palm oil mill. Methane is 

currently being emitted to the atmosphere. Thus, the project 

will improve the efficiency of natural resource utilisation. 

! Reduce dependence of petroleum products. The proposed 

activity will displace the future usage of fossil diesel as fuel to 

produce power, thus reduces the dependency on petroleum 

products. 

! Contribute to the overall competitiveness of the palm oil mill 

and thus maintain and develop jobs at the mill. The 

technology employed in the project is developed in Malaysia 

and secures that all jobs in relation to the project 

implementation will be in the country. 

! The capturing of methane from POME will reduce emissions to 

the nearby river. The project will also reduce local air pollution 

of methane, hydrogen sulphide and other foul smelling 

substance. 


Financing: 

Total project 

costs: 

Equity of Kim Loong Power Sdn Bhd 

RM 492,000.00 per year 



Title: 

Methodology: 






Kim Loong Methane Recovery for Onsite Utilisation 

Project at Kota Tinggi, Johor, Version 2.3, November 

26 th 2006 

AM0022: Avoided Wastewater and On-site Energy Use 

Emissions in the Industrial Sector. Version 3, 28 July 

2006 

http://cdm.unfccc.int/methodologies/DB/BM4NZO7YA 

H9373G9P0UZHN6G1XM3IW/view.html 

http://cdm.unfccc.int/UserManagement/FileStorage/U 

4WDYI7HRUFY90HEVDG1JHVQBMA68A 

38

5.5.8 Photo library: 

Figure 1: Project Layout: Closed tank anaerobic digesters and biogas utilization 

(Source: CDM –PDD of Kim Loong Methane Recovery for Onsite Utilisation Project) 

Figure 2: Project and system boundary of the project 

(Source: CDM –PDD of Kim Loong Methane Recovery for Onsite Utilisation Project) 



Organisation / Agency: Kim Loong Power Sdn Bhd (Project Operator) 

Main contact: 

Mr Gooi Seong Heen 

Address: 

19, Jalan Wong Ah Fook, Lot 18.01, 18 th Floor, Public 

Bank Tower, 80000 Johor Bahru, Johor, Malaysia. 

Tel: +607-224 8316 

Fax: +607-223 2562 

Email: 

heen@streamyx.com 

39


Organisation / Agency: Vitol S.A. 

Main contact: 

Mr David B Fransen 

Address: Boulevard du Pont-d'Arve 28 

P.O.Box 384 

Tel: +41(0) 22 322 11 11 

Fax: + 41(0) 22 781 66 11 

Email: 

N/A 

40

6 SET/CDM Financing Concepts 

6.1 Malaysia Govenrment Programme on Energy Efficiency and Renewable 


6.1.1 Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP) 

The Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP) was launched 

in 1999, to execute EE improvement initiatives in eight sub-sectors: wood, pulp and 

paper, iron and steel, cement, rubber, glass, ceramic and food. These sectors were 

chosen using a selection process based on information derived from the Asian 

Development Bank Project Report of 1994 (see Table 1) and a questionnaire prepared 

and circulated by the project proponents to energy intensive industries. 

The project is jointly funded by the Government of Malaysia (USD6.3 million), the Global 

Environment Facility (USD7.3 million), the United Nations Development Programme 

(USD300,000) and the Malaysian private sector (USD5.26 million). The Ministry of 

Energy, Water and Communications is the executing agency for the project, which is 

implemented by Pusat Tenaga Malaysia. 

For the MIEEIP, an EE project loan financing scheme of RM 16 million was set up at the 

Malaysian Industrial Development Finance Bhd (MIDF). As fund managers, MIDF will 

disburse loans for demonstration projects for each of the eight industrial sector, four of 

which will be done under the energy service companies (ESCOs) concept. The others are 

joint ventures between the MIEEIP and the factories. The allocations are made available 

by the Global Environment Facilities (GEF) and the Malaysian Electric Supply Industry 

Trust Account (MESITA). MIDF has also agreed to be the fund manager for projects 

involving local manufacturers of energy efficient equipment. 

6.1.2 Biomass Power Generation and Cogeneration Projects in Palm Oil 

Industry (BIOGEN) 

Pusat Tenaga Malaysia was entrusted by the Government of Malaysia as the 

implementing agency for the project. The project is supported by United Nation 

Development Programme (UNDP), Global Environment Facility (GEF) and the 

Government of Malaysia. This project aims to reduce the growth rate of GHG emissions 

from fossil fuel fired combustion processes. The project, launched in 2002, will also 

make use of the unutilised biomass waste through the planting up of power generating 

capacity by using the cogeneration technology. 

Besides decreasing the rate of greenhouse gases from fossil fuel fired combustion, the 

project exploits the energy potential of biomass waste in Malaysia. BioGen assesses 

41

iomass energy resources and non-energy applications of this available natural resource, 

especially in the palm oil sector. Other objectives include reducing waste residue for 

palm oil, promoting the growth of power generation and remove barriers related to 

technology, regulations and financing. 

Now, a full-scale model is being developed to promote the utilisation of biomass for 

power generation. The RE Business Fund (REBF) has been established to support the 

FSM project. 

The REBF uses funds from the UNDP/GEF programme to support biogas implementation 

in the palm oil industry with low interest loans. The scheme also creates awareness 

within the financial sector on RE projects and explores alternative financing means such 

as Clean Development Mechanism credits. 

6.1.3 Small Renewable Energy Power Programme (SREP) 

In May 2001, the government announced the launching of the Small Renewable Energy 

Power Programme (SREP). Small power generation plants which utilize renewable energy 

can apply to sell electricity to the utility through the distribution grid system. Project 

developers are required to negotiate directly with the relevant utility on all aspects 

relating to the renewable electricity purchase agreement, including the selling price on a 

"willing-seller, willing buyer" and "take and pay" basis. The renewable energy electricity 

producers will be given a license for a period of 21 years, which will be effective from the 

date of commissioning of the plant. Under this Small Renewable Energy Power 

Programme, the utilization of all types of renewable energy, including biomass, biogas, 

municipal waste, solar, mini-hydro and wind, are allowed. SREP criteria are determined 

by SCORE: 

• Maximum capacity of a small renewable energy plant designed for sale of power to the 

grid must be 10 MW. A power plant can be more than 10 MW in size, but the maximum 

capacity that will be allowed for power export to the distribution grid must not be more 

than 10 MW. 

• The distance between the generating plant and the location of the interconnection 

point at the distribution system must be within 10 km, with connection voltage 11 KV to 

33 KV. 

• The electricity buyer will decide the load (or whether there is load) at the site of 

generation. 

• No standby charges. If there is need for energy from utility, the current tariff will be 

used to calculate charges. 

42

• All costs incurred for the interconnection including system reinforcement (if required) 

such as replacement of cables, switchgears, protection relays and installation of meters 

will be born by the developer. 

• The existing generating plant must be ready to deliver power to the distribution system 

within 12 month after the approval of the interconnection. 

• The new plant and the rehabilitated plant must be ready to operate within 24 months 

after REPPA has been signed. 

• Department of Environment requirements must be complied with. 

6.2 Financing Initiative from Government 

6.2.1 Renewable Energy Business Facility 

The main objective of the Renewable Energy Business Fund (REBF) is to support the 

financial requirement of the Full Scale Model Projects (FSM) that would be established 

under the BioGen implementation programme. This REBF is expected to act as a 

successful model in financing Renewable Energy Project in Malaysia in order to give 

better perspective to other developers and financial institutions towards developing and 

financing the same mechanism of RE project in the country. 

The REBF uses funds from the UNDP/GEF programme to support biogas implementation 

in the palm oil industry with low interest loans. The scheme also creates awareness 

within the financial sector on RE projects and explores alternative financing means such 

as Clean Development Mechanism credits. 

Bank Industri and Teknologi Malaysia Berhad (BITMB) have been appointed as a Fund 

Manager for this REBF. Expected after the tenure period of 15 years, the fund shall be on 

a revolving basis to enable other RE project to access the fund. 

The total size of the fund is RM 28.0 million which is equally contributed by Pusat Tenaga 

Malaysia (PTM) and Bank Pembangunan Malaysia Berhad (BPMB). PTM's contribution 

comes from Global Environment Facility (GEF) of RM 9.2 million and Malaysian Electricity 

Supply Industry Trust Account (MESITA) of RM 5.0 million. 

BPMB (formerly known as BITMB) which has been appointed as a fund manager will set 

up a special account and solely monitor all transaction involving the fund such as 

disbursement and repayment. The financing of the FSM under BioGen project is on 

sharing basis between PTM and BITMB, whilst each entity contributes 40% of total 

financing, while the remaining 20% will be contributes by the project promoter 

contribution. The fund will give up to 80% margin of financing of the project cost. 

43

In term of site selection, PTM will evaluate and endorse the technical aspect of the FSM 

project before any qualified project is financed by REBF, whereas BPMB will undertake an 

evaluation on project commercial viability. BPMB has an absolute discretion to decline 

any project application that is not commercially viable. 

6.2.2 Energy Efficiency Incentives 

6.2.2.1 Companies providing energy conservation services: 

i. Pioneer status with tax exemption of 70% of statutory income for a period of 5 

years or Investment Tax Allowance of 60% on the qualifying capital expenditure 

incurred within a period of 5 years with the allowance deducted in each year of 

assessment be set-off against 70% of statutory income; and 

ii. 

Import duty and sales tax exemption for equipment used in the related project 

which are not produced locally. Equipment purchased from local manufacturers is 

given sales tax exemption. 

These incentives are for applications received from 28 October 2000 until 31 December 

2010. Companies are required to implement their projects within one year from the date 

of approval of the incentive. 

6.2.2.2 Companies which incur capital expenditure for conserving energy for 

own consumption 

i. Investment Tax Allowance of 60% on the qualifying capital expenditure incurred 

within a period of 5 years with the allowance to be set off against 70% of statutory 

income for each year of assessment. Incentive is applicable for applications 

received by the Malaysian Industrial Development Authority (MIDA) from 1 October 

2005 until 31 December 2010; and 

ii. 

Import duty and sales tax exemption on equipment used in energy conservation 

which are not produced locally. Equipment purchased from local manufacturers is 

given sales tax exemption. 

6.2.2.3 Incentives for the use of renewable energy resources 

Companies generating energy from renewable sources such as biomass, hydro power 

(not exceeding 10 MW) and solar power are eligible for the following incentives: 

44

i. Pioneer status with tax exemption of statutory income for a period of 10 years or 

Investment Tax Allowance of 100% on the qualifying capital expenditure incurred 

within a period of 5 years with the allowance deducted each year of assessment to 

be set off against 100% of statutory incomefor each year of assessment; and 

ii. 

Equipment used for the project will be given import duty and sales tax exemption if 

not produced locally. Equipment purchased from local manufacturers will be given 

sales tax exemption. 

These incentives are effective for applications received from 28 October 2000 until 31 

December 2010. Companies are required to implement their projects within one year 

from the date of approval of the incentive. 

6.2.2.4 Accelerated capital allowance on equipment to maintain quality of 

power supply 

In order to reduce the cost of doing business caused by interruptions in the power supply, 

companies which incur capital expenses on equipment to ensure quality of power supply 

is given Accelerated Capital Allowance for a period of 2 years. Thus, the annual 

allowance is increased from between 10 and 20% to 40%. The equipment eligible for 

Accelerated Capital Allowance shall be determined by the Minister of Finance. This 

incentive is effective from year of assessment 2005. 

6.2.2.5 Renewable Energy Power Purchase Agreement (REPPA) 

Renewable Energy Power Purchase Agreement (REPPA) is a crucial document in 

Renewable Energy (RE) power project as it contains all the necessary agreements that 

would govern the project implementation throughout is lifetime. Document would have 

to be heavily scrutinized by the financial institution in determining the project’s viability. 

A review on the existing document is essential to develop standardized REPPA that 

serves the needs of all parties involved particularly project developers, Tenaga Nasional 

Berhad (TNB) and financial institutions. The new REPPA is expected to shorten the 

negotiation time and would be strong enough to send positive vibes to the financial 

institutions as “bankable” document. 

Feed in tariff by fuel type (biomass, mini hydro and solar). The calculation will be based 

on the cost of energy production/kWh taking into account the price escalation factor. 

The price escalation factor will be based on the fluctuation price of fossil fuel in the 

market. The tariff will be determined based on a tariff structure with provision for fuel 

pass through. 

45

6.3 Main Player and Target Groups for CDM Porject 

The high level of political interest in CDM has contributed significantly to create a 

conducive environment for the project. The same is true of the significant interest in the 

CDM shown by potential project developers from the private sector. This has proved that 

the intervention was highly relevant and had a positive bearing on the motivation of the 

project team to perform at its best. 

The location of the Project at PTM was in many ways advantageous to the project since 

the institution and their staff has been very much engaged in the implementation of the 

project. PTM has also throughout the Project period been providing highly qualified 

counterpart staff for the project. The analytical parts of the Project have benefited from 

the competencies present at PTM on most aspects of the energy sector in Malaysia. 

In addition, the relevant Government organizations such as NRE, MEWC and EPU 

(Energy Section) are members of the Project Management Group for CDM. This group 

has been very efficient in providing continuous policy recommendations in the project 

and also provided a forum for more informal talks among the key-stakeholders on the 

development of CDM in Malaysia. 

At present, the main players in the CDM are: 

a) Ministry of Natural Resources and Environment (Designated National Authority for 

CDM) 

b) Ministry of Energy, Water and Communications (Technical Committee for Energy 

CDM) 

c) Pusat Tenaga Malaysia (CDM Energy Secretariat) 

d) Forest Research Institute Malaysia ( CDM Forestry Secretariat) 

e) Forestry Departments of Peninsular Malaysia, Sabah and Sarawak ( manages 

forest lands) 

f) Economic Planning Unit (Energy Section) (the government policy-making agency) 

g) Energy Commission (develops legal and regulatory framework and advises the 

Ministry on policy, tariff and other matters) 

h) Financial institutions 

i) Local universities and academic institutions 

j) Federation of Malaysian Manufacturers 

k) Non-governmental organisations (NGOs) 

46

7 Financing Schemes 

PRIVATE SECTOR CARBON FUNDS 

EcoSecurities-Standard 

Bank Carbon Facility 

Rabobank 

The Asia Carbon Fund TM 

Japan Greenhouse Gas 

Reduction Fund (JGRF) 

Managed by EcoSecurities and Standard Bank London. The 

Facility is managing a contract on behalf of the Danish 

government to buy high quality emission reduction credits 

In Eastern Europe and former Soviet Union. The Facility is 

also open for European companies and offers both CDM and 

JI credits. Starting capital put up by the Danish 

Environment Ministry is €10 million. 

Operates a contract on behalf for the Dutch Government to 

purchase 10 MtCO 2 from CDM projects. 

The €200 million, 8-year closed-end Fund is covering the 

Asian Region with a focus on India and China (50 percent 

allocation). Other countries to be covered include Malaysia, 

Thailand, Vietnam, Indonesia, Bangladesh, Bhutan, Sri 

Lanka & Mauritius. 

This fund is managed by Japan Carbon Finance, Ltd. (JCF) 

to develop greenhouse gas reductions projects and 

purchase CERs / ERUs credits that issued for the crediting 

period until 2012. The committed fund is approximately 

USD140million. The fund providers consist of major 

Japanese Private Enterprise & Policy – Lending Institutions. 

GOVERNMENT CARBON FUNDS 

World Bank Prototype 

Carbon Fund 

Development Bank of 

Japan 

Japan Bank for 

International 

Cooperation (JBIC) 

KFW 

Danish Government 

Austria CDM/JI 

Programme 

The World Bank is running several carbon funds including the 

Prototype Carbon Fund, Community Development Carbon 

Fund, Bio-Carbon Fund. It was the first initiative to kick start 

CDM market. Partners are European Governments such as 

Italy, the Netherlands, Norway and a number of private sector 

partners. Total size of all the funds: US$380 million. 

Intents to operate a carbon fund. Target U$ 100 million 

The Japan Bank for International Cooperation (JBIC) also has 

launched a CDM fund. Target US$100 million. 

German development bank operating CDM purchasing facility 

on behalf of German government. Also open for European 

companies under the EU ETS. Target €50 million 

The Danish Government is interested in buying CERs from 

CDM projects. 

The Austrian JI/CDM Programme aims to make a contribution 

to achieving the Austrian reduction commitment under the 

Kyoto Protocol through the application of the project-related 

flexible mechanisms, JI and CDM. The estimated amount of 

credits from the programme's projects during the first 

commitment period (2008 - 2012) is 35 million tonnes of 

carbon dioxide equivalent (tCO 2 e). The third calls for JI and 

CDM projects are open from 1 August 2005 until 31 January 

2006. 

47

ANNEX 1 

Project Developer 

CDM project idea developed by the private or 

public sector 

PIN 

Conditional Letter of Approval 

PDD 

Project Idea Note (PIN): A brief description of 

the project activity 

Technical Committee assisted by the 

Secretariat evaluates the project based on the 

national criteria. NCCDM approves the project 

and authorises the project partners to take 

part in a CDM project by issuing a conditional 

letter of approval. 

Project Design Document: A more detailed 

description of the project activity 

DOE Validation 

Review of the PDD according to international 

criteria 

Carbon Contracting 

Negotiation and signing of the Emission 

Reduction Purchase Agreement (ERPA) 

between project developer and CER buyer(s). 

Host Country Letter of Approval 

Designated National Authority (DNA), after 

receiving Validation Report, approves the 

project by issuing host country letter of 

approval 

Project Registration 

Project Monitoring 

Registration of project at CDM Executive 

Board 

Monitoring undertaken by project operator. 

Project Verification & Certification 

Verification/Certification undertaken by 

DOE, 

Issuance of CERs 

Issuance of CERs by the CDM EB 

National CDM Project Cycle

Annex 2 

Project 

Developer 

PIN 

DNA 

(NRE) 

Initial Check 

of National 

Criteria 

Compliance 

Sector 

Secretariat 

Recommendations 

Non-Compliance 

Technical 

Assessment 

Technical 

Committee 

Shortcomings 

Opinion and 

Recommendation 

NCCDM 

Revised 

Review 

and 

decision 

Approval 

DNA 

Rejected 

Conditional 

Approval 

National Approval Process (Phase 1)

Project 

Developer 

Annex 3 

PIN and 

Conditional 

Approval 

Consultant 

Renewed 

approval 

PDD 

Operational 

Entity 

Validated 

PDD 

DNA 

Sector 

Secretariat 

Confirm Renewed 

Approval in the 

NCCDM 

No 

Conformity 

with PIN 

111 

DNA 

Host Country 

Letter of Approval 

National Approval Process (Phase 2)

Malaysia - SETatWork - Sustainable Energy Technology at Work

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