Sarawak's government aims for solutions to meet local demand for power

At present, there are no formal mechanisms within Sarawak allowing for small industries and homes that produce renewable power for their own consumption to sell any surplus power generated to the state’s main grid. Some critics believe this counters the government’s principles of actively encouraging the adoption of green energy solutions wherever possible.

SWEET DEAL: In Peninsular Malaysia, national utility Tenaga Nasional has been running a feed-in-tariff (FIT) programme since 2011, and in 2014 Sabah and the federal territory of Labuan adopted the same regime, leaving Sarawak as the only Malaysian territory without a FIT scheme. Under the programme, Sustainable Energy Development Authority Malaysia specifies the conditions and rates at which excess privately generated biogas, biomass, small hydro and solar photovoltaics will be guaranteed for purchase. While firms and households in Sarawak are motivated to invest in renewable energy solutions to reduce their electricity bill, they are lacking the extra impetus provided by a FIT scheme.

Sarawak Energy, as well as its subsidiary the Sarawak Electricity Supply Corporation (SESCO), rationalises its decision to not implement a FIT on the basis that operating conditions in Sarawak differ dramatically from western Malaysia. “First off, SESCO has plentiful supply, and, considering how low its tariffs are, it would make a loss on any unnecessary purchases. Secondly, we are a large state with a highly scattered population, and if the source is far from the grid, you cannot expect Sarawak Energy to have to cover the costs of installing the connecting transmission line,” Syed Mohamad Fauzi Shahab, director of electricity supply at Sarawak’s Ministry of Public Utilities, told OBG.

According to Syed, it is a misnomer spread by opposition parties that the state is averse to encouraging independent renewable generation. However, the economic reality dictates that a different strategy to FITs needs to be employed. SESCO, instead, will allocate licences to supply the grid based on the principle of “willing seller, willing buyer”, and will periodically grant licences even when the deal does not make commercial sense as part of their corporate social responsibility mandate. In March 2014 Sarawak Energy signed its first renewable energy power purchase agreement for 10 MW of biomass with Olive Energy, a palm oil producer located 12 km from Mukah town, at the epicentre of the Sarawak Corridor of Renewable Energy.

BIOGAS: The aforementioned one-off deal aside, the Sarawak Oil Palm Plantation Owners Association ( SOPPOA) has been advocating that the lack of a formalised regime for placing privately generated renewable power up for sale is impeding its members’ ability to meet a federal mandate stipulating that all palm oil mills within Malaysia install biogas capture facilities.

On a national level, the palm oil industry is regulated by the Malaysian Palm Oil Board, which has issued a directive that any newly constructed or expanded upon mill must install biogas trapping or methane limiting capabilities in order to receive a licence. The SOPPOA has stated that it fully supports the national policy, but is lobbying for mills in Sarawak to receive an extension on meeting the requirements based on prevailing conditions. According to the SOPPOA, there are 67 palm oil mills being invested in within the state, towards which implementing biogas capturing facilities would come at a cost of around RM600m ($182.52m). While the local industry would like to play its part in restricting the release of methane into the atmosphere, with no guarantee that the biogas power generated would be purchased by the state utility, it would be difficult to generate a return on these investments.

As an interim solution, the industry body is asking the state government to assist in setting up small industries close to biogas plants, which could tap into the power generated. It recognises that a substantial portion of mills are located in remote areas far from the main grid, and that in order for Sarawak Energy to incorporate power generated into the grid, it would be paying a premium to do so, as it would also need to spend on installing distribution lines to isolated locations.