FOLLOWING the surge in the crude oil market and the subsequent rise in biofuel production, palm oil prices have been coupled with fuel prices. But there is another dimension to the oil palm industry’s energy potential – the use of biomass to generate electricity.
Power plant expert M. Umakanthan says the biomass from Malaysia’s oil palm plantations alone can power 5% to 10% of the country’s total energy requirements.
“And this is a conservative figure,” he adds. Biomass is any organic matter that is available on a renewable or recurring basis.
Umakanthan, who has over 30 years’ experience in fossil fuel and biomass power plant design, says biomass as a renewable energy (RE) resource can help big oil palm growers substantially reduce their energy bills. There is also the possibility of selling the excess capacity to Tenaga Nasional Bhd (TNB).
Under the Government’s Small Renewable Energy Power (SREP) programme initiated in May 2001, power plant developers can apply to sell electricity to TNB via the distribution grid system, but the plant capacity is capped at 10MW.
“This is on the condition that the power plants are commissioned within 24 months from the signing of the renewable energy power purchase agreement (REPPA) between the developer and TNB,” says Umakanthan.
Based on a report from the Energy Commission, TNB’s total installed energy capacity as at June 19 last year stood at about 18,000MW. This included electricity supplied by independent power producers (IPPs), amounting to about 7,000MW. The peak demand for electricity was about 13,000MW.
Umakanthan says RE could be tapped from various sources, including wind, hydro and solar. “However, to harness the RE from these sources, we need to look at the cost-effectiveness and ease of tapping the energy. And each country is different,” he told StarBizWeek.
He is convinced that Malaysia has an advantage in this aspect. Because the country is a leading palm oil producer, it is cost-effective and commercially viable to use empty fruit bunches (EFB), found in abundance in oil palm mills, to produce energy.
“The EFB can easily generate 5% to 10% of the country’s total energy requirements in an environmentally friendly and sustainable manner,” he says, adding that there are about 400 oil palm mills in Malaysia.
According to Umakanthan, it will take 20 to 22 months at a cost of about RM70mil to build a 10MW biomass power plant. The investment payback period is about five to six years. He adds that the cost of generating electricity using EFB is lower than that for coal and oil, which are imported.
“The cost of building a biomass power plant is also less than a coal, oil or gas-fired power plant,” he notes.
Back in the 1980s, Umakanthan was involved in the construction of some of TNB’s power plants, which are still operating today.
He is now a senior general manager of Garisan Etika Sdn Bhd and is involved in the construction of a 50MW diesel generator and gas turbine power plant project in Dhaka, Bangladesh, and a biomass power plant in Johor under IPP arrangements.
Incentives for RE
Under the Eighth Malaysian Plan, the Government had promoted the generation of RE from biomass, biogas, municipal solid waste, mini-hydro and solar. The Ninth Malaysia Plan has set a target of 5% RE in the country’s energy mix.
Under REPPA, IPPs could sell their excess power from the power plants to TNB at a tariff rate of 21 sen per kilowatt hour. “This is an attractive price,” says Umakanthan, adding that this is meant to encourage IPPs to move to RE sources.”
He adds that 600 to 650 tonnes of EFB from four to five mills is needed daily to run 10MW biomass power plant.
A plus point is that the residual ash from the burning of the EFB at a 10MW plant can be sold as fertiliser for about RM1mil per year.
The Clean Development Mechanism (CDM) established in the Kyoto Protocol permits RE projects in developing countries to generate carbon credits.
“These carbon credits can be marketed and counted against a developed country’s emission obligation,” Umakanthan explains, adding that a 10MW EFB-fired power plant can bring in about RM3mil to RM3.5mil per year from the carbon credits.
He says it is now an appropriate time to tap RE resources such as biomass, before fossil fuels such as oil and coal are depleted or get too costly. Malaysia’s energy generation mix in 2008 comprised gas (65%), coal (28%), hydro (5%) and diesel (2%).
He adds that at present, only a couple of local companies are involved in biomass as a RE resource.
“The energy output from biomass is insignificant in terms of its contribution to the energy generation mix,” he says, adding that there is still much room for the growth of RE in Malaysia.
What power analysts say ...
A local analyst who covers the power sector agrees that it is time for Malaysia to look at RE resources. He says there is over-dependence on fossil fuels, especially oil, whose prices in recent years have been very volatile, thus affecting the performance of many companies.
“There’s a need to at least cushion the cost (of oil) with RE sources that are more sustainable,” he argues. Unfortunately, he points out, there is still insufficient push by all parties, including companies, consumers and the authorities, to make the necessary changes to facilitate the adoption of RE.
“When oil peaked at US$147 per barrel in June 2008, everyone (including companies and governments) was worried about its impact on businesses. But now that oil has dipped below US$40 per barrel, everyone has forgotten how the energy crisis had badly affected the cost of doing business,” he notes.
The analyst believes that oil prices will spike up again in the mid to longer-term. “Businesses cannot flourish in an unstable environment or when operating costs are high. Any big jump or volatility in oil prices will hurt most companies’ bottomline,” he says.
He too is convinced that the most viable RE resource for Malaysia is probably biomass from the oil palm industry. “The options of harnessing RE from hydro, wind and solar cannot be discounted, but biomass from oil palm plantations is likely to be a more reliable feedstock because it is in abundant locally,” he says.