SEPTEMBER 29 — Malaysia stands at a renewable energy crossroads. While the global Feed-in Tariff (FiT) revolution successfully propelled solar and wind from niche technologies to cost-competitive powerhouses – precisely as the mechanism intended – one crucial piece of our domestic clean energy puzzle remains frustratingly inert: biomass. Despite sitting atop a potential goldmine of agricultural waste, particularly from our vast palm oil industry, the FiT for biomass has sputtered rather than soared. This isn’t just a missed opportunity; it’s an energy, economic, and environmental failure demanding urgent redress.

Malaysia is the world’s second-largest palm oil producer. This generates an estimated 80-100 million tonnes of biomass waste annually – empty fruit bunches (EFB), palm fronds, trunks, and palm kernel shells. Theoretically, this is a FiT dream: abundant, indigenous, and capable of providing valuable baseload power to complement intermittent solar and wind. Yet, the transition from potential to kilowatts has been painfully slow. Why? What are the roots of the stagnation? Are they more than just tariffs?

The logistical labyrinth has been described as a major hurdle. Unlike solar panels bolted to a roof, biomass energy starts in the field. Collecting, transporting, storing, and pre-processing bulky, dispersed, and often seasonally variable waste (like EFB) is a monumental operational and financial headache. The costs incurred before the fuel even reaches the plant gate are frequently underestimated and inadequately reflected in the FiT rate. Storage is critical (biomass degrades) and expensive, requiring significant land and infrastructure. Securing a consistent, long-term, and affordable supply of biomass is the Achilles’ heel. Mills often view their waste as a potential revenue stream (e.g., for mulching, composting) or a disposal nuisance, not primarily as fuel. Unclear ownership rights, fragmented smallholder involvement, and competition from other uses create market uncertainty. The “fuel risk” scares off investors far more than technology risk.

The current FiT structure, largely inherited from models designed for solar/wind, often fails to account for biomass’s unique complexities. The FiT rate may not fully cover the high capital expenditure (Capex) for efficient combustion/boiler technology, emissions control systems (crucial for air quality), and the extensive fuel handling infrastructure required. Transport costs are king. A FiT rate that doesn’t significantly differentiate between a plant located at a mill cluster versus one needing long-distance hauling from scattered sources makes many projects instantly uneconomical.

Smaller, distributed plants (often ideal for rural areas near mills) struggle disproportionately with high relative Capex and operational costs compared to larger facilities, yet the FiT doesn’t always incentivise this scale effectively. Many palm oil mills are located in rural areas with weak or non-existent grid infrastructure. Connecting a biomass plant requires substantial investment in grid upgrades. Who pays? Uncertainty over connection timelines and costs adds another layer of risk. While FiT exists, consistent, long-term commitment and streamlined permitting processes are vital for investor confidence. Perceived bureaucratic hurdles, delays in approvals, and shifting policy sands can deter investment. Clarity on sustainability criteria (ensuring biomass sourcing doesn’t lead to deforestation or environmental harm) is also crucial but adds complexity.

We cannot afford to let this potential rot in our fields. So how to reignite the biomass FiT engine? Refit the FiT. For example using tiered and location-sensitive tariffs. Implement significantly higher FiT rates for plants utilising difficult-to-access biomass or located in areas requiring long transport distances. Offer premiums for smaller-scale, distributed generation near mills. Recognise Capex. Structure tariffs or offer complementary capital grants/soft loans to better reflect the high initial investment in efficient, clean technology and fuel handling systems. Create long-term fuel security indexing. Explore mechanisms partially linking FiT payments to verified feedstock procurement costs, reducing fuel price volatility risk for developers.

Build the biomass backbone through centralised aggregation hubs. Government and industry collaboration is key. Invest in strategically located collection, storage, and pre-processing hubs. This reduces transport costs, ensures quality, and creates a reliable market for waste sellers (mills, smallholders). Create fuel guarantee schemes. Develop models (potentially involving state-owned entities or cooperatives) to guarantee minimum biomass supply volumes at predictable prices for qualifying projects, de-risking the fuel side. Empower the grid. Prioritise and fund grid upgrades in key biomass-rich regions. Establish clear, fast-tracked procedures and cost-sharing mechanisms for connecting biomass plants. Actively promote and support biomass projects for off-grid industrial applications (powering mills themselves) or rural mini-grids, bypassing the main grid bottleneck entirely.

Create a dedicated, empowered task force within Seda or the Energy Ministry to streamline biomass project approvals, permits, and grid connection processes. Forge a clear national biomass energy strategy with binding commitments from major palm oil players to prioritise energy conversion of waste, supported by consistent government policy and enforcement of sustainable sourcing. Support R&D and piloting for advanced conversion technologies (gasification, biogas from POME integration) that offer higher efficiency and better economics.

Malaysia’s biomass FiT stagnation is not a mystery, but a solvable equation of misaligned incentives, logistical neglect, and policy inertia. We have the resource. We have the mechanism. What we lack is the concerted will to bridge the gap between the palm oil field and the power socket. By recalibrating the FiT to reflect reality, building the necessary physical and market infrastructure, and fostering true collaboration, we can transform agricultural waste from an environmental burden into a cornerstone of our clean energy future. The time for half-measures is over; let’s harness this wasted potential before it literally goes up in smoke. Our energy security, rural economies, and climate commitments demand nothing less.  

* The author is affiliated with the Tan Sri Omar Centre for STI Policy Studies at UCSI University and is an associate fellow at the Ungku Aziz Centre for Development Studies, Universiti Malaya. He can be reached at ahmadibrahim@ucsiuniversity.edu.my. 

* This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.