DEC 23 — Feed-in-Tariff schemes are used worldwide to incentivise electricity generation using renewables. The aim is to decarbonise electricity generation. It is through such Feed-in Tariff (FiT) schemes that the development of renewables, especially solar and wind, has been impressive.

Thanks to such FIT programmes, coupled with the relevant R&D, the costs of solar photovoltaic and wind have come down significantly.

Implementing FIT schemes, however, presents a multifaceted array of challenges.

Overly generous tariffs can strain public finances or utilities, leading to higher electricity prices for consumers and sparking political and social resistance. Setting rates too low, on the other hand, fails to attract investment, while excessively high rates risk overcompensation and unsustainable project booms. Adjusting tariffs as technology costs decline is therefore critical to avoid inefficiencies.

Grid integration is a major challenge. The intermittent nature of renewable sources such as solar and wind requires grid upgrades to handle variability, posing technical and financial hurdles. Rapid deployment of renewables without adequate infrastructure can destabilise the grid, necessitating costly modernisation.

There are also administrative and institutional barriers. Complex application processes, slow approvals, and weak institutional capacity hinder effective implementation, especially in developing countries. Then there is the issue of monitoring and compliance, as ensuring adherence to FIT terms demands robust administrative systems, which may be lacking.

There is also concern about market and policy distortions. FITs can stifle market-driven mechanisms and provoke opposition from fossil fuel incumbents. Furthermore, favouring specific technologies may skew the energy mix, requiring ongoing adjustments to reflect evolving costs and innovations.

Malaysia has actively promoted renewable energy (RE) through its Feed-in Tariff (FIT) mechanism under the Renewable Energy Act 2011, managed by SEDA Malaysia. While solar photovoltaic (PV) has achieved considerable success under this scheme, the performance of biomass-based power generation has been mixed, despite the country’s significant biomass resource potential from palm oil, forestry, and agricultural residues.

The achievements of the biomass sector under the FIT policy have lagged expectations due to operational, economic, and regulatory challenges unique to biomass energy production. Without addressing these structural issues, Malaysia risks underutilising a key domestic renewable resource that could contribute to its energy transition and carbon reduction goals.

There are key challenges facing biomass under the FIT framework. Biomass energy relies on a steady, large-volume feedstock supply. In Malaysia, feedstock supply chains involving palm oil residues, wood waste, and rice husks are fragmented, seasonal, and logistically costly, leading to inconsistent fuel availability. Biomass feedstock prices are also volatile due to competition from other industries such as composting, fertiliser production, and biomass pellet exports. A fixed FIT rate does not account for these fluctuating operational costs, reducing investment attractiveness. It is no wonder that under FIT 1.0, a low percentage of the quota given was eventually translated into solid projects. Many failed to deliver the quota given.

Biomass power plants require substantial upfront investment and sophisticated technology for combustion, emissions control, and waste handling, making them costlier per MW installed compared to solar and wind.

The use of energy crops or unsustainable harvesting practices raises concerns about deforestation, biodiversity loss, and food security. Public opposition towards waste-to-energy plants, due to emissions and odour, can also delay project approvals.

Inconsistent enforcement of biomass sustainability standards and the absence of clear policies on waste ownership and feedstock rights hinder biomass energy development. There is also a lack of clear guidelines for integrating small-scale rural biomass projects into the grid.

Some of the policy recommendations include strengthening the biomass supply chain ecosystem. This includes supporting the establishment of biomass aggregation and logistics hubs near resource-rich areas, as suggested under the National Biomass Action Plan. Tax incentives could also be provided for companies developing efficient feedstock collection, processing, and storage systems.

There is a suggestion to introduce a flexible FIT model or a two-part tariff system for biomass, where the fuel cost component is periodically reviewed and adjusted based on market conditions. To enhance sustainability assurance, another suggestion is to make feedstock sustainability certification mandatory for biomass FIT eligibility. This should be accompanied by efforts to promote the use of agricultural and forestry residues over energy crops to mitigate land-use conflicts.

Other policy suggestions include decentralised, off-grid biomass solutions. This includes promoting small- and medium-scale biomass projects in rural and remote communities for energy access, as well as simplifying grid connection regulations. There is also a call to integrate biomass into circular economy policies, positioning biomass energy within the CE Roadmap by linking biomass-to-energy with waste reduction and valorisation, and rural income generation.

Malaysia possesses ample biomass resources, but current FIT structures inadequately address the operational realities of biomass power generation. Strategic policy reforms, particularly in supply chain management, tariff flexibility, and sustainability assurance, are therefore crucial to revitalising the sector. A targeted, locally adapted biomass policy can help Malaysia meet its renewable energy targets while supporting rural livelihoods and sustainable waste management.

* Professor Datuk Dr Ahmad Ibrahim is affiliated with the Tan Sri Omar Centre for STI Policy Studies at UCSI University and is an Adjunct Professor 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.