Policies
The National Energy Policy for Malaysia has targeted a number of strategies to support sustainable energy development. These include:

• “Secure supply  - Diversification of fuel type and sources, technology, maximize use of indigenous energy resources, adequate reserve capacity to cater for contingencies [adequate reserve margin for generation, upgrading transmission and distribution networks and distributed generation (islanding);
• Sufficient supply - Forecast demand, right energy pricing and formulate plans to meet demand.
• Efficient supply - Promote competition in the electricity supply industry.
• Cost-effective supply - Promote competition and provide indicative supply plan to meet demand based on least cost approach using power computer software such as WASP;
• Sustainable supply - Promote the development of renewable and co-generation as much as possible.
• Quality supply - (low harmonics, no surges and spikes, minimal variation in voltage)  Match quality with customer demand with variable tariffs;
• Efficient utilization of energy - Bench marking, auditing, financial and fiscal incentives, technology development, promotion of ESCOs, Labeling, Ratings, correct pricing, energy managers; and
• Minimizing Negative Environmental Impacts - Monitor the impacts, improve efficiency of utilization and conversion and promote renewable (28).”

Under the Ninth Malaysian Plan, strategies for developing energy security were highlighted along with a number of broad strategies including rural electrification, fuel diversification, energy efficiency, renewable energy and energy business development (29) .

 Targets and goals

The Government of Malaysia has a number of strategies for achieving national objectives for energy security. These include diversifying the electric power sector though the energy type, source and technology used. Under the National Energy Policy, it is stated that the electric power sector aims to provide a quality electricity supply to customers which is used and generated in an efficient manner and minimises negative environmental impacts.

Malaysia is well endowed with abundant non-renewable and renewable sources of energy (30). As the electricity industry is highly dependent on natural gas, the Government is expecting to diversify their energy sources through increasing the utilization of coal. It is expected that indigenous energy resources would be used as much as possible, and hydropower resources will also be developed over the medium term, along with renewable resources and co-generation. In 2004, around 7 per cent of the electricity supply came from non-carbon sources – primarily hydropower – so that presently other renewable resources are under-utilized. Over the next decade, the Government is aiming to expand the use of hydropower to 30 per cent of electricity generated, while power generated using gas and coal will be reduced. (31)

 Efficiency measures

The Energy Commission (Suruhanjaya Tenaga) began operation in 2001 to regulate electricity and gas in Malaysia. Part of its functions is to promote energy efficiency and renewable energy.(32)

The Government’s approach to energy efficiency is to raise awareness and promote efficient generation and utilization. Demand side management initiatives are undertaken by utilities, particularly through tariff incentives. A new electricity tariff structure is effective from 1 June 2006 which balances a number of social and economic issues, but is also meant to promote energy efficiency.

Along with a market approach, a regulatory approach aims to supplement energy efficiency activities through equipment labelling, focussing on large electricity users and appointing energy managers. For industry, an Industrial Energy Efficiency Improvement Programme has been launched, along with energy auditing, an energy service companies support programme and a technology demonstration programme (APEC). For the MIEEIP (Malaysian Industrial Energy Efficiency Improvement Project), an energy efficient project loan financing scheme of RM 16 million was set up to provide loans for demonstration projects under eight industrial sectors. Some of these projects will be undertaken by energy service companies, while others will be joint ventures between the MIEEIP and industrial companies . (33)

Co-generation is also being encouraged for efficiency purposes for generating heat and electricity at a single source, and energy efficient building designs are also being encouraged, some of which also incorporate photovoltaic technologies for electricity generation . (34)

 Environmental impact (35)

Environmental issues have been highlighted in the National Energy Policy as an important factor to be considered for electric power development, and energy development in general. However, initiatives to develop environmental protection strategies and policies have been limited. Major electricity development projects are required to undergo an environmental impact assessment. Emissions and discharges from power utilities are also subject to standards however air pollutant emissions from various energy sources, including electric power generation, is still quite significant in Malaysia (36). Utilizing alternative power generation technologies is one mechanism that the Government is considering to reduce environmental impacts. For example, co-generation initiatives are seen as having a far lesser impact on the environment than the more conventional oil-based generations.

 Renewable Energy

The Government announced the launching of the Small Renewable Energy Power Programme (SREP), on 11th May 2001. The launch of the Programme is among the steps being 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 2001-2010 (OPP3) and the Eight Malaysia Plan.(37) The Four Fuel Strategy had been in operation since 1981.

Under the Eighth Malaysian Plan, renewable energy was added to create a Five Fuel Strategy in the energy supply mix. A target was set for 5 per cent of the country’s electricity demand being met by renewables by 2005. Following this, the Ninth Malaysian Plan from 2006 to 2010 targets 350 MW of grid-connected renewable electricity by 2010. A number of incentives were set up to encourage this, including a Renewable Energy Purchase agreement whereby independent power producers less than 10 MW can negotiate directly with utilities to sell their electricity. Other tax incentives include an exemption for pioneering renewable energy projects to increase their utilization in Malaysia (38). A programme was also initiated to increase public awareness about renewable energy and energy efficient practices . (39)

This Ministry of Energy Water and Communications identified palm oil waste and solar energy as important renewable resources to be developed . (40)

 Affordability

The new tariff is structured to balance between protecting low income group and sustaining the nation's competitiveness. Not everyone will be affected in the same way. For example, there is no increase if the monthly bill is less than 200 kWh. And it adopts Specific Agriculture Tariff for selected agricultural activities. And new tariff structure encourages efficient use of electricity. The Special Industry Tariff is maintained for those who qualify and 10 per cent discount for government schools, government institutions of higher learning, welfare home and places of worship is maintained.

Stakeholders

Ministry of Energy
Tenaga Nasional Berhad (public listed company)
Pusat Tenaga Malaysia
Suruhanjaya Tenaga (Energy Commission)

(28) Ministry of Energy, Water and Communications, http://www.ktak.gov.my/, accessed in October 2007.
(29) Government of Malaysia, “9th Malaysian Plan”, chapter 19, http://www.st.gov.my/, accessed in October 2007.
(30) Ministry of Energy, Water and Communications http://www.ktak.gov.my/, accessed in October 2007
(31) Ministry of Energy, Water and Communications http://www.ktak.gov.my/, accessed in October 2007
(32) Suruhanjaya Tenaga website http://www.eest.net.my/, accessed in October 2007.
(33) Malaysian Industrial Energy Efficiency Improvement Project, http://www.ptm.org.my/mieeip/finance.html accessed in October 2007.
(34) APEC, APEC Energy Overview 2006 (Institute of Energy Economics, Japan, 2007).
(35) The official website for the economic analysis on Bakhun  http://www.epu.jpm.my/Bi/publi/bakun/bakun3.htm, accessed in October 2007.
(36) Ministry of Energy, Water and Communications, http://www.ktak.gov.my/, accessed October 2007.
(37) Ibid.
(38) APEC, APEC Energy Overview 2006 (Institute of Energy Economics, Japan, 2007)
(39) Ministry of Energy, Water and Communications, http://www.ktak.gov.my/, accessed in October 2007.
(40) Ibid.