Abstract
The palm oil industry is one of Malaysia major agricultural enterprises. There is considerable controversy about its environmental impacts and a major effort is underway to make it more sustainable. One approach to this objective is to minimize the waste from this industry by converting it into useful products, such as renewable energy. Palm oil biomass accounts for 85.5% of the total biomass production in Malaysia. The Small Renewable Energy Power (SREP) scheme, which began in 2001, was a tool that was intended to propel renewable energy development, but it failed to stimulate the growth of the industry. To rejuvenate the industry, a new Feed-in Tariff (FiT) regime was introduced in 2011 with an ambitious 2080MW target by the year 2020. Palm oil biomass is projected to contribute 800MW of grid-connected capacity towards this target, a huge step from the 40MW capacity reached during the SREP period. This study investigates whether the current downstream value chain system is capable of supporting such a high capacity goal. The research questions address the sustainability of fuel supply, bio-energy conversion technology and the costs and alternatives to grid extension. The results from this study will inform future policy strategies. The research methods include a combination of quantitative (survey) and qualitative (in-depth interview and focus group meeting) techniques. The author has found that it is worthwhile to explore the potential use of less sought after by-products such as large fibre and palm frond. Centralizing the biomass conversion technology at a hub facility offers an attractive approach to small producers. Smart-partnership collaboration for building a large-scale biomass plant is worthy of consideration as it would lower the business risk and increase the economies of scale. Finally, the high cost of building transmission infrastructure to remote areas can be avoided by extensively promoting decentralized generation.