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Malaysia looks to realise its energy efficiency potential

Interview - March 27, 2014
MAESCO, or the Malaysia Association of Energy Service Companies, was formed to bring together Energy Service Companies (ESCOs) within the nation under one entity. Talking to PM Communications, President of the organization Mr. Zulkifli Zahari stresses the country's efforts towards energy efficiency, such as the Green Tech policy, Malaysia's energy collaboration with other countries, and the ‘win-win’ situation of the energy performance contracting model
Malaysia is already strategically positioned to become an oil and gas hub in the ASEAN region. What is the potential for Malaysia to become also a regional green energy hub?

Since 2010, Malaysia has established a policy called Green Tech policy which specifically focuses on the possibilities for the country to remain energy independent while making sure that a good energy efficiency (EE) promotion is carried out. The policy priority objective is to ensure the growth of the economy while keeping the increase in energy consumption under control.

For the time being, that is the only policy that we have on EE. Our Prime Minister has made a statement concerning our nation playing an important part in making sure that impact of greenhouse gas is controlled. Malaysia’s intent is to try to achieve a 40% greenhouse gas emissions reduction - compared to 2005 levels - by 2020 subject to transfer of technology and availability of finances.

Of course it is an extremely high target, which can be converted in a business opportunity even for the communities in Malaysia - especially ESCO members - or for foreign investment and energy services providers  in order to spur the local sustainable energy industry, with a special regard for those who are involved in the sustainable energy chain. The potential is great and it comes with challenges as well.
The AEC will be established in 2015 and will create a single market among ASEAN countries. What will be the impact of AEC 2015 on the energy and green energy sector in Malaysia?

It will certainly be a positive impact because of the fact that it will become an open market providing services and products needed that everyone can benefit from. At the same time, the government wants to consider the impact it will have on the local producers and how they can play their own role to make sure that they’re not left out. In this scenario MAESCO can play a balancing role in order to improve the capacity of its members to make sure customers get a complete package. Moreover, MAESCO is cooperating with other governments, such as the Japanese Government, to see whether they can fund energy performance contracting projects locally.
One of the important aspects of EE projects is that it pays for itself. Energy performance contracting isn’t anything new, it’s carried out in many parts of the world such as Japan and Europe but it still is a relatively new concept in Malaysia. A positive aspect is that the customer don’t really need to worry that much about funding because once the equipment is implemented, returns are derived straight from consumers’ savings due to higher energy efficiency - for instance by improving the energy efficiency in industrial facilities.

I can’t say how deeply implemented this system actually is in the UK but it is highly recommended in Malaysia, where a 15%-16% increase in energy tariff is due to be applied by January 2014. Only very low  income houses will be exempted.
The UNDP in collaboration with the Malaysian Government launched in 2000 - the Malaysian Industrial Energy Efficiency Improvement (MIEEIP) Project. Many case studies derived from this project provides evidence that industry should apply this model.  Two examples: industries’ return on investment are I mentioned earlier. Many entities are very conscious about derived by the project itself within a short period and accelerated due to the tariffs increase that implementing a more energy efficient model because they know that the threat of being non-competitive is real and that subsidies currently in place will subsequently be totally removed. 
So, basically the energy performance contracting model allows consumers to save money through increased energy efficiency and permits ESCOs to make profits out of savings…
It’s a win-win situation for all the players in this sector and it makes business sense. A contract that has a payback period within 3 or 4 years from the energy improvement measure is something that is already supposed to be bankable. The Japanese Government, for instance, through JAESCO - MAESCO’s counterpart - are able to take advantage even better from this initiatives because of their close-to-0% interest rate in banking lending. But, this is a business model that can be implemented anywhere, even in the UK. 
Obviously by the sound of it, cooperation with other countries represent a great way to make energy efficiency a reality for Malaysia but also it’s an opportunity for them to get distribution links for products and services within the country.
Correct. Even Panasonic and Schneider   are our members. They’ve set up a specific division called Panasonic Ecosystems and made it our member in order to access potential and utility. Utilities have an important role in energy efficiency: on the one hand, the company has to benefit from selling energy supply but on the other hand they need to actually talk people into not wasting energy either.

For this reason, they engaged MAESCO to talk to their biggest customers about what they should do in order to adopt proper energy measurement standards, energy measurement policies, and energy management measure.
MAESCO also organize seminars workshops and training for the Industry. Is that correct?
That is our primary activity, from the revenue generation point of view. We do a lot of trainings, we address many energy causes, and we promote publication or guidelines on energy audits. Malaysia does not lack the professional and EE expertise and is quite adequate in providing capacity building for organizations.

This activity also serves to meet the market requirement of the local energy efficiency regulatory of our government in terms of the mandatory engagement of Energy Managers within large facilities. In doing so, MAESCO finds itself playing an important role in facilitating the sustainability commitment that Malaysia has declared to the international community.  
During a brief meeting we had with the representative of the Malaysian Water Association, the key point that emerged from our conversation is that raising awareness about energy efficiency and water consumption is essential. Do you agree with this perspective?
Yes, I do. The problem is that there is insufficient awareness programs conducted by the relevant government agencies. For instance ESCO services actually get tax allowances for cost to conduct energy audits but the rate is small. That those who purchase energy efficiency equipment and takeup ‘green projects’ are also eligible to actually apply for tax allowances.

In the afternoon, I will be in a meeting with my committee on the request of the Malaysian Industrial Development Authority (MIDA) on how our government play the role of providing incentives throughout the full economic chain of promoting the business of energy efficiency, from the level of awareness, training, implementation and also financing. This charting of the ‘ecosystem’ of the industry is directed to attract the commercial and industrial sectors to benefit from such incentives and at the same time enable to promote the expertise and ESCOs to meet the market requirements.
There is only one regulation that addresses the EE sector in the country called the Efficient Management of Electrical Energy Regulations (EMEER) according to which installations that consume or generate electrical energy for own consumption equal or more than 3,000,000 kWh for 6 consecutive months are mandate to comply with the regulation under EMEER 2008.

These entities have to meet the conditions of this regulation which include: having a qualified registered energy manager; submit reports to the energy commission empowered to enforce this regulation; report on what they are doing about energy consumption in terms of rationalizing and optimising its use. This regulation is being enforced by the Energy Commission of Malaysia.
This is a good start to legislate Energy Efficiency in the country. This presents an opportunity for MAESCO to facilitate the capacity building of Energy Managers to cater for the regulation. Energy Manager is not really technical in expertise. The Energy Commission basically regulates the electrical energy sector on behalf of the Ministry. Other agencies that are involve in sustainable energy includes Sustainable Energy Development Authority (SEDA) which regulates the Fit in Tariff Act. They are also involve in the capacity building EE programs.

There’s the Malaysian GreenTech Corporation, which deals with the promotion of green technology; and of course the Ministry itself has got its internal division of sustainable energy and so on.

The issue is how to actually navigate this sector. Most of the countries that have already implemented these EE programmes has regulation in place as well as the enabling tools. If you take a look at the PEMANDU’s website you can see that they focus on the New Key Economic Areas (NKEAs) within the oil &  gas and electricity; they have the Entry Point Projects (EPPs) that include a specific program on energy efficiency concerning electrical appliances based on government rebate vouchers for whoever buys 5-star rating energy office and home devices. Nevertheless, in my opinion, a lot more can be done, because these kind of incentives are not  sustainable. 
I understand that there are many players, actors, and projects in place in order to push forward policies to promote energy efficiency. What do you consider as the main challenges in the sector?

You see, two weeks ago I asked our government for an explanation as to why is the program on EE in government buildings not moving yet. There are policies and international declaration statements in place but the bureaucracy within the government is intricate.

The Ministry of Energy is addressing its energy issues but the buildings are being managed by the Ministry of Public Works. Reduction of CHG is being monitored by the ministry of Environment, and each of these ministries have their own agencies and departments.

Therefore not having a clear champion within the Government will be the main challenge to provide a clear direction. I can name all the programs that are on-going, including the UNIDO project for SMEs to promote ISO 50001 certification to meet the global standards on energy management; the Building Sector Energy Efficiency Project by the Public Works department - under the Environment department which was launched three years ago but unfortunately delayed due to management issues. MAESCO only recently is actively participating in the program.
Malaysia should also learn from the international experience. The International Energy Agency (IEA) for instance has given a very clear example of case studies about emerging economies’ contribution to EE development businesses and environment. One of the key recommendations is for Malaysia to introduce comprehensive enactments and setting good balance between the carrot and the stick. The existing regulation also cannot be fully implemented because we don’t have enough energy management capacity to address the national requirement. However this can be seen as a business potential for R&D, human capital development, and capacity building. 
The UK is one of the biggest green energy markets, in terms of business opportunities and R&D centres. Could you please share with the readers of The Daily Telegraph what is the potential for partnerships with UK private companies focusing on energy efficiency? 

There has always been good bilateral business relationship between our two countries, There are Malaysian corporations that invest heavily in Britain. I’ve worked with British companies before in the energy sector – EA Technologies just to name one – but again this was on the supply side of energy. EE businesses comes only after a stand for demand side management of energy emerge especially in developing countries like Malaysia.  

So, I welcome companies that can provide an appropriate expertise whether in green tech product, project management or even funding mechanism for all that matter. Yesterday I had a meeting with the Public Works department on the street lighting in terms of technology, standards and local production. The government would give preference to procure green technology and products that set up their manufacturing facilities locally even if it is foreign owned.

Only if the products are not available locally will import be considered.   The issue  raised was what is the local content to this project? How much are we going to import in terms of products and equipment? You can assign this task to any manufacturer from China or Britain or maybe Italy, but the priority - if there is a choice - is to invest on the local commerce. We need to find the right mix. It would be good for foreign companies to come to our country and set up a plan to look into not only local businesses but also regionally.
High-skilled labour is a crucial factor for the further development of green technology. What do you think is the role of the UK – considering the numerous presence of British campuses and universities here- in facilitating and shaping the necessary skills for the further development of green technology and green economy sector in Malaysia?
Well, as you know Malaysia was a British colony, so we are English speaking people; I was trained in Britain; I have a daughter who came back two years ago after studying law in London, while my son is studying architecture in UK too. We recognize British expertise, not only from an educational point of view. I think is up to the business community of England to pinpoint the areas of expertise that they have.

We are addressing EE even on to the utilities, which need to meet certain standards in order to manage their power plant. Can this be improved? The important thing about EE is that we need to appreciate the reverse mathematics of it in terms of utilities. Every unit of energy saved at the ‘end users’ side would result in the reduction of much more units of energy input at the source of energy which will then result in the reduction of GHG.
As pioneer of the sector and emblem of innovation, I would like to ask you what have been your main sources of inspiration?
It is an evolution of things. When I came back from Britain there was an economy crisis in Malaysia. So in the name of survival I’ve got into other businesses, starting to source for business everywhere and somehow I managed to create my small business network. I’ve got the privilege to work with a number of  international entities, which include some international ESCOs. So I entered the UNDP tender and secured the project called the Malaysian Industrial Energy Program (MIEEIP); one of the components of the projects  was ESCOs Development. The project has a noble cause.

The best satisfaction about what you do in life has to be what impact you can leave behind. I think that the greatest issue of EE, as you know, is to address global warming or climate change. If we look at what just happened in the Philippines, we will not be able to imagine how would it feel to look at our children not being able to be buried for so many days like it just happened there. I just want to make sure that Malaysia will play its positive role.