GHG Emissions and Costs of Developing Biomass Energy in Malaysia: Implications on Energy Security in the Transportation and Electricity Sector

Malaysia’s transportation sector accounts for 48% of the country’s total energy use. The country is expected to become a net oil importer by the year 2011. To encourage renewable energy development and relieve the country’s emerging oil dependence, in 2006 the government mandated blending 5% palm-oil biodiesel in petroleum diesel. Malaysia produced 16 million tonnes of palm oil in 2007, mainly for food use. This study addresses maximizing bioenergy use from oil-palm to support Malaysia’s energy initiative while minimizing greenhouse gas emissions from land use change. When converting primary and secondary forests to oil-palm plantations between 270 - 530 g and 120 -190 g CO2 equivalent (CO2-eq) per MJ of biodiesel produced, respectively, is released. However, converting degraded lands results in the capture of between 23 to 85 g CO2-eq per MJ of biodiesel produced. Using various combinations of land types, Malaysia could meet the 5% biodiesel target with a net GHG savings of about 1.03 million tonnes (4.9% of the transportation sector’s diesel emissions) when accounting for the emissions savings from the diesel fuel displaced.

Fossil fuels contributed about 93% to Malaysia’s electricity generation mix and emit about 65 million tonnes (Mt) or 36% of the country’s 2010 Greenhouse Gas (GHG) emissions. The government has set a target to install 330 MW biomass electricity by 2015, which is hoped to avoid 1.3 Mt of GHG emissions annually. The availability of seven types of biomass residues in Peninsular Malaysia is estimated based on residues-to-product ratio, recoverability and accessibility factor and other competing uses. It was found that there are approximately 12.2 Mt/yr of residues. Oil-palm residues contribute about 77% to the total availability with rice and forestry residues at 17%. Electricity from biomass can be produced via direct combustion in dedicated power plants or co-fired with coal. The co-firing of the residues at four existing coal plants in Peninsular Malaysia was modeled to minimize cost or GHG emissions. It is found that Malaysia can meet the 330 MW biomass electricity target via co-firing with a cost reduction of about $24 million compared to 100% coal. Optimal GHG reduction for co-firing was found to be 17 Mt lower than 100% coal at a cost of carbon mitigation (COM) of about $22.50/t CO2-eq mitigated. This COM is lower than an implied COM under the newly introduced levy on heavy electricity users in Malaysia.

Gasoline consumed roughly 370 PJ of energy in Malaysia's transportation sector in 2009. Ethanol can be blended with gasoline up to 10% by volume in most vehicles. Peninsular Malaysia's 12.2 Mt/yr of agro-forestry residues can be used for potentially producing 3.8 billion liters ethanol annually. Using a large scale mixed-integer linear optimization, it is found that if Malaysia introduces a 10% ethanol-gasoline blend (E10), approximately 2.9 Mt (24%) of the residues would be used at $5.4 million more cost compared to 100% gasoline (reference case) estimated at $5.2 billion/yr. In the E10 scenario, all cities receive 10% ethanol altogether producing 900 million liters of ethanol. The GHG emissions for 100% gasoline is estimated at 26.4 Mt/yr. The minimum GHG emissions if E10 is implemented in Peninsular Malaysia was found to be 24.5 Mt, 2.0 Mt lower than 100% gasoline, which implies a $4.70/t CO2-eq cost of carbon mitigation (COM). Since only 24% of the available residues are used to produce the E10, the possibility of producing the E10 and electricity via co-firing with coal simultaneously was investigated. This is done by combining the fuel (gasoline/E10) model with the electricity (coal-only/co-firing) model. The costs of the reference case combined scenario (100% gasoline and 100% coal) is estimated at $6.3 billion/yr and emits 63 Mt/yr of GHG emissions. The minimum cost for producing the E10 and co-firing is found to be $30 million lower than the combined reference case. This is achieved by using 5.9 Mt of residues. The minimum GHG emissions level obtained is 17 Mt lower implying a COM of $19.00/t CO₂-eq mitigated.

The findings in this research are used to recommend policies for mitigating GHG emissions impacts from the growth of palm oil use in the transportation sector. Policy recommendations are also discussed to ensure a successful implementation of co-firing of biomass and the production of E10 by ensuring a guaranteed supply of residues and financing the high capital cost of the renewable energy program.