ACHIEVING INDUSTRIAL ENERGY EFFICIENCY

A C H I E V I N G I N D U S T R I A L

E N E R G Y E F F I C I E N C Yi n M A L A Y S I A

A C H I E V I N G I N D U S T R I A L

E N E R G Y E F F I C I E N C Yi n M A L A Y S I A

Published by the United Nations Development Programme (UNDP), Malaysia.

© UNDP. All rights reserved.

First published August 2006.

ISBN 983-40995-7-6

United Nations Development ProgrammeWisma UN, Block C, Kompleks Pejabat Damansara,Jalan Dungun, Damansara Heights, 50490 Kuala Lumpur, Malaysia.www.undp.org.my

A catalogue record for this book is available from the Library of UNDP.

The contents may be freely reproduced for non-commercial purposes with attribution to thecopyright holders.

Maps are not authoritative on boundaries. Some photographs are courtesy of PTM.

Design: Thumb-Print Studio Sdn Bhd.

Industrialization and modernization are spreading everywhere, albeit at differing paces and with differing

consequences. And as they spread, alongside increased GDP and reduced poverty, there is increasing

fossil fuel use, natural resource depletion, and loss of biodiversity.

The energy-intensive lifestyle of those living in developed countries is now being adopted among rapidly

developing Asian countries. And this means, inter alia, increasing emissions from automobiles, factories, and

power plants. Global warming and climate change are consequences. So too are air and river pollution.

Given the increased scale of global economic activity, international trade is a major driver of environmental

change. Advancing economic growth requires intensifying the use of finite natural resources, but large-scale

use of these resources is leading to ecological disequilibrium.

Spiraling oil prices, environmental degradation, and global warming and climate change have contributed

to a re-evaluation of energy use in all economic sectors. The need for sustainable energy use has become

more evident. Not surprisingly, the challenge of improving energy efficiency is being taken up by the

Malaysian industrial sector.

In 1999, the government of Malaysia initiated a project: Malaysian Industrial Energy Efficiency

Improvement Project (MIEEIP) to improve the use of energy in the industrial sector, with support and

funding from the United Nations Development Programme (UNDP), the Global Environment Facility

(GEF) and the private sector. The project’s primary objective is to develop and implement activities that

will build stakeholders’ capacity and facilitate improved industrial energy efficiency. It focuses on eight

energy consuming industrial sub-sectors - wood, food, pulp and paper, rubber, iron and steel, ceramic,

glass and cement.

The project has highlighted a number of important issues and some significant lessons have been learnt.

It is hoped that as the project moves towards completion, these experiences and the outcomes in the form

of industry involvement and the demonstration models will provide exemplars for further steps in energy

efficiency throughout Malaysia. The information presented in this publication provides an indication of the

efforts being made at selected factories and the related policy implications.

This is the second of a new series of periodic publications that will report on UNDP Malaysia’s work in its

energy and environment practice area. The large range of projects being undertaken in this area are

designed to support Malaysia’s effort to achieve the Millennium Development Goal 7 (MDG7), of ensuring

environmental sustainability. The series of publications will also be made available through UNDP's website,

http://www.undp.org.my.

iii

F o r e w o r d

iv

I would like to thank the GEF for funding this project and the Ministry of Energy, Water

and Communications (MEWC) for implementing it with UNDP. I would also like to thank

other institutional participants and members of the MIEEIP team (page viii). Special thanks

go to the report team and PTM for their professionalism and good efforts in putting this

publication together. I sincerely hope that it will be widely read and will increase awareness

of the critical importance of good environmental management and efficient energy use.

Richard Leete Ph.D

Resident Representative

United Nations Development Programme

Malaysia, Singapore & Brunei Darussalam

C o n t e n t s

Foreword

Tables, Figures and Map

Acronyms and Abbreviations

Stakeholders

Energy in Malaysia

Malaysian Government Energy Policy

Pusat Tenaga Malaysia

The Malaysian Industrial Energy EfficiencyImprovement Project

The MIEEIP Components for Achieving EnergySustainability

Findings of the Energy Audit

Industrial Case Studies

Achievements of the MIEEIP Project

Lessons Learnt

Sources of Information

iii

vi

vii

viii

1

7

10

12

14

18

20

32

33

34

T a b l e sTable 1 Final Commercial Energy Demand by Sector, Malaysia, 2000–2010 2

Table 2 Primary Commercial Energy Supply1 by Source, Malaysia, 2000–2010 3

Table 3 Fuel Mix (per cent) in Total Electricity Generation, Malaysia, 2000–2010 6

Table 4 Potential Energy and Cost Saving Identified from the Factories Audited Under the MIEEIP, Malaysia 2002 19

F i g u r e sFigure 1 Crude oil and condensate production, estimated and forecast,

Malaysia, 1990–2010 4

Figure 2 Energy efficiency improvement for a typical motor-driven system 16

Figure 3 Resources for energy audits 18

Figure 4 Installation of an economizer 23

Figure 5 Losses in industrial furnace 27

Figure 6 Comparison of specific energy consumption for particle companies 29

Figure 7 Benchmark within Malaysia companies, 2002 30

Figure 8 Benchmark in cement industries, selected countries, 2002 31

Figure 9 Changes in SEC based on the implementation of energy saving measure (Company A), 2002 31

M a pMap 1 Gas supply network, Peninsular Malaysia, 2005–2010 5

Ta b l e s , F i g u r e s a n d M a p

vi

A c r o n y m s a n d A b b r e v i a t i o n s

vii

AAIBE Akaun Amanah Industri Bekalan Elektrik (Malaysian Electricity Supply IndustriesTrust Account)

ADB Asian Development Bank

ASEAN Association of South-East Asian Nations

bpd barrels per day

CDM Clean Development Mechanism

DANIDA Danish International DevelopmentAssistance

EC energy conservation

EE energy efficiency

EPU Economic Planning Unit

ESCO energy services companies

FDI foreign direct investment

FMM Federation of Malaysian Manufacturers

GDP Gross Domestic Product

GEF Global Environment Facility

GJ Giga joules

GWh Giga watt hours

kV kilovolts

kWh kilowatt hours

LEO low energy office

LNG liquefied natural gas

LPG liquefied petroleum gas

MECM Ministry of Energy, Communications andMultimedia

MEWC Ministry of Energy, Water andCommunications

MIDA Malaysian Industrial Development Authority

MIEEIP Malaysian Industrial Energy EfficiencyImprovement Project

mmscfd million standard cubic feet per day

MTJDA Malaysia-Thailand Joint Development Area

MW megawatts

NDP National Development Policy, 1991–2000

NEP New Economic Policy, 1971–1990

NG natural gas

NVP National Vision Policy, 2001–2010

PJ petrajoules

PTM Pusat Tenaga Malaysia

RM Ringgit Malaysia

Sdn. Bhd. Sendirian Berhad (Private Limited)

SEC specific energy consumption

SIRIM Standard Industrial Research Institute ofMalaysia

SREP Small Renewable Energy Programme

tcf trillion cubic feet

UNDP United Nations Development Programme

ZEO zero energy office

viii

S t a k e h o l d e r s

I n s t i t u t i o n a l P a r t i c i p a n t sExecuting Agency Ministry of Energy, Water and Communications

Government of Malaysia

Implementing Agency Pusat Tenaga Malaysia

GEF Implementing Agency United Nations Development Programme (UNDP)

UNDP GEF Bangkok Regional Office

Donor Partners AAIBE, The Government of Malaysia

R e p o r t T e a mProfessor KS Kannan Chief Project Coordinator

Hamiza Ibrahim Project Manager Component 4

Meena Kumari M. Nair Project Manager Component 5

Professor Warwick Neville University of Auckland

Asfaazam Kasbani UNDP Programme Manager

M I E E I P T e a mDr Anuar Abdul Rahman National Project Director

Ahmad Zairin Ibrahim National Project Deputy Director

Professor KS Kannan Chief Project Coordinator

Hishamuddin Ibrahim Programme Manager

Hamiza Ibrahim Project Manager Component 4

Ghazali Talib Project Manager Component 6

Phubalan Karunakaran Project Manager Component 2

Faizul Ramdan Project Manager Component 3

Mohd Ibrahim Bachik Project Manager Component 7

Noormaya Abdul Wahab Project Manager Component 1

ix

Meena Kumari M. Nair Project Manager Component 5

Jenny Chua Chong Ming Project Administration Officer

Abdul Malik Atan Finance Officer

Mohd Muhtazam Noordin Technician

Norazean Md. Noor Technician

Haniff Ngadi Technician

Norhisham Sabran Technician

S t a k e h o l d e r sEconomic Planning Unit

Ministry of Energy, Water and Communications

Ministry of Natural Resources and Environment

Energy Commission

Cement and Concrete Association

Federation of Malaysian Manufacturers (FMM)

Malaysian Association of Energy Service Companies (MAESCO)

Malaysian Energy Professionals Association (MEPA)

Malaysian Industrial Development Finance Bhd (MIDF)

Malaysian Iron and Steel Industries Foundation

Malaysian Rubber Products Manufacturers Association

Malaysian Timber Industry Board

National Productivity Corporation (NPC)

Standard Industrial Research Institute of Malaysia (SIRIM)

Small and Medium Industries Development Corporation

B a c k g r o u n dMalaysia is well endowed with naturalresources that provide the raw materials forwealth-creating economic activity such asrubber, palm-oil, tin, petroleum and naturalgas. Over the last few decades this naturalwealth has provided the basis for trans-forming Malaysia from a country reliant onprimary production into an industrializedsociety. Malaysia has achieved sustainedgrowth in gross domestic product (GDP),1957–2005, at an annual rate of 6.5 percent, largely due to substantial public andprivate investment, including foreign directinvestment (FDI) in industrial projects, andby expanding trade, especially exports.

Malaysia’s development has been shapedby the vision encapsulated in the three keynational policy frameworks: the NewEconomic Policy (NEP), 1971–1990; theNational Development Policy (NDP),1991–2000; and the National Vision Policy(NVP), 2001–2010. Over this period thecircumstances and environment in which the

country operates have changed significantly.Malaysia is now an open trading economyoperating in an extremely competitive andfast-moving global marketplace.

Economic growth based largely onindustrialization, combined with populationgrowth and urbanization, has created anexpanding demand for energy. In response,the development of the energy sector hasemphasized the establishment of a secure,reliable and cost effective energy supply. Theneed now is to ensure efficient utilization ofenergy resources, diversification of sourcesand minimization of wastage.

E n e r g y D e m a n dThe transport sector is the largest consumerof energy in Malaysia, accounting for 40.5per cent of the total final commercial energydemand in 2005 (Table 1). The industrialsector is next at 38.6 per cent, and theresidential and commercial sector combinedrepre-sented 13.1 per cent of total demand.

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E N E R G Y I N M A L A Y S I A

Source Petajoules Per cent of Total Average Annual Growth Rate (%)

Industrial1

TransportResidential & CommercialNon-Energy 2

Agriculture & Forestry

Total

2

Overall energy demand is expected toincrease at an average rate of 6.3 per centper annum between 2005 and 2010 due tothe anticipated higher GDP growth. Withimprovements in the quality of life of theMalaysian population there will be anincrease in energy consumption for manyreasons ranging from increased use ofelectrical appliances to more frequent travel.In an effort to improve energy efficiency,consumption will be benchmarked againstthat of other countries such as Denmark,Germany, the Republic of Korea, and theother countries of ASEAN. Initiatives are tobe intensified to ensure efficient energyutilisation and minimization of wastage, thuscontributing to the sustainable developmentof the energy sector.

The transport and industrial sectors willcontinue to be the major energy consumersconstituting 41.1 per cent and 38.8 percent of the total energy demand by 2010.Demand for transportation services will berequired by the manufacturing and agri-culture sectors as well as the tourismindustry. In the industrial sector, energy

intensive activities such as chemical,cement, ceramics, iron and steel, and foodprocessing industries are expected toremain the major consumers.

E n e r g y S u p p l yThe total supply of energy in Malaysiaincreased from 2,003 petajoules (PJ) in2000 to 2,526 PJ in 2005 (Table 2). Themain sources of supply were crude oil andpetroleum products, and natural gas. Theshare of crude oil and petroleum productsdeclined while that of coal and coke

A C H I E V I N G I N D U S T R I A L E N E R G Y E F F I C I E N C Y I N M A L A Y S I A

Source of Data: Ninth Malaysia Plan 2006–2010, Table 19-2.1 Includes manufacturing, construction and mining. 2 Includes natural gas, bitumen, asphalt, lubricants, industrial feedstock and grease.

477.6505.5162.0

94.24.4

1,243.7

630.7661.3213.0

118.78.0

1,631.7

859.9911.7284.9

144.716.7

2,217.9

38.440.613.0

7.60.4

100.0

38.640.513.1

7.30.5

100.0

38.841.112.8

6.50.8

100.0

5.75.55.6

4.712.9

5.6

6.46.66.0

4.015.9

6.3

2000 2005 2010 2000 2005 2010 8MP 9MP

Table 1 Final Commercial Energy Demand by Sector, Malaysia, 2000–2010

3


increased, reflecting reduced dependenceon a single source of supply in keeping withthe Fuel Diversification Policy. By 2010, allof the main forms of energy supply willexperience growth in response toexpanding demand but, consistent with theFuel Diversification Policy, the share ofpetroleum products is expected to declineto 61.9 per cent while that of natural gas isprojected to increase to 15.8 per cent by2010. However, although crude oil andpetroleum products will still contribute thegreatest proportion of the total supply, afurther increase in the use of coal and cokewill allow some reduction in the annualgrowth rate of the oil supply, while thecontributions by natural gas and hydro willremain about the same.

The security, reliability, quality and costeffective supply of energy will be enhancedthrough an optimal energy mix pre-dominantly from domestic sources. To meetMalaysia’s energy requirements, totalsupply is projected to reach 3,128 PJ in2010, of which the share of crude oil and

petroleum products is expected to declineto 44.7 per cent while coal will increase to11.2 per cent. The price of crude oil ininternational markets is expected to remainhigh so that further attempts will be made toreduce dependence on petroleum productsand to utilise them efficiently. By 2010,alternative fuels, including renewableenergy, are expected to contribute 350megawatts (MW) to the total energy supply.

Source of Data: Ninth Malaysia Plan 2006–2010, Table 19-3.1 Refers to the supply of commercial energy that has not undergone a transformation process to produce energy.2 Excludes flared gas, reinjected gas and exports of liquefied natural gas.

Source Petajoules Per cent of Total Average Annual Growth Rate (%)

Crude Oil & Petroleum Products1

Natural Gas 2

Coal and CokeHydro

Total

988.1

845.6104.165.3

2,003.1

1,181.2

1,043.9230.071.0

2,526.1

1,400.0

1,300.0350.077.7

3,127.7

49.3

42.25.23.3

100.0

46.8

41.39.12.8

100.0

44.7

41.611.22.5

100.0

3.6

4.317.21.7

4.7

3.5

4.58.81.8

4.4

2000 2005 2010 2000 2005 2010 8MP 9MP

Table 2 Primary Commercial Energy Supply1 by Source, Malaysia, 2000–2010

F o s s i l F u e l sCrude OilEstimated crude oil and condensatereserves increased from 4.5 billion barrels in2000 to 5.3 billion barrels in 2005 (Figure 1).The average production of domestic crudeoil and condensate increased from 681,000barrels per day (bpd) in 2000 to 727,000bpd in 2005. Based on this productionlevel, which is in line with the NationalDepletion Policy, the reserves are projectedto last for 19 years. Although total refiningcapacity declined from 591,000 bpd to546,000 bpd, it was sufficient to meet thedemand for petroleum products.

To ensure a sustainable supply of oil andgas, appraisal wells will continue to be drilledin small oil fields offshore as well as indeepwater areas. Efforts will also continue tobe undertaken to attract international oil com-

panies to invest in exploration, particularly inwater deeper than 200 metres and in ultra-deep water of more than one kilometreto increase domestic petroleum reserves.Over the period 2005 to 2010, crude oil pro-duction is expected to average 695,000 bpd.

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Note: MMSCF = Million Standard Cubic Feet; bpd = Barrels Per DaySource of data: (1) EPU, Malaysia Five Year Plan, (7th, 8th and 9th)

(2) Department of Statistics, Malaysia Economic Statistics-Time Series, 2005

1000

(’000 bpd)

Crude oil and condensate production

Natural gas production

Nat

ural

gas

pro

duc

tion

Cru

de

oilp

rod

uctio

n

(’000 MMSCF)

2000

20001990 ’95 ’05 ’10

1500

1000

500

900

800

700

600

500

400

300

200

100

0 0

Figure 1 Crude oil and condensate production, estimated and forecast, Malaysia, 1990–2010

Natural GasThe discovery of new gas fields contributedto the increase in reserves from 84.3 trillioncubic feet (tcf) in 2000 to 85.2 tcf in 2005and is expected to last for 33 years. Theaverage natural gas production increasedfrom 4,367 million standard cubic feet perday (mmscfd) to 5,800. Natural gas wasalso imported from West Natuna (Indonesia)beginning in 2002 and the Malaysia-Thailand Joint Development Area (MTJDA)in 2005 and these two sources areexpected to supply about 20 per cent of thetotal by 2010 (Map 1).

The average demand for natural gasin Peninsular Malaysia increased from1,643 mmscfd in 2000 to 2,141 mmscfd in2005. The power sector continued to be themajor consumer accounting for 66 per cent,

and the non-power sector consumed28 per cent. To meet the increasing demandfrom the non-power sector, the Natural GasDistribution System was expanded from455 kilometres to 1,365 kilometres.

CoalThe commissioning of two new coal basedgeneration plants in Peninsular Malaysia isexpected to increase the consumption ofcoal for power generation (19.0 milliontonnes) and industrial use (2.2 billion tonnes)by 2010. Most of the coal is importedbut efforts are continuing to enhancethe security of supply by exploring thepotential for development of local sources,particularly in Sarawak, as well as securinglong-term supplies from abroad.

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Kuala Sanglang

Songkhla Malaysia – ThailandJoint Development Area

Thailand

Prai

Lumut

Port Klang

Port DicksonMelaka

Serdang

Kertih

Paka

LawitJerneh

PM-3

Resak

AngsiBekok

Duyong

West Natuna ‘B’(Indonesia)

Kuala Lumpur

Kuantan

Segamat

Pasir Gudang

Senoko

Connaught Bridge

Map 1 Gas supply network, Peninsular Malaysia, 2005–2010

Source: Petroliam Nasional Berhad

Source of Data: Ninth Malaysia Plan 2006–2010, Table 19-5.

E l e c t r i c i t yBetween 2000 and 2005, the sources of fuelfor power generation were further diversifiedwith the increased use of coal, consistentwith the strategy to ensure security andreliability of electricity supply as well as toreduce the high dependence on gas.

Altogether, between 2000 and 2005, atotal of 6,420 MW of new generation capacitywas installed. Efforts were undertaken toreduce the high dependence on natural gasin the generation mix by increasing the use ofcoal. As a result, the share of coal in the totalgeneration mix increased from 8.8 per centin 2000 to 21.8 per cent in 2005 whereas thatof natural gas declined from 77.0 per centto 70.2 per cent (Table 3).

During this period the electricitytransmission system was further expandedwith the completion of new transmissionprojects linking generation plants to themain grids as well as providing connectionsto new industrial and commercial areas.Implementation of the rural electrificationprogramme (which now stands at 92.2%)benefitted residences in Sabah andSarawak in particular.

Peak demand for electricity is expectedto grow at an average rate of 7.8 per centper annum to reach 20,087 MW in 2010, bywhich time the accumulated installedcapacity is planned to be 25,258 MW, stillgiving a reserve margin of 25.7 per cent.

Initiatives are being taken to furtherenhance the efficiency and viability of theutility companies and the independentpower producers enabling a reduction inthe reserve margin while improving thesecurity, reliability, quality and cost-effectiveness of supply to customers.

The fuel mix for power generation willmainly comprise coal and natural gas, withcoal playing an increasingly important role.New coal based independent powerproducer plants utilizing electrostatic pre-cipitators and a flue gas desulphurizationprocess will enable coal-based production tomeet environmental standards. In addition,as part of efforts to promote the optimalutilization of municipal waste for electricitygeneration, a pilot project on waste-to-energyis being implemented in Peninsular Malaysia.

6


Year200020052010

4.22.20.2

8.821.836.5

77.070.255.9

10.05.55.6

0.00.31.8

69,28094,299

137,909

Oil Coal Gas Hydro Other Total (GWh)

Table 3 Fuel Mix (per cent) in Total Electricity Generation, Malaysia, 2000–2010

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M A L A Y S I A N G O V E R N M E N T E N E R G Y P O L I C Y

When Malaysia formulated its first energypolicy, concern over efficient utilization ofenergy and the need for energydevelopment to take account of environ-mental issues were fundamental. Theseconcerns were driven by the oil crises of1973 and 1978 and the underlying issuewas the need to ensure adequate andreliable supplies of energy.

The Energy Policy of 1979, the NationalDepletion Policy of 1980 and the Four FuelDiversification Policy of 1981, have pro-vided the framework for the development ofenergy supply. The main thrust of theenergy policy works within a framework ofthree broad policy objectives; supply,utilization and environment objectives.These policy objectives are instrumental inguiding the formulation of the Malaysia five-year development plans. Since then thefocus in the energy sector has shifted to thesustainable development of non-renewableresources and the diversification of energy

sources. The Four Fuel Diversification Policyidentified the country’s preferred energy mixas oil, natural gas, coal and hydro power. In2001, Government articulated the Five FuelPolicy, adding renewable resources andlinking this to sustainability and efficiency.

E n e r g y E f f i c i e n c yEnergy efficiency, as a significant element ofGovernment policy, is explicitly addressedin the Ninth Malaysia Plan. Energy efficiencyprogrammes will focus on energy savingfeatures in the industrial and commercialsectors as well as residential in the domesticsectors. The industrial sector is expected toimplement measures for improvements inplant, equipment and processes as well asthe end uses. Efficient Management ofElectrical Energy Regulations are to beintroduced, Uniform Building By-Laws to beamended to incorporate energy efficiencyfeatures, and specifications promulgated for

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accurate and informative electrical appliancelabeling to be futher enhanced. Promotion ofthe use of high efficiency motors includesinitiatives to develop local expertise in themanufacture of energy efficient equipmentand machinery. Energy efficiency measuresare to be intensified in the industrial,transport and commercial sectors, and ingovernment buildings.

R e n e w a b l e E n e r g yEfforts are being made to actively promotethe utilization of renewable energyresources. Under the Small RenewableEnergy Programme (SREP), two projectswith a combined capacity of 12 MW wereofficially implemented in the 2000–2005period. Waste from palm oil industries, land-fill gas and mini hydro systems are mostpopular due to the abundance of thoseresources. A roadmap for the developmentof solar, hydrogen and fuel cells was alsoformulated, UNDP/GEF assisted Biomass

Power Generation and Cogeneration inPalm Oil Mills (BIOGEN) and anotherUNDP/GEF assisted Malaysia BuildingIntegrated Photovoltaic Technology Appli-cation Project (MBIPV) were launched.

Further applications of new energysources are planned for the immediatefuture. Solar and wind technologies will bedeveloped with emphasis on utilizing costeffective methods as well as strengtheningcapacity building. Activities outlined in theroadmap on solar, hydrogen and fuel celltechnology will be expanded with prioritybeing given to research and development.Biofuel using palm oil as a renewablesource of energy is part of an initiative tomake Malaysia a world leader for palm oilproduction and utilization.

I m p l e m e n t a t i o n o f P o l i c yMany government departments andagencies have responsibility for the imple-mentation of elements of official energy

policy. Three of the leading governmentagencies are: the Ministry of Energy, Waterand Communications, the EnergyCommission, and Pusat Tenaga Malaysia -the implementing agency of the MIEEIPwhich is discussed more fully later.

Ministry of Energy, Water andCommunications (MEWC)The role of MEWC is to facilitate andregulate the electricity sectors in the countryand to ensure affordable energy is availableto consumers throughout the country. Asthe country is maturing, its responsibilityhas shifted from being a service provider topolicy formulation.

In 2004, MEWC moved to its ownbuilding in the Federal GovernmentAdministrative Capital, Putrajaya. TheGovernment wanted this building to be alow energy office (LEO) building and ashowcase for energy efficiency and lowenvironmental impact. Design support toachieve this was provided by the agency forDanish International Development Assis-tance (DANIDA) and the local consultants.An ambitious goal of energy savings ofmore than 50 per cent was set for theenergy efficiency of the building with anextra construction cost of less than 10 percent, giving a payback period for the extrainvestment of less than 10 years. To date,the MEWC LEO has achieved its buildingenergy index close to 100 kWh per m2 peryear and declared winner of the ASEANEnergy Awards 2006, Best Practice in theNew Energy Efficient Building category.

Energy CommissionThe Energy Commission (SuruhanjayaTenaga) has been the regulatory agency for

the electricity and piped gas supplyindustries in Malaysia since 2002 replacingthe Department of Electricity and GasSupply (DEGS). The Commission’s maintasks are to provide technical andperformance regulation for the electricityand piped gas supply industries, as thesafety regulator for electricity and piped gasand to advise the Minister on all mattersrelating to electricity and piped gas supplyincluding energy efficiency and renewableenergy issues. The Commission is also thetechnical secretariat for the SmallRenewable Energy Programme (SREP).

Energy efficiency measures are beingpromoted both in the home and in theworkplace. The Commission is attemptingto emulate the experiences of efficiencystandard setters and labeling programmesworldwide. The two common appliances forwhich the Commission is particularlypromoting energy saving versions are highperformance motors and energy efficientrefrigerators.

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M A L A Y S I A N G O V E R N M E N T E N E R G Y P O L I C Y

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Pusat Tenaga Malaysia (PTM), the MalaysiaEnergy Centre, was established by theMalaysian Government in 1997 for thedevelopment and coordination of energyresearch. PTM’s aim is to be the focal pointand catalyst for linkages with universities,research institutions, industry, and nationaland international energy organizations.

PTM offers membership to individuals andcompanies across the entire spectrum ofthe Malaysian energy industry including theelectricity power industry, the oil and gasindustry, research institutions, institutions ofhigher learning, service providers, suppliersand energy consumers. Membershipprovides access to informational databases;consultancy services on building andindustry energy audits; energy efficiency andrenewable energy; training programmes;and opportunities for industry networking.

P T M P r o j e c t sThe Malaysian Industrial Energy EfficiencyImprovement Project

This project is discussed in detail in thefollowing section.

Building Energy Efficiency ProgrammeEnergy efficiency in buildings promotes theoptimal use of energy for heating, coolingand lighting. This is achieved by severalstrategies that optimize and regulate energyuse in the building envelope. Measuresinclude: structural elements such aswindows with glazing to prevent heat gain,and controls for regulating energy use. PTMservices include energy audit in buildings,technical advisory on energy efficiencyfeatures for new premises, standarddevelopment and linkages with supplierson new technologies.

The Biomass Power Generation and Co-generation in the Palm Oil Mills (BioGen) ProjectThis project is jointly funded by theGovernment of Malaysia, the GlobalEnvironment Facility (GEF), and the privatesector. The main objective is to reduce the

P U S A T T E N A G A M A L A Y S I A

The PTM has four major functions.• energy policy research• guardian and repository of the

national energy database• promoter of national energy

efficiency and renewable energyprogrammes

• coordinator and lead manager inenergy research and development,and demonstration projects

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P U S A T T E N A G A M A L A Y S I A

growth rate of greenhouse gas emissionsfrom fossil fuel fired combustion processesby utilizing biomass waste from palm oilmills. The project is crucial in providing keypolicy recommendations for renewableenergy policy to the government. A FullScale Demonstration project is alsoongoing and once complete will act as thesample resource for the industriesto emulate.

The Malaysia Building Integrated PhotovoltaicTechnology Application ProjectThis project is jointly funded by theGovernment of Malaysia, the GlobalEnvironment Facility (GEF), and the privatesector. It is intended to encourage the long-term cost reduction of non-emittinggreenhouse gas technologies by theintegration of energy generating photo-voltaic technology in building designsand envelopes. The project has severaldemonstration PV projects in varioussectors including residential houses.

ASEAN Energy Efficiency Sub-Sector NetworkPTM is the country focal point and projectsinclude ASEAN Energy Awards BestPractices in Building, industry energy auditsand building energy audits in membercountries; and benchmarking in buildings.

ASEAN New and Renewable Energy Sub-Sector NetworkPTM is the country focal point andprojects include information for theCommercialization of Renewables inASEAN (ICRA), a regional dialogue oninternational experience in harnessingrenewable energy; and ASEAN EnergyAwards in New and Renewable Energy

projects and ASEAN-AusAID on EnergyPlanning and Analysis.

Clean Development Mechanism ProgrammePTM acts as the Secretariat (Energy)and reports to the Technical Committee(MEWC) in carrying out its responsibilities.It provides input for the formulation of CDMpolicy, conducts technical evaluation as wellas creates a national database on majorstakeholders.

PTM Building ProjectThe new PTM building project is a zeroenergy office (ZEO) initiative that requiresthat the building must not consume moreelectricity than can be produced usingrenewable energy sources on site. Theintention is not only to make the PTMbuilding a key demonstration building forenergy efficiency in Malaysia with a targetedbuilding energy index of 50kWh per m2 peryear, but to provide a platform foradvancing the Malaysian constructionindustry towards adoption of ZEOstandards within two decades.

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The MIEEIP was launched after a period ofnational and international audit and reviewof the energy situation in Malaysia by theAsian Development Bank (ADB), JapanInternational Cooperation (JICA), govern-ment departments and relevant agencies.Industry was chosen as the sector in whichthe greatest commercial and environmentalimpacts could be achieved. However, thereare barriers hindering the implementation ofenergy efficiency measures, conservationefforts and sustainable energy use.

B a r r i e r s t o A c h i e v e m e n to f E n e r g y E f f i c i e n c y a n dE n e r g y C o n s e r v a t i o nTThe main barriers to implementation ofenergy efficiency (EE) include:• limited knowledge or awareness of EE

techniques and their economic benefits; • limited access to information and

benchmarks for EE technologies• an unwillingness to incur what are

perceived to be the ‘high-cost / high-risk’transactions

• preference for industries to focus oninvestments in production rather than onefficiency

• lack of financiers prepared to financeEE investments

• insufficiently stringent regulations on EEstandards and their implementation

• few EE technology demonstrationprojects by industry or Government

• inadequate local energy support servicesand lack of trained industry and financialsector personnel in energy management

The Malaysian Industrial Energy EfficiencyImprovement Project (MIEEIP) is part of theGlobal Environment Facility (GEF) Ope-rational Program No. 5: Removing Barriersto Energy Efficiency and Energy Conser-vation. The Malaysian project was initiatedin mid-1997 and commenced in 2000.

The project incorporates measures forcapacity building and a demonstrationincentive scheme to address inadequateinformation and perceived risk in industrialprocedures.

T h e E n e r g y I n t e n s i v eM a n u f a c t u r i n g S u b - S e c t o r sThe MIEEIP designated eight energyintensive industries as the primary focus forenergy efficiency promotion. This strategywas not intended to exclude other sub-sectors, but to focus on the main energyusers that stood to benefit relatively quicklyand substantially as the project built up itscapacity to promote and fufil the objectivesof the programme.

T H E M A L A Y S I A N I N D U S T R I A L E N E R G YE F F I C I E N C Y I M P R O V E M E N T P R O J E C T

to improve energyefficiency in the industrialsector –• by removing barriers to

efficient industrialenergy use

• by creating asustainable institutionalcapacity by providing –~ energy efficiency

sources~ a conducive policy,

planning and researchframework

D e v e l o p m e n tO b j e c t i v e

The Selected Energy IntensiveManufacturing Sub-SectorsWood GlassRubber Pulp and PaperFood CementCeramic Iron and Steel

Additional Manufacturing Sub-Sectors Subsequently IdentifiedPlastic ChemicalTextile

13

T H E M A L A Y S I A N I N D U S T R I A L E N E R G Y E F F I C I E N C Y I M P R O V E M E N T P R O J E C T

A n t i c i p a t e d O u t c o m e sBy the conclusion of this project (mostcomponent programmes conclude in 2006–2007) Malaysia will have an institutional andtechnical foundation for continued efforts tocapture the energy efficiency potentialwithin the industry sector and achievereductions in greenhouse gas emissions.Outcomes include:• information on EE technologies that is

documented, accessible and widelydisseminated

• promotional campaigns on the rationaluse of energy by industry

• establishment and publication of sectoralenergy benchmarks

• investment by industries in economicallyand financially viable EE projects andpractices

• trained personnel in energy managementthroughout industry

• financiers prepared to fund EE projects forindustry

• affordable energy efficient equipmentavailable to industry

• introduction and enforcement of stringentEE regulations by Government

• promotion, strengthening and utilization oflocal energy support services

• implementation of significant EEtechnology demonstrations by Govern-ment and relevant agencies incollaboration with the private sector andfinancial institutions.

1. Energy Use Benchmarking 5. Energy Service Companies (ESCO) programme2. Energy Audit Programme 6. Energy Technology Demonstration Projects 3. Energy Rating Programme 7. Local Energy Efficient Equipment Support Programme4. Energy Efficiency Promotion 8. Financial Institutional Participation

M I E E I P C o m p o n e n t s

“Environmental responsibility and competitive operating performance are important goals of our company. With the implementation ofMIEEIP demonstration project at our premise, we are assured of improving out bottom line and at the same time conserving energy andreducing waste to preserve the environment.”

Tn Hj Mas’ut A.Samah , Managing Director , Pascorp Paper Industries Berhad

Q u o t a t i o n

14

E n e r g y U s e B e n c h m a r k i n gP r o g r a m m eObjective: To establish and develop energyuse benchmarks for various industry sub-sectors as guides in their energy efficiency(EE) efforts.

Process: An industrial establishment thathas an energy use record higher than theestablished norm is a potential candidate forsaving energy. As such, industries willimprove their processes in order to manu-facture products with less energy usage.Achieving and improving benchmarks isenhanced by reviewing information onenergy utilization performance of industrialprocesses and operations in othercountries with similar conditions to those inMalaysia. Bechnmarking will also educateindustries on energy use reporting andawareness for continuous improvement.

Success Criteria: By the conclusion ofthis programme, the project will haveachieved the following results:• data collection and database system for

energy benchmarking set up• established industrial energy use bench-

marks.

E n e r g y A u d i t P r o g r a m m eObjective: To achieve widespread use andpractice of energy auditing as a tool inenergy management in industry.

Process: Energy auditing is a proven andeffective energy management tool. How-ever, many industries and firms have beenunaware of the benefits of undertaking an

energy audit. This programme was set upunder MIEEIP to assess current practicesin energy auditing, and to develop stan-dardized energy audit tools and pro-cedures. During the audit process, datafrom the energy bills and from the field(using specialized measuring equipment)will be collected and analyzed. Potentialenergy savings can then be identified andsuitable recommendations including followup programme will be provided. Forty eightfactories will be audited by 2005 andadditional six more factories by the year2007 from eleven various sub-sectors ofindustries.

Success Criteria: By the conclusion ofthis programme, the project will haveachieved the following results:• developed standardized energy audit

procedures and energy audit tools• conducted energy audits in selected

industry sub-sectors and evaluated theresults.

T H E M I E E I P C O M P O N E N T S F O RA C H I E V I N G E N E R G Y S U S TA I N A B I L I T Y

15

T H E M I E E I P C O M P O N E N T S F O R A C H I E V I N G E N E R G Y S U S T A I N A B I L I T Y

E n e r g y R a t i n g P r o g r a m m eObjective: To provide information on energyefficient equipment and energy rating pro-grammes by establishing energy standardsand labeling for key industrial equipment.

Process: Application of efficiency standardsis a cost effective action to improve overallenergy efficiency. It involves recommendingsuitable policy for equipment standards,setting up of an industrial equipment testingfacility, establishment of comparative ratings,nameplate specification of characteristics,and the assembling, organization and dis-semination of the information to increaseawareness and encourage the use of energyefficient equipment. High efficiency motorsand boiler best practice programme havebeen identified as the critical activities tobegin with. PTM is taking the leadresponsibility by providing rating policyrecommendation and techno-economicstudies and works in close cooperation withother relevant government agencies.

Success Criteria: By the conclusion ofthis programme, the project will haveachieved the following results:• released to industry information on energy

efficient equipment and energy ratingprogrammes

• developed an implementation plan for acomparative energy rating programme forkey equipment.

E n e r g y E f f i c i e n c yP r o m o t i o n P r o g r a m m eObjective: To disseminate information onenergy efficient practices in industries andEE and EC technology applications, and to

establish an association of accreditedenergy specialists, consultants and tech-nology developers and providers.

Process: This programme addresses theinformation barriers that hinder theimplementation of EE efforts in industry. Toprovide a user-friendly way of accessingand retrieving relevant information, theprogramme has built on the informationdissemination activities of PTM. Energyproject profiles and case studies ofsuccessful EE applications are beingdocumented and disseminated to encourageparticipation, mainly through the Federationof Malaysian Manufacturers (FMM) or specificindustry associations. A collection of tech-niques and technology applications is beingcompiled as a computerized database tosupport industrial firms in their energysaving efforts. The programme will utilize itsown publication (MIEEIP Newsletter), variousconferences and workshop seminars andwebsite as the medium of dissemination.

Success Criteria: By the conclusion ofthis programme, the project will haveachieved the following results:• enhanced the information dissemination

activities of the public and the privatesectors

• established a professional organization oflocal energy specialists, consultants andtechnology developers and providers.

E S C O S u p p o r t P r o g r a m m eObjective: To enable PTM to determine theoptimal structure for the development ofenergy services company (ESCO) industryin Malaysia which includes issues on

16


regulatory framework, financing and riskevaluation on projects.

Process: The model of industrial ESCOswas not well developed when the MIEEIPwas initiated where local energy supportservices were weak, and there were fewfull-time professional energy auditors. Lackof technical expertise and the absence ofperformance-based project financing havebeen identified as the underlying causeswhich should be overcome. MIEEIP isattempting to overcome the lack of financeavailable to ESCOs to implement projects. Italso aims to educate ESCOs in theidentification of feasible projects, technicalknow-how, services they can recommendand advise them on how to determineacceptable levels of risk associated withperformance contracting.

Success Criteria: By the conclusion ofthis programme, the project will haveachieved the following results:• evaluated the capacity and capabilities of

known ESCOs• developed and monitored the institutional

and legal framework for the delivery andcost recovery of ESCO services.

E n e r g y T e c h n o l o g yD e m o n s t r a t i o n P r o g r a m m eObjective: To demonstrate the applicability,technical and economic feasibility of provenenergy efficiency technologies in varioussectors of industry.

Process: Two major attitudinal barriersexist. Firstly, energy in Malaysia is readilyavailable and relatively cheap, and

companies do not perceive any problemas long as production remains profitable.Secondly, many companies have onlya vague understanding of the sortof measures and technologies available toassist them and a belief that anyimprovements in energy efficiency are costly.

The energy technology demonstrationprogramme is being implemented toconvince industrial firms that this is notnecessarily the case. By demonstratingactual applications, it is possible to showthat substantial benefits can accrue andneed not be costly. The major activities inthis programme involving feasibility studies,the engineering design, installation,operation, monitoring and evaluation.Several demon-stration projects withproven technologies will be developed,implemented and moni-tored in selectedsub-sectors of industry. For example,energy efficiency improvement for a typicalmotor-driven system (Figure 2) can beimplemented in various industries.

Success Criteria: By the conclusion ofthis programme, the project will haveachieved the following results:• identified and implemented potential

Improve efficiency by:• better power quality• switching off• slowing it down• VSD• high efficiency

motor• reducing transmission

loss

Figure 2 Energy efficiency improvement for a typical motor-driven system

17

T H E M I E E I P C O M P O N E N T S F O R A C H I E V I N G E N E R G Y S U S T A I N A B I L I T Y

energy saving technologies• monitored and evaluated each project for

information dissemination purposes.

L o c a l E n e r g y E f f i c i e n tE q u i p m e n t M a n u f a c t u r i n gS u p p o r t P r o g r a m m eObjective: To have energy efficientmanufacturing improvements replicated bylocal equipment manufacturers and featurethese improvements as a means ofpromoting and accelerating the productionand utilization of locally produced energyefficient equipment.

Process: PTM set out to determine whatrealistic improvements could be achievedwith more efficient and reliable locallymanufactured equipment by assessing theequipment manufacturing capabilities oflocal equipment manufacturers, determiningand evaluating the manufacturing processesinvolved. Training, technical assistance andfinancial incentives have been provided toencourage and assist with retrofittingmanufacturing systems to the selectedmanufacturers. The programme is beingimplemented in conjunction with thetechnical assistance provided under theenergy rating programme (Component 3)and has focused on production of suchcomponents as: fans, blowers, boilers,motor rewinding and industrial kilns.

Success Criteria: By the conclusion ofthis programme, the project will haveachieved the following results:• assessed, evaluated and implemented

the typical energy performance andidentified potential improvements and

new designs for locally manufacturedindustrial equipment

• provided technical assistance and fundingto eligible equipment design and manu-facturing improvement projects of selectedlocal industrial equipment manufacturers.

F i n a n c i a l I n s t i t u t i o n a lP a r t i c i p a t i o n P r o g r a m m eObjective: To engage financial institutionson the feasibility of project financing byestablishing energy business fund andrelated frameworks.

Process: Finance and banking institutionsin Malaysia have been reluctant to fund EEprojects. MIEEIP is creating opportunities forthe Government, through PTM, to demon-strate the viability of energy efficiencymeasures and of the ESCOs that are nowundertaking energy saving projects. ESCOsand their projects will be fully scrutinized,and PTM will review and evaluate theirtechnical and financial viability, the financialperformance of the firm, the energy savingpotential and the corresponding potentialfor GHG emissions reduction.

Success Criteria: By the conclusion ofthis programme, the project will haveachieved the following results:• trained local banking and financial

institutions on funding EE projects inindustry

• developed criteria for the selection andidentification of eligible companies forenergy technology demonstration schemefinancing assistance and industrial equip-ment manufacturing improvement finan-cial assistance.

Energy audits must be well planned and keyresources must be specified (Figure 3).Participation from the host companies iscritical, especially when disclosing proprietarydata and information.

Results of the energy audits in 48factories representing different sub-sectorswere classified into three main categoriesas follows:

1. no-cost measures2. medium cost measures3. high cost measures

No cost measures: These are easy toimplement, dealing mostly with measure-ment and control along with maintenance.These measures could be further dividedinto two classes, related to thermal andelectrical measures such as combustion andsteam blow-down control, improvement ofelectricity supply and distribution network.

Low cost measures: These are applied tothermal (replacements of burners, heatrecovery system) and electrical utilities(efficient air conditioning and compressed airsystems) as well as process improvements(variable speed drives, batch to continuousprocess). These require low investment andproven technologies to be implemented.

High cost measures: These involve largeinvestments and innovative technologies.Two classes of measures are possible. Thefirst includes incorporation of new tech-nologies in an existing plant, such as co-generation. The second concerns processmodifications and the installation of newprocesses.

Greater potential saving could berealised if measures are implemented forthermal energy utilization which normallyrequires financial incentives or financing aidto make it attractive. Except for the cementand glass sub-sectors, the thermal energyreduction strategies would result in savingbetween 6 to 15 per cent. Notably, greaterenergy reductions could be realised if thehigher cost measures could be imple-mented by the industries involving capitalinvestment.

Findings from the forty eight factories

Figure 3 Resources for energy audits

Auditors

Budget and time

Instruments

Energy records

Computer andsoftware tools

18

F I N D I N G S O F T H E E N E R G Y A U D I T

show that if all measures are implemented,an energy reduction between 2% to 34%of the Annual Energy Consumption (AEC)could be realised across the individualsectors (Table 4). In general, those factoriesconsumed approximately 39 PJ per year,equivalent to 9.0 per cent of the totalfinal energy consumed by the Malaysianmanufacturing sector. It is envisagedthat if all the measures are implementedby the factories, electricity consumptionwill be reduced by 5.6 per cent andfuel demand reduced by 26.7 per cent

with nearly 800,000 tons/year of avoidedCO2 emissions.

Details of potential energy savings andCO2 reductions are as shown in Table 4.

F I N D I N G S O F T H E E N E R G Y A U D I T

19

Sectors

Annual EnergyConsumption (GJ/year)

Annual Energy Costs (Th. RM/year)

No Cost EnergySavings (GJ/year)

Low Cost EnergySavings (GJ/year)

High Cost EnergySavings (GJ/year)

Total Energy Savings (Total GJ/year)

Total Cost Saving(Th. RM/year)

CO2 EmissionsReduction Potential(Tons/year)

1,835,430

42,233

24,361

111,087

238,139

373,587

8,515

27,988

Food

1,031,528

13,512

7,996

131,702

220,863

360,561

5,201

30,378

Wood

774,061

24,061

38,566

75,229

41,561

155,356

5,992

14,463

Ceramic

21,556,595

204,149

1,375

6,866

337,266

345,508

33,752

444,667

Cement

4,000,370

97,830

31,449

13,732

58,913

104,095

2,485

8,069

Glass

611,307

16,908

57,010

21,171

84,292

162,472

4,313

18,931

Rubber

5,080,208

84,201

51,559

69,100

690,889

811,547

19,767

194,403

Pulp &Paper

4,223,247

160,131

64,194

56,985

148,874

270,053

5,247

22,836

Iron & Steel

39,112,746

643,026

276,510

485,872

1,820,796

2,583,178

85,272

761,734

Total

Table 4 Potential Energy and Cost Saving Identified from the Factories Audited Under the MIEEIP, Malaysia, 2004

Me

as

ur

es

Source of Data: PTM. Findings of the Energy Audits.

H e v e a B o a r d B e r h a d G e m a s , N e g e r i S e m b i l a nProduct: ParticleboardSub-sector: woodHeveaBoard is a particleboard manu-facturing company that was founded in1993 and commenced operation in 1996.The company was listed on the BursaMalaysia (formerly the Kuala Lumpur StockExchange) in 2005.

The particleboard produced by the factoryin Gemas, Negri Sembilan, is made fromrubber (hevea) wood—a product that isrenewable, sustainable and environmentallyfriendly. The finished product is covered withveneer or décor melamine paper lamination.The plant has an installed productioncapacity of 360m3/day and an annualcapacity of 120,000m3.

The production process involves thereduction of rubber wood to fine flakes ofspecified dimensions that are dried out toreduce their moisture content from about40 per cent to 3–4 per cent. After mixingwith adhesives the particles are formed intomats according to rigorous specificationsand then compressed in a hot press underhigh pressure and controlled temperatureinto boards of designated dimensions. The

hot press process operates at atemperature of 210°C at the outlet of thethermal heater which consumes largeamounts of energy in order to maintain sucha high temperature. After the raw boardshave been stored and conditioned they aresanded, dimensions are calibrated, and theboards laminated or veneered. The variousstages of the manufacturing processproduce large amounts of wood waste inthe form of bark, and saw and sander dust.

The company was approached by theMIEEIP which offered to assemble a teamto undertake an energy efficiency audit ofthe manufacturing process. After a detailedassessment of the existing system the auditreport recommended that managementconsider the use of a wood dust fired fuelthermal oil heater, replacing the existingmedium fuel oil fired thermal oil heater thatheats the hot press. The company manage-ment recognized the potential benefits interms of cost and reduction of CO2

emissions and agreed to proceed. The MIEEIP, together with the Malaysian

Industrial Development Finance Berhad andusing a pre-determined set of criteria,selected a local ESCO company, MensilinHoldings Sdn Bhd to work with HeveaBoard

This case study providesan example of:- Energy use bench-

marking- Energy audit- Energy efficiency

promotion- ESCO support- Energy technology

demonstration- Financial institutional

participation

20

I N D U S T R I A L C A S E S T U D I E S

The increase in energy efficiency and the cost savings have been outstanding:annual fossil fuel savings 37,385 GJenergy cost savings RM720,000 approximatelyannual CO2 reduction 2,916 tonnes approximately

I m p a c t

21


“The transfer of technology from the demonstration project has equipped our staff with the ability to conduct and manage such projectsin the future. Overall our participation in the MIEEIP has created awareness and greater understanding and appreciation of energyefficiency and conservation.”

Mr S. Ganesan, General Manager, Heveaboard Berhad

and to manage, implement and financethe project. The ESCO undertook furtherauditing investigations, conceptual andengineering design work and responsibilityfor the contracting, construction andoverall monitoring of the project.

The project replaced the medium fuel oilfired thermal oil heater which consumedapproximately 37,385 GJ of medium fuel oilannually, or 46 per cent of the factory’s totalthermal energy consumption, with a 2.9

MW wood dust fired thermal oil heater thatutilizes the waste generated in the manu-facturing process. The new underfeedstoker system was installed in parallel to theold system (that now serves as a standbyfacility), and relies on biomass in the form oftimber waste ducted from all around thefactory into a holding silo adjacent to theheater which consumes about 1300 kg ofwood waste per hour – an amount wellwithin the factory’s capability to supply.

Q u o t a t i o n

22

C a r g i l l P a l m P r o d u c t s S d n B h dK u a n t a n , P a h a n gProduct: Refined palm oilSub-sector: foodCargill, a subsidiary of Cargill United States,was formerly known as Kupak Sdn Bhd andcommenced operations in 1980. Thecompany manufactures palm oil productssuch as palm fatty acid and refined bleacheddeodorized palm oil, and specialtyproducts such as olein and stearin (usedin cosmetics and toiletries). The plantoperates seven days a week and has anoverall output of about 450,000 tonnes ofpalm oil and its by-products, more than90 per cent of which are exported.

Crude palm oil passes through severalprocesses in the company’s two refiningand two fractionation plants to produceedible and refined oils. These require largeamounts of thermal and electrical energyto be fed to high and low pressure boilers,heaters, compressors, motors, pumps,and refrigeration and water coolingsystems. About 85 per cent of the energyconsumed is in the form of thermal energy(steam and a hot oil system) from fuel, while the remaining 15 per cent is in the formof electricity. Fuel represents 61 per cent ofthe energy costs and electricity 37 per cent.

An MIEEIP energy audit identifiednumerous no-cost, low-cost and high-costmeasures that could achieve energysavings, and over the 3–4 year period ofimplementation the company itself alsoinitiated further measures. Altogether ninesignificant modifications were undertakenas part of the project, leading to majorsavings and increased efficiency.

Repair of compressed air pipeleakages in the membrane presses, jointsand pressure regulator in a fractionationplant that were resulting in a 30 per cent airleakage loss in the system. Immediaterepairs reduced electricity consumption.On-going maintenance measures includedoperating the system at the lowest possiblepressure, keeping the air intake clean andcool, and reducing leakage loss to anacceptable maximum of 5–10 per cent.

Steam leak minimization was a no-costmeasure that was achieved by a monthlymaintenance program. Inspection of pipingjoints and the remedying of small leaksreduced heat loss and made savings thatcumulatively amounted to tens of thousandsof RM annually.



marking- Energy audit- Energy rating- Energy efficiency

promotion- Energy technology

demonstration

The increase in energy efficiency and the cost savings have been exceptional:total energy savings 24,522 GJtotal cost savings RM1,911,00annual CO2 reduction 516 tonnes approximately

I m p a c t

Steam trap maintenance was also readilyaccomplished by extending the company’sregular maintenance and replacementprocedures to more than 300 steam traps.

Thermal insulation maintenance wasidentified by the audit team as a significantissue that was occurring as a result ofuninsulated pipes and fittings. This was nota simple matter to resolve as structural andmaintenance issues discouraged or pre-cluded insulation. Detachable insulatingjackets and detachable types of insulationhousings for valves and flanges overcamemost of these problems.

Process heat recovery was madepossible in an alternating heating andcooling process that reduces temperaturesfrom more than 200°C to about 60°C by theinstallation of a heat exchanger thatrecovered heat from the dry fractionationprocessor and diverted it elsewhere for pre-heating purposes. A heat recovery systemapplies a similar concept as the installationof an economizer (Figure 4).

Process control measures to avoidunnecessary heating of the stearin holdingtanks required the installation of temperatureregulators to maintain the temperatureat 60°C. The cost of this installation wassignificant but was exceeded by theenergy savings in the first year.

Boiler-fuel switching from medium fuel oiland diesel to natural gas for two boilers andtwo heaters involved the setting up of anabove ground piping network to a nearby

natural gas pipeline, the conversion of theburners and final commissioning. Thecompany invested RM471,000 in theconversion and achieved an annual costsaving of RM1,400,000 – recovering costsover a period of about four months.

A new heat scheme (steam system)was installed by diverting clean condensatefrom heat exchanger systems, tank heatingand steam headers in the refineries to theboiler feed water tank by a newly installedpipeline. The work also involved installing ahot tank complete with steam coil. The heatrecovered from the system increased thetemperature of the boiler feed water from30°C to 60°C not only creating savings onfuel consumption but also on water usage.

Fractionation plant cooling systemoptimization necessitated the replace-ment of old inefficient chillers by adedicated cooling tower to maintain waterquality for the coolers.

23


Steam

boiler

Burner

ID FanFresh air

Chimney

Economizer with thermal oil heater

circulation

Figure 4 Installation of an economizer

P a n - C e n t u r y E d i b l e O i l sP a s i r G u d a n g , J o h o r eProduct: Refined palm oilSub-sector: foodPan-Century Edible Oils is a wellestablished company located in PasirGudang, Johor. At the time of the audit thecompany’s annual manufacturing capacityfor edible oils and specialty products wasabout one million tonnes. The company hadalready formed a Focused ImprovementProject Group, reflecting its desire toachieve greater efficiency and productivity,before the MIEEIP team undertook anenergy audit. At that time the factory'smonthly energy bill was RM2 million so that,with such a high level of energyconsumption at stake, the audit teamaimed not only to identify energy cost-saving potential, but also to transferappropriate, on-going auditing skills andprocedures to company staff.

More than 550 metric tonnes of steam isgenerated daily for physical oil palm refining,soap noodle production, tank farm heatingand fractionation. Four major projects that

would improve energy efficiency wereidentified and others have subsequentlybeen initiated or are under review by thecompany which has its own monitoring andtargeting system—an established policy ofthe Aditya Birla Group of which it is a part.

Steam system optimization entailed anumber of measures including: substitutinga low pressure steam system for a mediumpressure system that would produce therequisite temperature of between 70°C and80°C for tank farm heating and trace linesby installing pressure regulating valves;similar measures in vacuum circuits tomaintain steam supply pressure; improvedinsulation of steam lines; replacement andmaintenance of steam traps; purifyingcondensates and recycling them for re-usein the boilers; and replacement of steamejectors by a vacuum pump to createvacuum pressure. Since fuel constitutes 90per cent of the cost of steam generation, anholistic approach to optimizing the existingsteam demand and supply structure hasproved extremely beneficial financially.

24





demonstration

The increase in energy efficiency and the cost savings have been considerable:annual energy savings 35,000 GJtotal cost savings RM1,000,000cost recovery 1–2 years

I m p a c t

Cooling tower modification was requiredfor more efficient supply of cooling water forcrystallizers, heat exchangers, compressorsand condensers. Seven cooling towers arelocated strategically in the fractionation,physical refining and soap noodle plants butthe audit established that energy savings ofabout 25 per cent could be achieved byimplementing thermal efficiency measures.

High efficiency motors are generally twoto four per cent more energy efficient thanstandard motors so that despite anapproximately 20 per cent higher purchaseprice, power savings in the medium to longterm more than compensate. The total costfor the replacement of all existing standardmotors to high efficiency motors wasRM400,000 which was recovered withinfour years.

Energy monitoring and targeting withinthe company’s installations is part of theparent company’s purta system thatmonitors and benchmarks all aspects ofmanufacturing performance. The companyinstalled metering equipment to monitorsupply and consumption of electricity,steam flow and chiller load at critical pointsin the system. Centralized electronic datafeedback and reporting through the localnetwork has made the system extremelyefficient.

25


26





demonstration- Financial institutional

participation

J G C o n t a i n e r s S d n B h dK l a n g , S e l a n g o rProduct: Glass containersSub-sector: glassJG Containers is a medium sized glasscontainer manufacturing company that hasbeen operating in Malaysia since the early1970s. Manufacturing capacity sincerefitting amounts to about 120 tonnes ofglass containers per day, and energy toproduce this output constitutes about 20per cent of the firm’s operating costs.

As a result of an MIEEIP audit thecompany undertook a series of modi-fications, both low and high-cost, to itsproduction equipment and processes. Atthe time of the audit the glass furnace wasinefficient because of heat loss and poorheat recovery from the exhaust, and thesedeficiencies were compounded by in-adequate insulation of somewhat datedequipment and an inadequate controlsystem on the furnace (Figure 5).

The glass furnace was completely rebuiltwith an improved control and heat recoverysystem permitting an increase in output from90 tonnes per day to 120 tonnes per day.

The specific energy consumption (SEC) forthe process declined from 7.08 GJ/tonne to4.94 GJ/tonne. The total cost of the projectwas RM7 million with a payback period ofabout four years.

The company also reconditioned one ofthe annealing lehrs at a cost of RM50,000which resulted in energy savings of750kWh per day. The annual savings incosts were approximately RM57,000 sothat the payback period was less than oneyear. Production costs also benefitted asthe SEC was reduced from 0.13 GJ/tonneto 0.075 GJ/tonne, an improvement inenergy efficiency of 42 per cent.

The increase in energy efficiency and the cost savings have been considerable:annual energy savings 60,100 GJdaily reduction in water consumption 25m3 (through recycling)annual cost savings RM1,800,000

I m p a c t

Another annealing lehr was completelyreplaced with a new energy efficientLPG/NG fired lehr at a cost of RM400,000.This resulted in net savings of RM62,000per annum in energy costs and a paybackperiod of 6.5 years. Output increased andthe SEC was reduced from 0.13 GJ/tonneto 0.042 GJ/tonne, an improvement ofabout 67 per cent.

The rebuilding of the boiler and thereplacement of one lehr and modificationof the other substantially reduced CO2

emissions.Measures were also introduced to

recycle water. The factory consumes about100m3 of water per day mainly for servicingcoolers and cleaning cullets (glassfragments for re-melting). About 25m3 areused daily just for washing cullets and thiswater had been allowed to run off into thedrains. A simple tank with a filter wasinstalled to remove sediment and grit beforethe water is recycled for further culletwashing. The cost of the installation wasRM18,000 and the savings achieved aboutRM17,500 per annum.

JG Containers is committed to energyconservation and reviewing other potentialenergy efficiency projects that mainlyinvolve fuel switching to realize theeconomic, technical and environmentalbenefits of natural gas. In particular, thiswould include LPG fired versions of theremaining electrically powered annealinglehr and the glass melting furnace. Use ofLPG would result in further cost savings,improved processes, increased productivityand more acceptable emission norms.

27


Flue gas loss Flue gas loss

Pre-heated air

Rapidcooling air

Cooling air

Leakage losses

PREHEATING ZONE

BURNING ZONE

COOLING ZONE

Outer convection losses

Car cooling airHot exit loss

LPG

Combustion loss

Combustionair

Fluegas

Opendoor leak

Opendoor leak

Figure 5 Losses in industrial furnace

28


J a y a k u i k S d n B h dK l a n g , S e l a n g o rProduct: ParticleboardSub-sector: woodJSB is a Malaysian company specializing inthe manufacture of high quality particle-board and melamine-faced particleboardutilizing technically advanced manufacturingequipment in its plant located in Sandakan,Sabah. JSB has a production capacity ofabout 70,000m3 per annum but operates atabout 70 per cent capacity to produceabout 50,000m3 annually of which abouttwo-thirds is exported. JSB generates itsown electricity using diesel gen-sets (enginegenerator sets) and oil fired thermal energysupplemented by sander dust combustionfor its heating needs.

The MIEEIP conducted an energy audit atJSB and recommended a total of sevenenergy saving initiatives and the option ofreplacing a fossil-fuelled boiler with abiomass boiler. The seven energy efficiencymeasures included three no-cost measures,three low-cost measures and one high-costmeasure. The implementation initially of fourof the measures had immediate beneficialresults for the company.

Repair of compressed air leakages ofup to 40 per cent identified by the energyaudit had a major impact. In the course ofthe company’s preventive maintenanceoperation the leaking pipes and solenoidvalves were repaired. While not all leakagesin a compressed air system can beeliminated this reduced the leakageproblem to much nearer an acceptable5–7 per cent for this medium-sizednetwork. A staff member has beenassigned to monitor the air pipe systemand report any leakages. Wastefulpractices such as using compressed air forcleaning purposes and cooling motorshave been reduced or eliminated.

Inlet air temperature reduction ofcompressed air to as low an ambienttemperature as possible in the compressedair station room was readily improved byincreasing openings and installing ven-tilation fans. Quite minor modificationsreduced the temperature in the room andconsequently the inlet air temperature,improving the compressor's efficiency.




demonstration

The increase in energy efficiency and the cost savings were considerable:Initiative Fuel Savings Cost Savings

(litres/year) (RM/year)Repair of compressed air leakagesInlet air temperature reduction 24,356Installation of sky lighting at the

packing bayReadjustment of thermal oil

heating settings 14,066Process management: increased

use of sander dust for burner 363,707

27,063

15,629

410,785

I m p a c t

Installation of sky lighting at thepacking bay eliminated the necessity ofproviding artificial lighting throughout theday. Installing sky lighting in the packing bayroof enabled the plant lights to be switchedoff during the day and only used in theevenings, at night, or on dark, cloudy days.

Readjustment of thermal oil settingtemperature to take account of actualneeds produced substantial savings. Thetemperature was automatically maintainedat between 210 and 220°C. This settingmet the requirements of both the pressand the laminating machines of about190-195°C and allowed for heat loss duringtransfer. However, when the laminatingmachines were not in use this allowance forloss was unnecessary because the presswas only a short distance from the thermaloil heater. Lowering the temperature to190-195°C during such periods reduced oilconsumption and resulted in significantannual cost savings.

Process management: increased useof sander dust for the burner. Althoughsander dust provided some of the fuel forthe wet flakes dryer burner, sander dustcombustion was not effectively monitored.By maximizing sander dust use, burnerdiesel consumption was greatly reduced. Ofall the initiatives implemented, this virtuallyno-cost measure gave the maximum

savings, contributing about 90 per cent ofthe overall savings achieved.

The initiatives implemented in this firstphase generated substantial savings. Theinstallation of the sky lighting, the repair ofthe air leakages, and the adjustment to theair inlet temperature alone reduced thefactories annual diesel consumption bymore than 27,000 litres and achievedsavings of nearly RM 25,000. The mainexpense incurred was for the installation ofthe sky lighting at a cost of approximatelyRM6,000.

The specific energy consumption (SEC)for JSB improved from 2.85 GJ/m3 to 2.46 GJ/m3, an improvement of about14 per cent. Because of this improvement,JSB improved its national benchmarkingrank from third to second (Figure 6).

29


6

7

5

4

3 2.852.46 2.62

1.05

3.583.24

3.95

6.37

2.25

AverageRussiaPolandThailandCompany A Company B Company CJSB 2003JSB 2002

JSB’s SEC for 2002 and 2003

Average SEC amongMalaysian Companies

Minimum SECfor Malaysia

2

1

0

GJ/

m3

Figure 6 Comparison of specific energy consumption for particle companies

Note: International benchmarks are for reference only. Benchmarks vary according to raw material, technology, and climatic andgeographical conditions.

30


C e m e n t c o m p a n i e s P e n i n s u l a r M a l a y s i aProduct: CementSub-sector: cementCement production is an energy intensiveindustry and the largest energy consumingcommodity in the building material category.Cement production accounts for two percent of world primary energy consumptionand up to six per cent of total energyconsumption in cement producing countries.

For cement companies, energy costsalone typically account for up to 10 per centof total operating costs. Benchmarkingprovides an effective tool for companies todetermine whether or not they are per-forming at a level comparable to other firmsin the industry. Energy inefficiencies can beidentified by measuring and comparing theenergy intensity at the process level andthe overall company level against peers ora recognized leader in the industry.

Over a short period leading up to mid-2002, three Malaysian cement companiesunderwent energy audits. The companiesoperate integrated plants producingOrdinary Portland Cement and MasonryCement. For benchmarking purposes ananalysis compared the specific energyconsumption (SEC) – the amount of energyconsumed in producing one unit of output -for each of the companies. Company A,with the lowest energy use and as such the‘leader’, established the current Malaysianbenchmark at 3.93 GJ/tonne (Figure 7).

Overall the companies achieved anaverage of 4.00 GJ/tonne. Compared withother major cement producing countriesthis is a relatively low figure, partly due tothe predominance of dry cement pro-duction in Malaysia.

Despite the favourable comparison onthe basis of international benchmarking(Figure 8), there was still scope for localcompanies to improve their SEC byimplementing energy saving measures thathad been identified during the energy audit.These findings indicated that the cementsector has the potential to make savings ofup to 45 per cent, of which 17 per centcould be achieved without any additionalinvestment (Figure 9).

For example, if Company A, with a SEC




demonstration

3.93

3.85

Benchmark Company A Average SEC Company B Company C

3.90

3.95

4.00

4.05

4.10

3.93

4.00

4.02

4.07

SE

C

Figure 7 Benchmark within Malaysia companies, 2002

Source of Data: PTM, MIEEIP News.

of 3.93 GJ/tonne and—from this exercise—the leader and benchmark setter forMalaysia, were to implement the no-costand high-cost measures identified by theenergy audit, it could improve its SEC asdemonstrated in the graph. With thesechanges, Company A’s international rankingcould improve dramatically. Significantly, theno-cost and low-cost measures could beimplemented by the companies using onlytheir existing in-house expertise.

The energy saving measures applicableto the cement sub-sector concentratemainly on improving fuel consumptionwhich is more than 88 per cent thermalenergy. Specific measures include:• use of biomass as an alternative or sup-

plementary fuel for drying and heatingsystems

• heat recovery from the kiln flue gas for rawmill air heaters and pre-heaters

• reduction in leakage and insulation of pre-heaters

• application of variable speed drives forfans and pumps

• reduction in leakage in compressed airsystems

• improved handling of coal storage andtransport to reduce loss.

Benchmarking is an on-going processleveraging companies towards industrialexcellence, and the first step is to under-stand the current situation. In the process ofbenchmarking, best practices are identifiedand shared. This creates an environment forcreativity and innovation. The MIEEIP teamrecommends industries to adopt energyuse benchmarking as a daily productivityimprovement tool. Organizations activelysupporting these measures in the cement

industry include the Cement and ConcreteAssociation, and the National ProductivityAssociation which operates an online datacollection system where the Industrial EECommunity has been established.

31


6

5

4

3

2

1

0

GJ/

tonn

eC

emen

t

Your

Com

pany

Min

imum

Mea

n

Max

imum

Thai

land

Euro

pe

Philip

inne

s

Ger

man

y

Can

ada

Portu

gal

Indi

a

Fran

ce

100(%)

95

90

85

80

75

70

65

60

Current no cost low cost high cost

3.93 GJ/t

3.70 GJ/t3.65 GJ/t

3.06 GJ/t

Figure 8 Benchmark in cement industries, selected countries, 2002

Figure 9 Changes in SEC based on the implementation of energy saving measure (Company A), 2002



32

A C H I E V E M E N T S O F T H E M I E E I P P R O J E C T

C a p a c i t y B u i l d i n g• PTM is now able to conduct

comprehensive energy managementanalyses and provide advisory services toboth the public and private sectors.

• Several ESCOs are now capable ofassisting industries to conduct energyaudits and implement EE projects.

• Individual industrial companies are nowbeing provided with the information andguidance to implement no-cost energyefficiency measures.

• Financial institutions are now able tounderstand and implement the provisionsfor energy efficiency project financing.

P o l i c y I m p l e m e n t a t i o n• Specifications for high energy electric

motors have been adapted to meetMalaysian operational standards.

• Energy management is recognized as the‘tool’ for achieving energy efficiency, andis now being extended to otherapplications such as the design andconstruction of energy efficient and lowenergy buildings.

• The Malaysian Government’s 12 per centaverage increase in the electricity tariff in2006 demonstrates a serious commit-ment to minimizing energy wastage,especially in the industrial sector.

A c c e p t a n c e b y I n d u s t r y• More than 50 factories have been audited

and the number of requests is increasing.• Almost all factories audited have

implemented the recommendations of theenergy audit team.

• As part of the demonstration programme,five factories have successfully utilizedthe financial scheme available throughthe MIEEIP to implement audit recom-mendations.

• More than two thousand industryprofessionals throughout Malaysia havebenefitted from the seminars/workshopsorganized by the MIEEIP team.

• Two local manufacturers have imple-mented new specifications andprocesses in manufacturing energyefficient equipment.

• MIEEIP Website and the Newsletters arenow widely circulated and feedbackindicates that the information provided isvalued by the recipients.

I m p a c t o n t h e E n v i r o n m e n t• Implementation of energy efficiency

measures has contributed in almost allinstances to the reduction of greenhousegases, particularly CO2.

33

L E S S O N S L E A R N T

S t a k e h o l d e r P a r t i c i p a t i o nAchieving a significant impact on policyrequires consistency with the developmentaims of Government; this was substantiallyachieved through broad, high-levelstakeholder participation in the projectdesign and throughout the stages ofimplementation.

I n s t i t u t i o n a l F o c u sThe pre-existing institutional focus of thePTM greatly expedited and helped sustainthe project and its viability, and could beseen as setting a useful precedent forsimilar projects in the future.

C a p a c i t y B u i l d i n gRetaining international consultants fortechnical inputs and building local expertisehas been advantageous, but nationalproject managers need experience andappropriate management skills to makeoptimal use of such resources, and in someinstances further training to achieve this isdesirable.

L o n g - T e r m C o m m i t m e n tPromotion of energy efficiency is a long-termpolicy. Energy efficiency, as demonstratedby the work of UNDP/GEF in other countries,is a cost effective way of reducingemissions of greenhouse gases, but needsan achievement horizon of decades.Sustainability of this work and the impactachieved largely depend on theGovernment’s willingness to put substantialresources behind such efforts on acontinuing basis so that progress achievedso far is not squandered. It also requires

support from civil society and the public. Forsimilar projects, it is desirable that theyshould be predicated on the reasonableexpectation of substantial Governmentfunding to sustain momentum.

M a n a g i n g E x p e c t a t i o n sCare must be taken not to exaggerate thepotential of certain instruments to deliver(such as ESCOs and specific financial in-centives) as failure to achieve expectationscan have negative impacts on industry.

L e v e l o f S u b s i d i e sThe main barrier to more efficient use ofenergy is its relatively low cost. The practice inMalaysia of substantially subsidizingconsumer costs does not encourageconsumers to improve efficiency andeliminate wastage.

S c a l i n g U pMore demonstration projects in varioussub-sectors of industry are needed to showthat EE is indeed achievable and can beimplemented despite the lower cost ofenergy.

S u s t a i n a b i l i t yPolicy makers and authorities mustcontinuously encourage and facilitate effi-cient use of energy in all economic sectors.This may include the provision of energyefficiency regulation and the enforcement ofthose where applicable. Although voluntaryapproach is desirable in the initiation phase,the transition to a long-term permanentapproach is highly needed to sustain theEE programme.

34

S O U R C E S O F I N F O R M A T I O N

Asia Development Bank (1994) A Report on Energy Efficiency in Malaysian Industries:Economic Analysis and Recommendations for an Institutional Framework, Report to theFederation of Malaysia, Ministry of Energy, Telecommunications and Posts; Paris.

Ikeda, Kayo (2004) Energy and the Poverty Nexus in Sustainable Development: PromotingRenewable Energy as a Policy Option for Malaysia, unpublished.

Lucas, Professor Nigel (2003) Malaysian Industrial Energy Efficiency Improvement Project:Mid-Term Evaluation Report, unpublished.

Malaysia Economic Planning Unit (2001) Eighth Malaysia Plan 2001–2005, Kuala Lumpur,Malaysia.

Malaysia Economic Planning Unit (2006) Ninth Malaysia Plan 2006–2010, Kuala Lumpur,Malaysia.

Pusat Tenaga Malaysia (various dates 2002–2006) MIEEIP News.

Pusat Tenaga Malaysia (2003) Annual Report 2002, Kuala Lumpur.

Pusat Tenaga Malaysia (2003) Industrial Energy Audit Guidelines: A Handbook for EnergyAuditors, Seri Kembangan.


Pusat Tenaga Malaysia (2004) Findings of the Energy Audits MIEEIP, unpublished.


United Nations Development Programme (1999) Project of the Government ofMalaysia/Global Environment Facility: Project Document, unpublished.

United Nations Development Programme with United Nations Department of Economicand Social Affairs and World Energy Council (2000) World Energy Assessment: Energy andthe Challenge of Sustainability, New York.

United Nations Development Programme (2006) Energy and Poverty in Malaysia:Challenges and the Way Forward, Bangkok.

United Nations Development ProgrammeWisma UN, Block C, Kompleks Pejabat Damansara Jalan Dungun, Damansara Heights, 50490 Kuala Lumpur, Malaysia.

Tel: 03 2095 9122 Fax: 03 2095 2870 www.undp.org.my

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ACHIEVING INDUSTRIAL ENERGY EFFICIENCY