the national biomass strategy

THE NATIONAL BIOMASS STRATEGYCAPTURING MALAYSIA’S WASTE TO WEALTH OPPORTUNITY

Copyright 2016 by Agensi Inovasi Malaysia. All Rights Reserved.

CONFIDENTIAL DRAFT – NOT FOR DISTRIBUTION

1

Under the Agensi Inovasi Malaysia Act 2010, AIM is administered by a Governance Council (GC) that givesinputs and go-ahead for AIM’s direction, policies and initiatives.

There are 17 members in the GC, led by the Malaysia’s Prime Minister as Chairman. Members of theCouncil are appointed by the Prime Minister, with each member serving the Council for a term notexceeding three years. The reappointment of a member is limited to three consecutive terms.



2

INNOVATION

Innovation is not just coming up with new inventions or ideas and marketing them.

We need to transform into an innovation-led economy through the transformation of our mindset and entire eco-system to enable innovation to thrive.

Agriculture-based Economy Industrial & Service-oriented Economy

Innovation Economy



3

ABOUT THE NATIONAL BIOMASS STRATEGY 2020



OBJECTIVE OF THE NBS2020

4

Create a national strategy on how to use biomass for portfolio of high-value downstream activities (e.g., bioenergy, biofuel, biochemical)

Primary objective: maximize sustainable GNI impactfrom biomass in the 2020 time frame

Other considerations

▪ Downstream value creation

▪ High value job creation

▪ “Indigenous technology” creation within Malaysia (direct and indirect value creation)

▪ Sustainability impact and emissions impact

▪ Using Biomass as leverage to form smart partnerships with downstream companies and not selling it as commodity so that biomass owners can start getting into higher-value downstream industries

Strategy Design principles

▪ Private Sector Led

▪ Portfolio Approach for Downstream Activities and Objective industry facilitation

▪ No Specific Technology Recommendations

Malaysia’s Opportunity to Capture

RM30 billion additional GNI

impact

~66,000 new jobs

RM25 billion investment

opportunities

~12% CO2e abatement



5

Stakeholder involvement

Advisory panel

Stakeholder labs

Survey with ~170 plantations and ~70 mills

5

Inclusive stakeholder efforts on the development of National Biomass Strategy 2020: 300+ interactions (development work in 2010 and launched in 2011)

INDUSTRY – GOVT – ACADEMIA COLLABORATION

Copyright 2012-2015 by Agensi Inovasi Malaysia. All Rights Reserved.

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66

0

5

10

15

20

25

30

35

202020152011

Additional 20% biomass shift towards portfolio of Higher Value Uses by 2020 (inclusiveness)

Energy

Wood

products

1%

1%

3%

1%

4%

Use of biomass by type of end-product

6%

4%

9%

3%

9%

Share of total biomass available

in given year

Fuels

Pellets

Biobased

chemicals

Business as usual

Biomass used

Million tonnes, dry weight

11% 31%Total:

Pellets enable profitable

mobilization today,

and act as flexible

buffer once biobased

chemicals become

commercially available

Biomass to wealth

~14 bln

~8 bln

~9bln

~3bln

~2bln

GNI



7

The National Biomass Strategy looked into 4 Key Aspects of

Malaysia’s Potential to Develop a Sustainable Biomass Industry

iAvailability, Cost, Location of Biomass in Malaysia

iiTechnology Available to Process Biomass (Maturity)

iii Portfolio of Uses for Biomass

iv Malaysia’s Biomass Opportunities2011: Oil Palm Biomass

2013: Expanded Scope to Cover Forestry and Dedicated Crops As Source of Biomass



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BIOMASS UTILISATION CUTS ACCROSS SECTORS SO ITS IMPORTANT TO HAVE CENTRAL AND OBJECTIVE FACILITATION



2011 2012 2013 2014 2016 2020

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The National Biomass Strategy 2020: Chronology of Events

SOURCE: Press articles, BIO Pacific Rim pictures

“the NBS would pave the way for the growth of new high

value industries…including in bio-based chemicals and bio-

energy”

- Prime Minister Datuk Seri Najib Tun Razak, at the launch

of the strategy at the opening of BIO Pacific Rim 2011

Prime Minister launched

the 1MBAS Unit (Cross

Agency Task Force) to

accelerate and strengthen

execution NBS 2020 in

March 2012

NBS V1.0

Palm Oil Biomass

NBS V2.0

Expanded Scope

Forestry and

Dedicated Crops

Awareness State Buy-In Facilitation

Commercialisation

Create Multiple Biomass

Mobilization Models to

move industry and solve

Commercialisation Issues

By 2020

• RM30b additional GNI

• 60,000 jobs

• 12 reduction CO2

• RM 25b in Investments

Sabah and Sarawak

Biomass Strategy

(Co-Development with

Sabah and Sarawak

State Govt)



1MBAS team has been engaging local and international stakeholders

to facilitate the successful execution of the NBS2020

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Since launch, AIM’s NBS2020 team has amongst others:

• Engaged with >90 mill owners in Sabah State to resolve the Biomass Mobilization challenges, together with the Sabah Ministry of Industrial Development, POIC Sabah, MIDA, MPOB and PEMANDU

• Engaged and collaborated with Sarawak based industry, the Sarawak State Government, State Planning Unit and its agencies to develop a biomass cluster in Sarawak

• Organized visits for Malaysian biomass owners to downstream users of biomass

• Engaged with international pellets, bio-fuels and Bio Chemicals off-takers to work with Malaysian biomass owners

• Presented the Nation’s National Biomass Strategy at International conferences throughout Asia, Europe and Americas

• Facilitated feasibility studies for potential JV parties to invest in Malaysia

• Established the Pellet Association Malaysia to help industry

1MBAS worked closely with stakeholders in the Sarawak & Sabah Govts. and industry for years, gained real traction to create high-value biomass clusters to benefit both States resulting in SBIDP for Sabah and Sarawak.



NBS2020 positions Malaysia as the SEA Biomass Processing Hub in minds of biomass owners and (Global) biomass users

11

2011 today2012 2013 2014

Strategy advocating

Milestones

Industry Interest/engage

Intern’l

Local

Launch NBS2020

Launch NBS2020 v2.0

Launch 1MBAS initiative

Lahad DatuJV Cluster

SEA first 2GEthanol pilot plant

P.A.M. established

Bintulu 2G ethanol project

100,000 t/month pellet order received

World Bio Markets, Europe

BIO Pacific Rim, USA

Biomass pellets, Korea

JV Cluster workshop, KK

Downstream pellet engagements, Korea

Palmex, Sandakan

BioBased Chem Asia, BKK

BIO Pacific Rim, KL

Palmex, Tawau

NBS2020labs



12

SOURCE: MPOB; Interviews

1 Based on end 2014 records, 5.39m ha total planted areas in Malaysia, 4% replanted area per year and company specific information

MALAYSIA generates sufficient amounts of dry palm biomass per year and availability subjected to mobilisation cost

Solid

(dry weight)

POME

Annual Availability

Site of

production

Per ha

(tonnes)

National total

(m dry tonnes)1DescriptionBiomass Type

MillLiquid by-product from steriliza-

tion and milling process of FFB

Shells

(PKS)

MillRemains after palm kernel oil

extraction

MillRemains after oil extraction

from mesocarp

MillRemains after removal of palm

fruitsEFB

Fiber

(MF)

Fronds PlantationLeaves of oil palm tree

Trunks

12.2

0.8

1.4

1.4

9.6

3.0Plantation

65.7

4.3

7.5

7.5

51.7

16.2Tree trunk available at end of

plantation lifecycle

Liquid

(wet weight)

87.2



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A detailed costing methodology has been developed to illustrate how biomass can be mobilized in a Sustainable Way



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25 m tonnes of biomass can be mobilized in Ports at USD 80 and below using fully-loaded cost methodology

Cost of biomass in 2010

USD per tonne (dry weight)

Biomass available

Million tonnes

100

0

55

160

1510

20

5025 30 35

140

120

0

40

45

80

60

5 20 40

• 25 m tonnes below USD

80 at fully-loaded cost

• Costs can be significantly

lower e.g. if processing

plants are co-located with

palm oil mill clusters

Pre-process-

ing cost

3

Substitution,

harvesting

and collect-

ion cost

1

2

Transport

cost4

13 m tonnes below

USD 60 at fully-

loaded cost

SOURCE:, NPOB, AIM analysis, Academic papers, plantation interviews



25 m tonnes of biomass could be mobilised across Malaysia

Copyright 2012-2015 by Agensi Inovasi Malaysia. All Rights Reserved.



16

Biobased Chemicals should offer highest value-add in the future

24-78

1,100-3,515

430-1,100

380-1,250

15-150x

215-390

Revenue generated per tonne of lignocellulosic biomass input (dry weight)

RM

Upper range

Lower rangeFertilizer

Bioenergy

Biofuels

Biobased-

chemicals

Existing revenue per

tonne today

Wood industry / Pellets

*Based on figures 2010-2011

Changing Prices of Downstream Products:USD90-96 cfr in the latest tender by EWP for 30,000t wood pellet for March, delivery May 2016.(Source: Argus)

Changing Prices of Downstream Products:USD110-120 FOB Vietnam to Japan with FM Certification (Source: Argus)



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Wide range of downstream uses for ligno-cellulosic biomass: 2G BioFuelshave reached commercial scale, 2G Biochemical between 2016-2020

SOURCE: MOSTI R&D for Biomass 2010, Status of 2nd Generation Biofuels Demonstration Facilities in June 2010, MY-Basic Workshop February

2011, Expert interviews

Today

2014

FertilizerWood

industryOtherBioenergyPellets

2015

2020

Ligno-cellulosic

pathway

Biobased-

chemicals

In 2013, Lignocellulosic

biofuels already being

commercialized

(accelerated pace)

Biofuels

Beta Renewables’

cellulosic ethanol facility

in Crescentino, Italy is

the first plant in the world

to produce commercial

quantities of advanced

biofuels.

40-60K/annum capacity

(fermentation based)

October 2013 Sept 2014

Poet-DSM became the

World’s 2nd Cellulosic

Ethanol Plant using

straws as feedstock

located in the US

70K/annum capacity

(fermentation based)



18

Portfolio approach to downstream allows integration building asustainable business model



19

MOST OF MALAYSIA’S BIOMASS POTENTIAL RESIDE IN EAST MALAYSIAOIL PALM TOTAL PLANTED AREA (END 2014)

Planted palm oil area as of Dec 2014

Million hectares

SOURCE: As of end December 2014 ; MPOB; Poyry

>50% of total planted area in of Sabah and Sarawak

2.8 million hectares combined

0.01

Perlis

Penang

0.0

0.05

Kedah

Malacca

0.08

Selangor 0.14

Kelantan 0.14

Terengganu 0.17

Negeri Sembilan 0.17

Perak 0.39

Pahang 0.71

Johor 0.73

Sarawak 1.26

Sabah 1.51

Mature Immature

Total Planted Area in Malaysia: 5.39 million hectares

Sarawak

Sabah



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SABAH & SARAWAK: ” LAUNCHPAD FOR MALAYSIA AS THE PREMIER BIOMASS PROCESSING HUB IN SOUTH EAST ASIA”

• Close collaboration between Federal and State Governments

• Both states account for more than 50% of the biomass generated in the country

• Potential for• RM 8.0 billion in GNI• > 55,000 jobs• > RM 31.5 billion in investment in East

Malaysia

Officially launched by YAB Dato’ Sri Mohd Najib Bin Tun Haji Abdul RazakOn the 25th February 2016



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THE LAUNCH OF SABAH AND SARAWAK BIOMASS DEVELOPMENT PLAN AS PART OF SOUTH EAST ASIA’S PREMIER BIOMASS PROCESSING HUB

SABAH AND SARAWAK Launchpad for Malaysia as the Premier Biomass Processing Hub in South East Asia.: (From left) PermanentSecretary of Ministry of Industrial Development Sabah Datuk Hashim Paijan, Agensi Inovasi Malaysia CEO Mark Rozario, Minister ofInternational Trade and Industry Dato’ Sri Mustapa Mohamed, Sabah Deputy Chief Minister Datuk Raymond Tan Shu Kiah, Minister in thePrime Minister’s Department Dato’ Mah Siew Keong, Prime Minister of Malaysia Dato’ Sri Najib Tun Razak, Sarawak Assistant ChiefMinister Datu Haji Len Talif Salleh, Director of Sarawak State Planning Unit Datu Haji Ismawi, Minister of Science, Technology andInnovation Datuk Seri Panglima Madius Tangau, Minister in the Prime Minister’s Department Dato’ Sri Abdul Wahid, Deputy FinanceMinister Datuk Johari at Prime Minister’s Office, Putrajaya



The Sabah Biomass Industry Development Plan can strengthen Malaysia’s proposition as the Premier Biomass Processing Hub

Note: The forecast is based on dedicated feedstock supply and not taking into consideration feedstock

sharing/optimisation.

Sabah Biomass Industry Dev. Plan

The Sabah Biomass Opportunity …

Could help Sabah capture:

~RM3.2 billion* additional revenue

per year

~25,000+ new Green jobs

~RM13.5 billion in investments

25


Sandakan, Lahad Datu, and Tawau can mobilise 4.8 million dry tonnes of biomass with future potential in Labuk Sugut

23

2

3

1 Sandakan

Lahad Datu

Tawau

4 Labuk Sugut

(Potential)

Copyright 2016 by Agensi Inovasi Malaysia. All Rights Reserved. 24

Commercial-scale Teck Guan plant

using EFB and fronds as feedstock

Bio-energy in Labuk Sugut with

minimum infrastructure investment

Integrated MEG and ethanol plant in

Labuk Sugut with significant investment

on infrastructure (jetty, roads, utilities)

Integrated xylitol and ethanol plant in

Lahad Datu using fronds as feedstock

Improvement of current pellet plants in

Lahad Datu and Tawau to reach

profitable commercial-scale industry

N-butanol plant in Tawau with remaining

EFB and woody biomass as feedstock

5 investments were identified as opportunities for Sabah within 10 years


The Sabah biomass industry offers several development opportunities over time

1 Improvement to existing pellet plants in Lahad Datu and Tawau, no Capex required

2 Revenue gained by the private investors

3 1.2 mn dry ton biomass released from biomass power plants

28

Biomass

mobilised

mobilisationmobilisation



Sarawak has the opportunity to become a leader in high-value biomass industries, and Asia’s First Integrated Biomass Hub

Note: The forecast is based on dedicated feedstock supply and not taking into consideration feedstock

sharing/optimisation.

Sarawak Biomass Industry Dev. Plan

The Sarawak cluster could become Asia’s …

1stCommercial-scale biomass plantation

1stMulti-feedstock Biomass Hub

1stBio-port

1st2G Ethanol plant

1st2G Bio chemicals plant

And could help Sarawak capture:

~RM4.8 billion* additional revenue

per year

~35,000+ new Green jobs

~RM18 billion in investments

29



27

Sarawak can mobilise 6 million dry tonnes of biomass in 4 main clusters, Bintulu & Miri highest potential

Note: 1 Biomass of harvesting

residues from timber and rubber

plantations excluding natural

forest



Within the next 6 years, 3 to 5 bio-based chemical plants could be established in the relevant clusters

28

For Kuching and Tanjung Manis each …

a. A demonstration plant using EFB

only, or

b. A full-scale MEG or xylitol plant

using EFB as feedstock, or

c. A pellet plant using only EFB as

feedstock

1 integrated commercial scale

chemical plant in Samalaju using EFB

as feedstock

1 integrated commercial scale

chemical plant in Miri using EFB as

main feedstock

Brooke Renewables ethanol plant in

Bintulu using dedicated short rotation

crops as feedstock

Sarawak Biomass Industry Development:

Plan Phase I and II

5



The available biomass at a competitive cost can support new investments in four phases over time

29Note: The forecast is based on dedicated feedstock supply and not taking consideration of feedstock sharing/optimisation.



30

NBS 2020 Succession Plan: State Level Champions To Drive NBS (Internalisation)


Malaysia has already implemented a wide number of incentives to facilitate further industry development

31

Feed-In Tariff (FiT)1

Domestic

Investment

Strategic Fund

(DISF)

2

Commercialisation

of Research &

Development Fund

4

Green Technology

Financing Scheme

(GTFS)

3

Techno Fund5

Intellectual Property

Financing Scheme

(IPFS)

6

Incentive

Grant

Grant

Grant

Grant

Grant

Pioneer Status7

BioNexus Status8

Business Start-up

Fund (MTDC)10

Investment Tax

Allowances (ITA)

9

EPP 6 Developing

Oleo Derivatives11

Credit Guarantee

Corporation (CGC)12

Tax

Incentive

Incentive

Incentive

Grant

CAPEX

Incentive

Financing

Support



The Malaysian government provides financial support through subsidies, tax breaks, and direct grants

Government support structures

Grant & loan programs

1-innoCERT: Innovation coaching programs for innovative

SMEs. Eligible to RM 1 million SME Innovation Award

Bio-Technology Venture Fund: US$100 mil venture fund

for biotech companies operating in Malaysia

Business Start-up Fund: Up to RM 5 million for technology

startups

Commercialization of R&D Fund: RM500k-RM4 mil for

university R&D commercialization initiatives

Commercialization Innovation Fund: RM500 mil fund to

assist SMEs in commercializing R&D

Cradle Investment Program: RM500k /company prototype

development fund, maximum two applications / company

Domestic Investment Strategic Fund: RM1 billion fund to

accelerate high-tech shift of Malaysian owned companies

Green Lane Facility: 2% interest rebate for approved loans

Green Technology Financing Program: RM250k to RM2

mil contract financing for green certified companies

Green Technology Financing Scheme: RM10 million up to

10 years for Malaysian-owned companies using green

technology

MyCreative Venture Capital: RM200 mil fund to increase

innovation and creativity among youth

TechnoFund: RM5 mil / company bridge fund for basic

research to commercialization

Tax rebates / exemptions

BioNexus status program: 100% income

tax exemption for value-added

biotechnology activities

Green Lane Facility: tax deductions to

obtain 1-innoCERT certification

Import duty / sales tax exemption: on

imported raw materials, components,

machinery, and equipment to produce

finished products. Minimum exemption is

RM1 mil

Investment Tax Allowance: 100% income

tax exemption for 60% of capital

expenditure for biomass-to-energy

technologies

Pioneer Status

100% statutory income tax exemption for

10 years for value-added biomass

utilization

Reinvestment Allowance: 15-year tax

allowance on 60% of capital expenditure to

update or automate factory or plant

Mandates / subsidies

10th Malaysia plan 2011-2015:

stipulates Renewable Energy Act

and Feed-in tariff mechanism

Feed-in Tariff Programme: up to

RM 46 cents/kwh tariff for bio-

energy. Guaranteed access to grid

Renewable Energy Act 2011:

15.5% renewable energy in mix by

2015

National Green Technology

Policy: Accelerate national

economy and sustainable

development with green technology

SOURCE: Lux Research Analysis, 2015



33

Timothy OngSenior Vice President, Strategic Impact ProjectsHead of National Biomass Strategy Delivery Unit (1MBAS)-------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------Agensi Inovasi MalaysiaMalaysia’s National Innovation AgencyPrime Minister’s Department3501, Level 3, Quill Building 3Jalan Teknokrat 563000 CyberjayaSelangor Darul EhsanMalaysiaT : +603 8319 3116F : +603 8319 3499M : +6012 675 7586E : [email protected]

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