ROLES OF THE KEY STAKEHOLDERS FOR THE GROWTH OF ENERGY SERVICE INDUSTRY IN MALAYSIA

The potentials of energy service industry in the form of investment opportunities and   the creation of new jobs is enormous which can contribute significantly to the growth of our economy. With the potentials valued at billions of dollars at regional markets which will be more opened with the upcoming ASEAN Economic Community(AEC)  introduction and the implementation of Trans Pacific Partnership Agreement(TPPA), Malaysia could not afford to just ignore it and not participating.

Like any other industry, energy service industry where energy efficiency is the core part of it, a holistic approach is required to ensure all efforts to be place will bear fruits in long term and able to be sustained to create more opportunities in the way forward.

In this last part on this topic, let us examine on what is exactly expected from key stakeholders in this country in terms of roles and responsibilities that need to be played by each of them to grow and sustain the energy services industry. The more we delay in tapping opportunities from this industry, more we are going to lose its economic opportunities that could benefits us in short and long terms especially in the current challenging economic climate.

The Figure 1 below illustrates that overall framework, key elements, thrusts needed and process flow to grow the energy efficiency industry where energy service is the core feature where big scale investments and new jobs creation is concern.

Figure 1: The schematic framework, thrusts and process flow of the holistic approaches to grow energy efficiency industry at the national level.

For energy service or energy efficiency industry players, what is needed is a clear platform with a conducive business ecosystem for them to play their roles to tap the already available and newly created business opportunities. Like any other industry, there are factors that will contribute to the industry growth such policies, institutional framework for administration and regulatory supports, availability of funding and financial supports for loans, fiscal incentives, awareness and etc. All these factors require involvement of all stakeholders to play their specified roles that will enable industry players to step out and explore existing and new opportunities that will be created with the growth of the industry.

At the national level, Malaysia requires and clear and well national energy efficiency policy with its own policy goals and targets to be achieved at stipulated period. This policy will serve as the common goal for all sectors to refer and figure out ways on how they can play their roles to achieve that national targets according to their sector.

To grow the industry in more sustainable manner, there are thrusts that need to be established which will involve all stakeholders with defined roles. These thrust could also be seen as tools to achieve the national policy targets. On top of that, inclusiveness in policies development and reviews is also required to ensure goals and targets established to be well understood and accepted with commitment by all stakeholders.

Firstly, for the government, there is an urgent need to build a strong governance for energy efficiency administration and effective and comprehensive regulatory frameworks. In the same time, the government need to look and act on energy efficiency measures or programs holistically and urgently for prioritized targeted groups and not with project-based approaches which often no further efforts to sustain and improve performances beyond the project period.

Secondly, there must be a commitment for funding because there is need to establish as sustainable sources of fund to finance big scales energy efficiency projects implementation. The government should play its roles in getting the financial institutions to be involved more in energy efficiency industry like other types of industry. The fund can be in the form of a revolving fund with loan facilities administered and managed by the government appointed entity. To add the availability of fund for energy efficiency projects investments, commercial financial institutions need to be roped into the picture.

The fund or loans facilities established can be utilized by parties involved to implement such projects among large energy users themselves and industry players such as Energy Service Companies (ESCOs) who are mainly involved in energy performance contracting projects that require large amount of fund.

The mechanism to distribute the fund should also made as business-friendly possible to attract large energy users and industry players to use it with assessment criteria for the eligibility to suit the energy service business models such as energy performance contracting type of projects and if the fund to be sourced as loans by the large energy users themselves.

The inputs from industry associations representing both sides from large energy users  from various sectors such as manufacturing, healthcare, hotels and etc. and industry players such Malaysia Energy Service Companies Association can be sought to establish the financial and technical assessment criteria that will be adopted by the administrator of the fund and financial institutions.

Thirdly, there is a need for some consistency, uniformity and accountability in implementing energy efficiency programs by any agency empowered and made responsible by the government. This agency can be a one-stop-center for all parties especially investors and industry players to refer for energy efficiency related matters that will finally resulted in more big scale energy efficiency projects to be implemented in faster mode.

The last two thrusts that also need to be made available to support the growth of energy efficiency industry which are the continuous dissemination of information, awareness creation and education for targeted sectors and the initiative to have more research and development in energy efficiency technologies and applications.

Decision makers from financial institutions and business owners among large energy users are the most important target groups that require strategic approaches for them to look at business and investment potentials in energy efficiency industry. This will require a well-planned strategy to educate and create the awareness among them and this role is expected to be played by energy service industry players with the assistance and facilitation by the government.

Awareness creation and education among business leaders on potentials of investments in energy service industry must be an on-going process through seminars, dialogues and conferences facilitated by the government.

All the five key thrusts will serve as a very strong platform for the whole energy efficiency industry to grow where energy service industry players will have to play their roles to tap the opportunities created in the process and in the way forward as the industry keep growing in the future.

With the inclusion of the preparation of a strategic national plan for the demand side or the energy users’ side of the energy sector in the 11^th Malaysia Plan between 2015 and 2020 by the government, all the above five thrusts are strongly recommended to be  included in the plan. The inclusion of initiatives for the demand side management is mentioned in the 11^th Malaysia Plan document, Chapter 6 under the title of Pursuing Green Growth for Sustainability and Resilience.

The initiative which is led by the Economic Planning Unit under the Prime Minister’s Department  is from adopting the sustainable consumption and production concepts where managing the demand side is one of the  key criteria as illustrated in the Figure 2 below. The formulation of the strategic national plan for the demand side is expected to come in the form of a comprehensive master plan which will include types of energy consumption which are electrical, thermal and transport energy sectors.

Energy efficiency measures for the demand side will be focused according to different types of users which are industrial, buildings and households.

Figure 2: The plan by EPU in the 11^th Malaysia Plan for the establishment of a national energy efficiency strategic master plan.

For ESCOs in Malaysia, the biggest potentials to be exploited from the energy efficiency growth the possible adoption of energy performance contracting business model by large energy users the new strategic business strategies for business sustainability. More efforts are needed to sell the idea among key decision makers from all sectors to consider other alternatives of funding to implement big scale energy efficiency projects that are already available and proven in developed and developing markets such as in USA,Europe and Thailand and China.

What are needed to stimulate the growth of the investments in the energy efficiency industry through energy performance contracting projects is illustrated in the Figure 3 below. Energy service companies who will play the key roles to promote and to ensure the successful adoption of energy performance contracting business model need supports from other stakeholders which are the designated government agency, financial institutions and professional bodies to provide the supporting measures covering the financing, technical assessment, fiscal incentives and performing the independent energy performance measurement and verifications works.

These supports measures are not only required by ESCOs as the industry players but also by each stakeholder in order for them to play their roles effectively. For example, banks will required an independent and competent party to assess technical proposal on loan applications for energy performance contracting projects investments by energy service companies and companies with large energy consumption.

Another example is, fiscal incentives provided by the government in the form of tax exemptions or investment tax allowance for large investments in energy efficiency projects implementation will attract more companies to consider to invest with their own internal fund or from commercial loans.

Figure 3: Support measures required from stakeholders to stimulate the take-up of EPC model by large energy users and ESCOs.

THE CONCLUSIONS

Despite its enormous potentials, the investments and business opportunities in energy service industry in Malaysian market is still relatively very much “untapped” due to factors that have been discussed this article and my last two articles in this topic. It means there are so much more need to be done by all stakeholders to stimulate the growth of the industry  that will benefit all in many ways.

Energy performance contracting model has been proven as a viable and effective business model for faster big scale energy efficiency projects implementation for large energy users. However, with the lacking of national level holistic approach to implement energy efficiency programs and also the lacking support measures to implement energy performance contracting projects have been main barriers.

More successful energy performance contracting projects are required to attract more attention of business owners from large energy users, financial institutions and other investors to look at energy service industry as another attractive platform to invest their money for more profits to grow their businesses.

In the same time ESCOs must have and continue to develop their competency and capability to ensure successful EPC projects implementation to who more success stories to the market and all stakeholders. The upcoming AEC implementation for ASEAN countries and TPPA to be implemented in markets in participating countries, Malaysian ESCOs must also look at these markets to expand their investments and sell their expertise.

All stakeholders must work hand in hand to grow and stimulate the energy service industry from the holistic approach of energy efficiency implementation for Malaysia to benefit from its potentials as the new source of economic growth for the current and  future development to become a greener nation for our future generations.

Note:

The contents of this article is also featured in my column in the Green Plus magazine.