Cenergi SEA Berhad
Level 4, Block E, Dataran PHB Saujana Resort, Section U2, 40150 Shah Alam, Selangor.
+603 5885 0454
+603 5885 1474
Cenergi SEA Berhad
Level 4, Block E, Dataran PHB Saujana Resort, Section U2, 40150 Shah Alam, Selangor.
+603 5885 0454
+603 5885 1474
This white paper was prepared by the New Ventures Department of Cenergi SEA and is intended to provide general guidance and advice on policy. The contents of this white paper should not be reproduced or distributed without the written consent of Cenergi SEA. Whilst some of the information contained in this white paper was processed from sources believed to be reliable, Cenergi SEA does not provide a guarantee on their accuracy or completeness. Cenergi SEA also does not accept any liability for any direct or indirect damages resulting from the use of the information in this white paper.
Introduction about NEAAP
In January 2014, the Ministry of Energy, Green Technology and Water (KeTTHA) released a National Energy Efficiency Action Plan (NEEAP) which aims at presenting a strategy for a well-coordinated and cost-effective implementation of energy efficiency measures in the industrial, commercial and residential sectors which will lead to reduced energy consumptions and economic savings for the consumers and the nation. The target of the MEEAP plan which is confined to electricity usage and does not cover the other energy sector is to save electricity and reduce electricity demand growth.
The concept of energy efficiency refers to a dynamic energy management system and technology implemented into buildings to ensure cost savings and reduction in environmental impact. Energy efficiency is seen as the ‘low-hanging’ fruit in terms of carbon reduction as well as providing a greater cost savings to energy consumption.
‘Realising the energy savings potential in buildings would deliver a range of benefits including lower electricity and fuel costs for businesses and households; greater reliability in meeting energy demand without costly disruptions; and reductions in emissions of greenhouse gases and other pollutants that pose a threat to human health.’ (IEA, 2015)
Budget cuts in universities
In addition, Universities in Malaysia have recently seen a cut in budgets. The higher education institutions had their budget slashed by RM2.4 billion (US$573 million), from RM15.78 billion (US$3.8 billion) in 2015 to RM13.37 billion (US$3.2 billion) for the year 2016. This coupled with a great drive to increase awareness in turning more environmental friendly and implementing and practicing carbon-reducing methods provides a great incentive for energy efficiency measures to play a significant role in both carbon-cuts and cost savings.
Energy Savings Performance Agreement (ESPA)
With the above in mind, the Energy Savings Performance Agreement (ESPA) model was built as a commercial model that allows a developer to invest in energy efficiency measures and incorporate these into buildings to allow the consumer to enjoy energy savings. Using innovative commercial structures, our energy efficiency solutions can pay for themselves out of the savings realized, meaning our customers realize immediate operating cost savings with no upfront capital expenditure. The ESPA model benefits in the following ways:
Cenergi SEA has successfully implemented the ESPA model through four of our key projects in Malaysia. Our latest and largest project is with the International Islamic University Malaysia (IIUM). On October 24th 2016, Cenergi entered an agreement with IIUM to be able to design, procure, install, operate and maintain energy saving equipment. Through this agreement, we executed a RM40 million Built-Own-Transfer (BDT) energy savings contract guaranteeing an electricity savings of up to 33.53% per year. The successful implementation of the ESPA model at IIUM has inspired us to roll-out similar projects across all universities in the country.
In this proposal, we would like to seek the cooperation of MOHE and KeTTHA to help bring the ESPA solution to other universities.
National Energy Efficiency Action Plan
The Malaysian Government has been drumming up efforts to look to energy efficiency as a means to drive national targets in carbon reduction. The release of the National Energy Efficiency Action Plan (NEEAP) in 2014 by the Ministry of Energy, Green Technology and Water (KeTTHA) with an updated version of the NEEAP for 2016-2025 aims at 52 233 GWH (8%) savings, which is equivalent to CO2 reduction of 37, 702 ktCO2eq. The NEEAP will be implemented through 4 strategic thrusts which focuses on implementation of an Energy Efficiency Plan, the strengthening of institutional frameworks, capacity development and training, the establishment of sustainable funding mechanisms, and private sector investment in energy efficiency initiatives.
The Energy Savings Performance Agreement (ESPA) in the NEEAP
Implementation of the Energy Savings Performance Agreement (ESPA) concept in the government sector was approved by the government in January 2013. In ensuring successful implementation of the ESPA, ESCOs are required to register with the Ministry of Finance to carry out ESPA projects in government buildings under the Green Technology Services Code (22280) as well as with the Energy Commission.
ESPA Incentives under the NEEAP
Fiscal Incentives for Energy Efficiency have been introduced under the government’s financial budget in 2001 by providing tax incentives for energy efficiency projects and equipment.
Why Use the ESPA Model for Increasing EE Implementation?
Sustainability in Malaysian Universities
Sustainability is an idealized societal state where people can live long, comfortable, productive, without compromising their needs. The concept of sustainability’ has been widely promoted, integrated and considered in many sectors, including private, government, as well as education (Prugh et al., 2000). Many universities have taken initiatives to create sustainable environment through various projects and research activities. Nevertheless, misunderstanding the concept of sustainability and not good planning has made such projects a failure. Hence, there is need for the concept of sustainability to be well understood by university’s stakeholders before any sustainability projects are undertaken.
The quality of Malaysia’s higher education system is on the rise
Malaysia is currently ranked 27th out of 50 higher education systems, based on the 2015 Universitas 21 rankings, and has been steadily climbing upwards. This improvement has brought with it an increase in demand from students for higher education, and this growth is both quantitative and qualitative – more students are pursuing higher education, and in more technical areas, as employers increasingly seek higher-skilled graduates.
Pursuing green growth for sustainability under the 11th Malaysia Plan
The Tenth Malaysia Plan, 2011-2015, recognised the importance of environmental sustainability as part of a comprehensive socio-economic development plan. Measures to address the issues of climate change, environmental degradation, and sustainable utilisation of Malaysia’s natural endowment were therefore featured in the Tenth Plan.
In the Eleventh Malaysia Plan, 2016-2020, green growth will be a fundamental shift in how Malaysia sees the role of natural resources and the environment in its socio-economic development, protecting both development gains and biodiversity at the same time. Building a socio-economic development strategy that will increase the resilience to climate change and natural disasters remains critical. To pursue green growth, the enabling environment will be strengthened — particularly in terms of policy and regulatory framework, human capital, green technology investment, and financial instruments.
This enabling environment will facilitate a shift in the economy, particularly in the private sector, towards more sustainable patterns of consumption and production. This transformation will ensure sustainability of the nation’s natural resources, minimise pollution, and strengthen energy, food and water security. By conserving biodiversity, the continuity of their function as a natural buffer against climate change and natural disaster can be strengthened. This buffer, complemented by structural approaches such as innovative flood mitigation and green infrastructure, as well as non-structural approaches like hazard risk maps and warning system, will strengthen disaster risk management and ultimately improve the wellbeing and quality of life of the rakyat.
Energy Conservation Opportunities in Malaysian Universities
The rationale of the sustainable campus is to become more efficient in resources use, particularly in energy usage. Among many listed activities, energy conservation can be one of the effective tools in assisting Malaysian universities to achieve sustainable status. In fact, the integration and promotion of energy conservation concept in the university can reduce energy usage and minimize carbon footprint. Sohif Mat et al. (2009) explains that the energy efficiency can increase the lighting performance, keep comfortable temperature, reduce the high cost of electric power, minimise dependence on electricity, and improved ventilation and indoor air quality.
Significance of Conserving Energy: The context of Malaysian Universities
Since 2007, The Malaysia Ministry of Education has urged all education centres to save energy (The Star, September 13, 2007). Administrators in Malaysian universities also are concerned about the expensive monthly electricity bill. Both energy managers from Universtiti Teknologi Malaysia (UTM) and International Islamic University Malaysia (IIUM) have agreed that local university nowadays are facing serious energy wastage problems. Energy cost them more than ten million ringgit annually and this burdens the universities. This leads to a new thinking and search for new methods of conserving energy that need to be studied and used in order to save costs.
Rationale for Using ESPA in Universities
For a list of oldest public universities in Malaysia, please refer to Appendix 1.
– Budget cuts in Universities
As of 2016-2017 budget, universities have seen a reduction in their allocated budgets. Higher education institutions have to face the tough decisions on making their budgets go further. This has resulted in the restriction of funds being allocated for operational costs such as staff salaries, research grants and building maintenance.
– Universities have mandates to go green
Universities have started to realise the importance of implementing programmes and campaigns that prioritise environmental action. Many local campuses have started to implement their own zero-carbon targets. (ie. UMS’ Ecocampus, UM’s Green Campus)
– Umbrella Impacts
ESPA potential in savings and carbon reduction provide a solution that can be done at a facility management level but savings realised will be able to affect costs at a campus level and funds saved will be able to feed into cost of operations elsewhere. ‘ESPA financing gives college and university administrations the chance to capture lost utility and operating costs and channel those funds to meet critical infrastructure, growth and expansion needs – often with minimal disruption to campus operations.’ (JP Morgan, 2012)
Key Considerations at Project Level
Customer Risk: Key risks that are associated with the implementation of the ESPA model have typically been associated with the repayment of the shared savings.
Operational and Building Use Risk: Universities usually own the premises on which they operate but the use and consumption of buildings can change over the contract period.
Behavioural Change Risk: There is also no quantitative method to account for extra savings on consumption due to behavioural change of the tenants of the premises (ie. Implementation of ‘eco-campaigns’ that encourage students and staff to be more conscious of energy usage thus reducing energy costs)
Key Considerations in Growing the ESPA in Universities (As seen from IIUM Case Study)
Cenergi & IIUM’s Energy Efficiency Project
In 2016, Cenergi and the International Islamic University Malaysia (IIUM) collaborated on the design and implementation of an energy efficiency program for IIUM’s campuses. Cenergi EE Sdn Bhd signed an Energy Savings Performance Agreement (ESPA) with IIUM in order to be able to design, procure, install, operate and maintain energy saving equipment for its Gombak campus. This initiative represents IIUM’s first plan under its sustainability program to reduce the institution’s carbon emissions through efficient energy management. On average, the project guarantees electricity savings of up to 33.53% per year for IIUM. The project, now in Phase 2 of its implementation phase has already seen electricity savings that have surpassed its guarantee of 33.53%.
Refining the basis for accounting for benefits arising from EE ; Improving awareness on EE initiatives carried out by companies operating on the ESCO model to encourage private and public partnerships with ESCO entities
The Ministry needs to derive a standard of measurement that can account for the predicted uptake of EE across various sectors from less than 2 % to 15 % by 2030 in a transparent and coherent manner in addition to (as per Green Technology Master Plan 2017-2030) showing how carbon emissions reductions corresponds to this.
Measuring energy savings is a measurement of what the energy use would have been if the energy efficiency savings project had never been implemented. To accurately quantify such a measurement and enable comparison, a sound baseline of the current energy consumption needs to be established.
It is important for us to instil awareness on energy efficiency across ministries to ensure a holistic support to EE efforts e.g. MOE for schools and universities, KPDNKK for shopping complexes, KPKT for residential.
Apart from partnerships with government and commercial stakeholders, large-scale property developers should also be incentivized to collaborate with ESCO entities so as to incorporate EE into their township planning as well as their properties and facilities, i.e. Sunway Group & IOI Properties.
Case Study for International Islamic University Malaysia (IIUM), Gombak
|Energy Consumption (kWh)
|Electricity Bill Amount (RM)
From the data tabulated above, it is concluded that the energy savings percentage after implementation of ESPA is ~10%.
Before ESPA (Phase 1) – 3,300 kWh/year per student
After ESPA (Phase 1) – 3,085 kWh/year per student (EE of 7% reduction per student)
Managing DSM through EE under a GER framework
Using Singapore’s deregulated retail market as a model, Malaysia should look to implement a deregulated energy market but specific to renewable energy (i.e. Green Energy Retailing – GER), whereby a REPPA is signed between a RE generator and consumers whereby the grid owner may impose wheeling charges for use of their transmission system.
Below are some DSM measures implemented in Singapore, which may be introduced in Malaysia:-
Utilising existing frameworks of governance to encourage the uptake of EE such as the Green Building Index
Green Building Index (GBI): green rating tool for buildings which aims to promote sustainability. Malaysia’s own voluntary GBI initiative was launched on May 21st 2009, and as of 2017, the GBI certification has provided savings of 10kWh per m2 per year.
As of September 2017, gross floor area (GRA) of GBI rated buildings in Malaysia is 18.1 million m2 and has resulted in carbon emissions reductions of 841 ktCO2e/annum.
New and upcoming development projects and townships in Malaysia should be encouraged to adopt GBI standards through incentives that function as a reward for compliance. Eg: rebate on energy efficient appliances, discounts on GBI property.
This project has been co-financed with Malaysian Debt Ventures (MDV) on a project finance basis.
Key Learning From Project Implementation:
University management process require approvals from the Ministry of Higher Education for projects that exceed a certain allocated budget (ie. 25 million). This process of attaining multi-level approvals slows down the process of project implementation considerably.
National plans to increase the use of energy efficiency as a means to achieve low-carbon objectives are on a positive trajectory with the conceptualisation and implementation of programmes such as the National Energy Efficiency Action Plan.
One of the most effective methods of implementing energy efficiency programs for commercially operational buildings has been illustrated through the use of the Energy Savings Performance Agreement that can be performed under an Energy Services Company.
In the course of using the ESPA model and working with commercial buildings, Cenergi as an ESCO has found that there are particular added benefits when using the ESPA model in higher education institutions. This is due to a recent push for universities to not only achieve their own low carbon targets through education as well as practical solutions but also as a cost-saving measure.
Building the pathway toward higher wider implementation of EE programs for universities however, has proved challenging due to both institutional and internal managerial roadblocks that either cause delay or stagnation of project roll out. It is recommended that a greater push to marry low-carbon initiatives by universities and energy efficiency programmes through awareness and institutional support be encouraged.
List of oldest public universities in Malaysia
|Average Number of Students
|University of Malaya
|Universiti Teknologi MARA
|Universiti Sains Malaysia
|Universiti Kebangsaan Malaysia
|Universiti Putra Malaysia
|Universiti Teknologi Malaysia
|Universiti Islam Antarabangsa Malaysia
|Universiti Utara Malaysia
|Universiti Malaysia Sarawak
|Universiti Malaysia Sabah
|Universiti Pendidikan Sultan Idris
|Universiti Sains Islam Malaysia
|Universiti Teknikal Malaysia Melaka
|Universiti Malaysia Perlis
|Universiti Malaysia Pahang
|Universiti Sultan Zainal Abidin
|Universiti Pertahanan Nasional Malaysia
|Universiti Malaysia Terengganu
|Universiti Malaysia Kelantan
|Universiti Tun Hussein Onn Malaysia