22/10/2010 (Sceptre International) - Palm-based biomass power plants in Sabah state in Malaysian Borneo, with the construction of the first plant set to begin by the middle of next year.

Argus reports that the two companies aim to build 15 biomass-powered plants by 2015 and are in talks with a Malaysian independent power producer to provide electricity to domestic and regional markets.

Malaysia's massive oil palm industry has huge potential as a biomass source. But the Malaysian government's call for oil palm companies to use biomass to generate electricity may be impractical without first creating a viable biomass policy, trade sources said. Malaysia already has a national biofuels policy in place to promote the use of palm-based biodiesel.

Malaysia's new feed-in-tariff (FIT) mechanism that is expected to be implemented next year could spur more investments in the domestic renewable energy sector, sources said. The Malaysian parliament is expected to pass legislation enabling the FIT mechanism to be launched in the second quarter of 2011.

The FIT programme will guarantee renewable producers a fixed tariff for power sold to the grid. The current proposal limits the program to 219 MW in 2011, increasing to nearly 1,000 MW in 2015. The bulk of new generating capacity to be installed under the program is likely to be based on biomass and mini-hydro.