22/08/2026 (The Edge Malaysia) - The Malaysian palm oil industry has no shortage of biomass, with over five million hectares of plantations generating almost 94.7 million tonnes a year. This includes fronds and trunks left in the field, as well as empty fruit bunches (EFBs), palm kernel shells (PKS), palm kernel cake and mesocarp fibre produced during milling.

On paper, that makes the sector an obvious candidate to contribute more to Malaysia’s energy transition, whether through renewable power, biofuel or carbon removal.

The reality is more complicated, as much of that biomass is already being put to use. Many palm oil mills already run on their own waste, leaving less surplus biomass available for other uses than the headline figure suggests, said Datuk Carl Bek-Nielsen, chairman of the Malaysian Palm Oil Council (MPOC) and vice-chairman and chief executive director of United Plantations Bhd (KL:UTDPLT).

“Waste is now equal to gold because that gold can be converted into energy,” said Bek-Nielsen.

He was speaking at a roundtable organised by The Edge and MPOC on Aug 12, at which senior industry figures gathered to consider what oil palm can offer beyond the fruit.

The roundtable, held at MPOC’s office, was held to discuss the opportunities that the industry could leverage amid the current energy crisis, triggered by the US-Iran war, which has spurred the search for alternative energy sources. At the same time, the pursuit of net zero targets — especially by big tech companies — and the introduction of carbon tax is driving up the demand for carbon credits.

The palm oil industry is able to fulfil some of the demand for greener energy sources and carbon credits through its biomass waste, while supporting the country’s climate targets. Malaysia’s National Energy Transition Roadmap aims to raise the renewables’ share of installed capacity in the coming decades.

Biomass and biogas currently contribute only a small share to the national grid. Electricity demand is rising as more power-hungry data centres come online, adding to the need for new sources of supply.

Already, various players are looking at how they can tap into the biomass waste from the palm oil sector to generate renewable energy, produce sustainable aviation fuel (SAF) and biochar, among others. There is also interest in turning unproductive plantations into solar farms.

The challenge, as Bek-Nielsen pointed out, is to ascertain how the biomass waste can be used for other purposes without jeopardising the palm oil industry’s productivity and sustainability targets. Navigating this would require careful planning and a clear idea of where the biomass waste is and what is the best value that can be derived from it.

Much of that biomass is already being put to use at the mills. EFBs are returned to the fields as mulch, thanks to their nutrient-rich profile. PKS and mesocarp fibre are generally burnt in boilers to generate steam energy.

“The challenge is how we move from self-consumption to extracting it out of our operations. The key thing here is how to make it commercially viable. There are various factors, like logistics, innovation and whether the price is right for us to generate the energy. We need to discuss what the enablers are, who the leaders of the collaboration are and what role each stakeholder needs to play in the industry for this to happen,” said Rashyid Redza Anwarudin, chief sustainability officer at SD Guthrie Bhd (KL:SDG).

The opportunities are there. In fact, SD Guthrie sees renewable energy as one of the company’s key growth drivers. The company has a renewable energy segment to drive its initiatives in this area, which include Large Scale Solar and biogas plants.

“Other than biomass, we are also looking at solar, because at the end of the day, another asset that we have is land. We are looking at areas that are no longer productive [and asking] if there is an opportunity to convert those into solar farms. It’s essentially a door for us to not just reduce our own emissions but also to support the nation’s agenda,” he said.

As a plantation company, SD Guthrie needs to ensure the land remains fertile for the future generations.

“Our priority is to maximise use in our own operations. Whatever is left, we will figure out what to do with it. And the value we get from taking it out has to beat the value we already get from using it in the mill,” said Rashyid.

FGV Holdings Bhd has also ventured into this area, with 28 biogas plants that convert methane from palm oil mill effluent (POME) into renewable energy for Tenaga Nasional Bhd and rural townships, while the PKS are exported to Japan.

“Most of our feedstock is received either from independent or organised smallholders … Not every estate we have is nearby, so we always need to make decisions [based on] where the mill is and if it makes logistical sense to do mulching, a compost plant or a biogas plant. All these are done on a case-by-case basis, and you will see a portfolio of different initiatives to tackle the climate agenda,” said FGV head of transformation Gideon Tan.

He framed the challenge as one of value rather than volume, arguing that Malaysia tends to default to the lowest-value uses of its biomass.

“There are at least four categories of what you can do. One is bioenergy or biofuel, and I include biogas in that. Then plant and animal nutrients. The third, which is less explored here, is biomaterials and packaging. And the fourth is biochemicals. We are usually in the first two … What we don’t really have is a policy that covers all these areas and asks what is actually good for Malaysia, rather than leaving each company to decide on its own,” said Tan.

Malaysia Biomass Industries Confederation (MBIC) president Datuk Leong Kin Mun, who has run national feasibility studies on the subject, estimated the gross figure of solid palm oil biomass waste in Malaysia to be at 90 million to 100 million tonnes a year on a dry basis.

But little of it can be simply gathered and sold because the PKS and mesocarp fibre are largely spoken for and perhaps only a third of the EFBs are accessible since the larger planters return their own to the field.

In this regard, the speakers called for a clearer view of what biomass waste is available in Malaysia and a strategy for how it can be tapped and for what purposes, based on the value provided.

“Malaysia has around 4.8 million tonnes of PKS and about a third of it is exported to Japan. The rest are used to power mills,” said Leong.

There remains some biomass waste that can be used for grid-connected biomass power plants or biogas plants, in which he sees great potential. He pointed out that the Sustainable Energy Development Authority (Seda) recently awarded about 136MW of the quota under the Feed-in-Tariff (FiT) scheme to 11 biomass power plants.

This has attracted two major players from the palm oil sector: a 50MW project submitted by a Johor-based plantation and another by a private miller in Nibong Tebal. “This is a good sign for the industry, especially as the FiT rate has increased from the previous 35 to 36 sen per kWh to between 44 and 45 sen per kWh,” said Leong.

Where renewable energy makes sense

One of the low hanging fruit is in renewable energy, particularly biogas. POME can be treated to capture methane for power or heat. And since 2014, the Malaysian Palm Oil Board (MPOB) has made biogas trapping a condition for building a new mill or expanding an existing one.

Even so, the take-up remains low, with MPOB counting around 135 mills fitted with biogas-capturing facilities, out of more than 450, so most still let the methane escape, according to its 2023 research journal.

Those that have installed such facilities tend to be the newer or larger operations while smaller mills, whose economics are tighter, have largely not done so.

Bek-Nielsen believes the technology should be eventually adopted by all mills. “All palm oil mills in Malaysia should have biogas plants. No more excuses — you build, or no permit,” he said.

The harder question is what happens to any power generated beyond a mill’s own needs. Most mills sit in the rural interior where the grid is weak, so a mill can have both the biomass and the means to generate and still struggle to sell the electricity.

Moving the biomass instead of the power is similarly challenging. Leong cited a study comparing a central plant collecting EFBs from 20 mills against upgrading a single mill in place. “On logistics cost alone, the difference is RM5 million to RM10 million a year,” he noted, and suggested upgrading existing mills into grid-connected biomass plants, rather than developing a standalone independent biomass plant in centralised locations, subject to the readiness of interconnected grid infrastructure.

One possible opportunity lies in the growth of data centres, particularly in Johor, which has drawn one of the region’s largest pipelines of such projects. These facilities need a large and reliable supply of power, much of it around the clock.

Leong believes the demand could be linked to the biomass available in nearby plantations. “Data centre investors came to Malaysia and asked for cheap electricity. At the same time, we have plenty of biomass. They can turn it into biochar, especially for the oil palm industry driven by smallholders,” he said.

His idea is to bundle the demand for cheap power with the demand for carbon-removal products, so that investors seeking favourable electricity deals would also commit to buying palm-based biochar credits.

Ensuring smallholders benefit too

The same issue of scale is one reason why solar farms are attracting the interest of industry players, particularly on marginal land. The proposal is not to replace productive oil palm plantations with solar farms, but to make use of land that is producing poor yields.

The idea takes on added relevance given the challenges facing the country’s smallholders who work a sizeable share of the nation’s oil palm land, whose average age is around 60 and many of their holdings are nearing the end of their productive cycle, with fewer of the next generation willing to take over. Some plots yield only 1.8 to 2 tonnes of crude palm oil per hectare — well below what a well-run estate produces.

For oil palm growers on marginal soils, low returns, rising labour costs and the difficulty of maintaining their plantations as they approach retirement age are making the economics increasingly challenging.

Solar could offer some smallholders another source of income, particularly where oil palm is becoming less viable, said Bek-Nielsen. “I really think solar energy is an area where the potential has not really been fully tapped.

“We’re just scraping the surface for smallholders. You imagine they have huge land banks. If now, the government gives them a more favourable rate, by all means do it. Give them special status and put up big solar farms so they can earn more money compared to running oil palm plantations, instead of having the hassle to chase these yields on marginal soils, which is going to be very, very difficult.”

National Association of Smallholders Malaysia (NASH) president Adzmi Hassan sees pooling marginal plots into a leasable land bank as a way to address the challenges faced by the ageing smallholder population, rather than simply as another renewable energy project. Consolidating scattered plots would also ease the certification headache, since under a group scheme, a single non-compliant grower can put the entire cluster’s sustainability certificate at risk.

He said the idea could also give growers on marginal land a form of pension through the income generated from solar projects. “We suggested to the government some sort of pension for smallholders. Unlike other sectors, such as government employees who have pensions or private-sector workers who have the Employees Provident Fund, we have nothing.

“So, in this way, when they reach retirement age and beyond, they can just relax. [They can receive, say,] RM3,000 a month from solar power. This is the way forward.”

On the conversion of biomass waste into other uses, smallholders also lose out. Although they own the palm trees, much of the residue is generated only after the fresh fruit bunches reach the mill, where the FFB leaves their hands.

The same disconnect runs through the wider discussion on biomass, biochar and carbon markets, where much of the value is captured downstream.

Most smallholders are left with oil palm trunk waste, which is produced after replanting at 25 years, and oil palm fronds after every harvest. This is where Adzmi believes biochar production could be a viable waste management solution that could generate income.

Dry biomass waste is burnt in low-oxygen conditions and turned into biochar. In the process, atmospheric carbon is locked into solid form for centuries, and the biochar can be used to enrich soil health.

“Simple biochar production would be a good idea. [It would be great] if this can be developed by the government, particularly for smallholders ... It could also be developed through cooperatives. These are new initiatives that we can look into and get support for,” he said.

One idea raised was a shared biochar plant, with Adzmi suggesting that growers could pool their resources to run a single unit instead of buying equipment individually. The plant could process residue from the surrounding farms and potentially generate additional income through carbon credits.

https://theedgemalaysia.com/node/815441