Preliminary Study on Demand Side Management (DSM)

What is the project about?

At the United Nations Framework Convention on Climate Change (UNFCCC) Conference of Parties - 15 (COP15) in Copenhagen, Malaysia has pledged to voluntarily reduce carbon dioxide (CO2) emission intensity of Gross Domestic Product (GDP) up to 40% by 2020 as compared to 2005 levels, conditional on financial and technological assistance from developed countries. In line with this pledge, the Government has introduced many green and energy efficiency initiatives, while enhancing the nation’s energy security and sustainability.

Challenges in Demand Side Management

The current practice of implementing ad-hoc basis of EE initiatives unable to reduce energy usage in a holistic manner. A robust approach is needed to sustainably reduce energy consumption that cut across the entire energy spectrum.

The total energy demand is escalating every year and the Government is finding all means to increase the supply as a way to match the demand. This leads to planting up of new power plants in order to meet the continuous demand. Thus, DSM is a better tool to control the rising demand of energy, delay the construction of new power plants, reduce GHG emission and prolong the depleting period of the countries’ resources. In future, Malaysia is anticipated to be a net importer of gas and oil and DSM can delay such situation.

What do we hope to accomplish?

The project will support the country’s long-term efforts on energy demand which will include electricity and thermal energy sectors by developing the DSM masterplan as stated in the 11 Malaysia Plan. DSM has been identified as one of the SCP strategies (Strategy B3) and assist Malaysia in achieving the 40% reduction in GHG emission intensity of GDP compared to 2005 level.

Under the 11MP, EPU will initiate a study on DSM masterplan which covers the whole spectrum of the energy sector. DSM is a vital tool to reduce peak electricity demand impacting the overall load on an electricity network. This will have beneficial effects including mitigating electrical system emergencies and increasing system reliability. It will also result in less dependence on expensive imports of fuel, reducing peak power demand and minimising harmful emissions to the environment.  The scope of the new DSM master plan will include the electric and thermal energy, including usage in the transport sector. During the Eleventh Plan, measures will be taken to identify potential improvements and appropriate approaches to ensure efficient use of energy in buildings, industries and households.

These measures include increasing competencies of energy service providers, especially Registered Electrical Energy Managers, and promoting the implementation of Energy Performance Contracting for government buildings. User awareness will be enhanced on energy labelling and the availability of standards such as ISO 50001 for buildings and MEPS for appliances will be promoted. Other specific measures will include introduction of Enhanced Time of Use (EToU) tariff scheme and gradual abolishment of the Special Industrial Tariff for energy intensive industries. Infrastructure related initiatives such as implementation of smart grids and highly efficient co-generation technologies for combined heat and power system will be promoted.

In response to this shortcoming, prior to EPU’s comprehensive study on DSM, a preliminary study to investigate the current baselines (completed, on-going and planned initiatives) nationally and abroad, identify scope and the relevant areas and finally to develop the comprehensive terms of references and consultancy document in the form a complete tender document inline with the Government of Malaysia’s format.  The scope of the preliminary study are as below:

Type

Definition

Electrical Energy

Covers electricity consumption by commercial, residential and industrial sectors. (Activities not cover by NEEAP)

Thermal Sector

Primarily  used by the industrial sector for manufacturing processes that requires in-house electricity generation and hot water production which utilises but not confined to boilers, generators and heat recovery systems.

Transport Sector

Covers land, water and air transport that may include public transport, mass transport, commercial transport (for freight and logistics) and private vehicles but these are by no means exhaustive.

 

Another possible combination can also be in the form of clustering of sectors as per the National Energy Balance (NEB) i.e. commercial (electricity, thermal and combined heat and power (CHP), industrial (electricity, thermal and CHP), residential (electricity-based consumption) and transport (which consumes electricity and petroleum products).  Nevertheless, the final scoping of the preliminary DSM study will be explored further during the inception phase.

Project objectives, outcomes and outputs/activities

The Project aims to provide baseline understanding of the current state of energy demand side of Malaysia. The outcome targeted is baseline studies on DSM initiatives, focus and boundary setting as well as framework activities for a full-fledged DSM study. There are 3 specific Outcomes as follows:

 

In the national context of Malaysia, demand side management will lead to capturing the full potential for low carbon green growth where there is a need to use policies and actions across a wide range of areas to correct existing market and policy failures and gaps, particularly those arising from environmental externalities and inadequate incentives for innovation. The strategy of this Project is to apply the precautionary principle within the energy industry where costs are relatively small and the likely benefits and risks avoided are significant. In preparing the preliminary DSM document, The Project will also strengthen the capacity of policy makers and technical know-how of stakeholders towards low carbon development whilst at the same time undertaking concrete actions that will deliver emission reductions during the life of the project.

The Project promotes inter-sectorial cooperation, to ensure effective engagement across services and technology areas and efficient use of national resources. In particular, planning of the main energy end-use sectors (transport, electricity, thermal users) requires good inter-sectoral cooperation if resource efficiencies are to be improved as stated in the 11 Malaysia Plan, as stated above.  A full-fledged DSM project will lead to the efficient use of energy and promote energy efficiency which is in line with Country Programme Action Plan Priority 2a Enhancing national resilience to climate variability and change.  The key focus will be on integrating sustainability principles, such as sustainable production and consumption and eco-efficiency in policy formulation and systems across various levels of government (federal, state and local authorities), in order to enhance resilience and increase policy coherence and coordination. The programme will also interlink policy on cross-sectoral climate change mitigation measures, such as pursuing low carbon cities, energy efficiency in building and industrial sectors.

Mainstreaming Gender and Vulnerable Communities Issues

The project shall endeavour to ensure women, children, indigenous and the under privileged communities will be consulted and participating actively in project activities, where relevant.  EPU may seek advice from UNDP and other interest groups to ensure issues related to gender and vulnerable communities are included during formulation and implementation.  Where applicable, gender and community issues will be considered throughout the project implementation, including at the Inception Phase as women and men, as well as vulnerable communities can exhibit distinct differences in their perspectives and priorities concerning environmental quality and impact as well as access to energy services.  In this regard, gender and vulnerable community perspectives, will, when possible, be incorporated during policy formulation by ensuring consultative processes include women, children, indigenous and community organizations as well as gender and specific community subject matter experts.

The project will also, where possible, ensure the representation of women and vulnerable communities during workshops and trainings as well as public awareness programmes, as supporting their role in educational activities will help these groups access the knowledge and skills they require to be active participants in other initiatives which address climate change. Where possible, their engagement throughout the project should be reported to monitor that their perspectives have been included to achieve the outcome of the project.

South-South and Triangular Cooperation (SSC/TrC)

Upon the successful implementation of the project, it helps in the promotion of success stories and best practices between South countries, where the project allows for the exchange knowledge, know-how and expertise between developing countries, communities, NGOs, businesses, academic and government institutions. Malaysia’s development experiences and expertise in areas should be shared especially on areas where it has a comparative advantage. The project can also lead to transfer of south-south technologies on demand-side management related to electricity, thermal and transport sectors.  Malaysia’s lesson will lead to further strengthening South-south cooperation by broadening and intensifying its scope through enhanced regional and sub-regional cooperation, pooling of resources in joint collaborations thus, strengthening trade and investment as well as the position of the South in multilateral negotiations and organizations. Such partnership would then contribute to ensuring a more effective participation of South countries in the global economy and accelerate the pace towards the achievement of the Sustainable Development Goals (SDG)

Sustainability and Scaling-up

The outcomes of the Project integrate specific activities that guarantee their replicability and/or sustainability. It will advance energy planning and management for energy security and mitigation of GHG emissions for Malaysia.   It marks an important paradigm shift for Malaysia towards efficient management of energy resources. This initiative will give due emphasis to the demand side for a balanced management of the entire energy spectrum.  The preliminary DSM study will move towards the implementation of the comprehensive DSM master plan by EPU where issues on policy framework, regulatory and sustainable financing will be also explored.

 

Who finances it?



 

  Donor Amount (USD)
2016 Total resources required:             
$480,000
  GCS including GMS                 
$480,000
  In-Kind Contributions $100,000
     
     
     

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