ESCO Support Program
Policy measure

According to van den Akker (2008), the Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP) was initiated by the Government of Malaysia in 1999 to improve energy efficiency in Malaysia’s industrial sector. The implementing agency of the project was the United Nations Development Program (UNDP) on behalf of the Global Environment Facility (GEF). The Pusat Tenaga Malaysia (PTM, Energy Centre) was appointed by the Ministry of Energy, Water and Communications (MEWC) to implement the project on its behalf. Funding and support for the programme is provided by the GEF, UNDP, the Government of Malaysia and the private sector.


Component 5 of the MIEEIP, the ESCO Support Program, aims to (van den Akker, 2008):

  • “To develop a suitable institutional and legal framework for ESCO activities in the country.
  • To develop institutional arrangements that will promote ESCOs to the industrial sector.
  • To assist the local ESCOs in making bankable project proposals, business plans, and in securing financing arrangements for their clients.
  • To advice ESCOs in defining the feasible products and services that they can offer and evaluating the risks associated with performance contracting.”

In total, USD$ 167,789 was spent on Component 5 (van den Akker, 2008).

Implementation

“In an energy performance contracting (EPS) scheme, it is the task of the (ESCO) to perform an energy audit and to propose energy-saving options and measures; the ESCO will then make the investment (on a loan arrangement with a financial institution. During project implementation, the ESCO will be adequately paid for its services from the energy saved and the ESCO will make monthly repayments to the bank.


MIEEIP has developed the tools for ESCO development and capacity building. The Master Energy Services Agreement (MESA) was drawn up by the MIEEIP Team at PTM as a sample document to assist energy service companies and industries in the implementation of energy efficiency activities by setting out the relevant procedures and obligations of both parties.” (van den Akker, 2008) 


According to APERC (2003), 32 ESCOs have registered with the Malaysian government of which four have been selected to conduct energy efficiency technology demonstration projects in energy-intensive industries (APERC, 2003).

Challenges

According to van den Akker (2008), “most industries, while being convinced of the benefits of energy efficiency measures, have been hesitant to provide capital investment for such efforts. [Moreover,] while most ESCOs [in Malaysia] are capable of conducting energy audits, currently only a few of them are ready to move further from energy audits to energy performance contracting."

Outcomes

The following outcomes have been identified:

  • According to van den Akker (2008), MESA has thus far only been used and tested once, signed between Heaveaboard Bhd as the host site and Mensilin as the ESCO. “The MESA has since been reviewed after identifying some weaknesses in its original version of the MESA. Apparently, one issue that MESA does not adequately address, for example, are details in project implementation.”

  • “A directory of Malaysian ESCOs was published in 2003, which also included various materials on energy efficiency promotion and services that ESCOs can provide. The directory was distributed to some 1,000 recipients. The directory lists out only 28 ESCOs. These are the more established ones in the country. Their services and specialization cover energy audits, energy management, energy efficiency training, energy efficiency retro-fittings, energy performance contracting, and renewable energy solutions.” (van den Akker, 2008)

References

van den Akker, J., 2008. Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP): Final Evaluation. Available at: www.undp.org.my/uploads/mieeip%20final%20evaluation%20report%20jan%202008.pdf.