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This article first appeared in Enterprise, The Edge Malaysia Weekly on February 10, 2020 - February 16, 2020

If you extract palm oil from a fresh fruit bunch, you are left with empty fruit bunches and a fluid known as palm oil mill effluent (POME). While these are typically viewed as waste, nothing could be further from the truth.

These materials — like other types of organic waste — can be turned into bio-based products that are in high demand, particularly in the areas of bio-energy, bio-agriculture, eco-products and bio-chemicals.

“We have a lot of technology and innovations that centre on how to use biomass as a feedstock and for different applications. Energy is just one example,” says Datuk Leong Kin Mun, president of the Malaysia Biomass Industries Confederation (MBIC).

“We have BioCNG [biogas-based fuel as an alternative for compressed natural gas] and wood pellets made from sawdust, which is a waste product from logging, and can replace coal for energy generation.”

Many companies are already emerging in this area. For instance, biogas company Green Lagoon Technology Sdn Bhd raised more than RM800,000 on an equity crowdfunding site in 2016 and successfully exited in 2019. Fibromat Bhd, which produces and distributes erosion control products made from biomass, was listed on the Leading Entrepreneur Accelerator Platform (LEAP market) in March last year. Several companies have invested in operations to manufacture palm pellets for the export market.

According to the National Biomass Strategy 2020 blueprint, Malaysia is projected to produce up to 80 million tonnes of biomass annually by this year, with the majority from the palm oil sector. The MBIC points out that the biomass industry has the biggest potential to drive the circular economy agenda in the country. This includes the six million tonnes of food waste generated annually that end up in landfills.

The demand for bioenergy is rising, especially from countries that want to wean themselves off their reliance on coal, such as Japan, China, South Korea and most of the countries in Europe. Some of these countries are already importing wood pellets, palm kernel shells and empty fruit bunches from Malaysia, Indonesia and Vietnam. Northport (M) Bhd established a biomass logistics hub in Port Klang in 2018 to cater for this demand from the North Asian countries.

Of course, traceability of this biomass — making sure it comes from waste streams — is something that these countries scrutinise. According to the MBIC 2019/2020 review, sustainability and chain of custody requirements, as well as the Roundtable on Sustainable Palm Oil certification, are some of the requirements explored by importing countries.


Opportunities in the biomass industry

One of the lowest-hanging fruit in the biomass industry is bioenergy, according to Leong. This could be the production of biogas by breaking down organic waste, production of BioCNG and pellets or briquettes that are burnt for energy.

“Last year, the export economic value of palm oil and palm-based products was RM66 billion. But only 10% [of the tree] is palm oil. If you want to pick low-hanging fruit [for the remaining 90% of the tree], you can [use the biomass waste] for fuel switching, which means opting for green fuel instead of fossil fuels,” says Leong.

For palm oil mills, this means using electricity generated from biomass waste rather than electricity from the grid, which could be generated from coal.

This can also be applied to the rubber industry. In August last year, the Malaysia Rubber Export Promotion Council committed a matching grant to qualified rubber products exporters to install biomass energy systems. Leong, who sits on the technical committee to review grants, says it has received some proposals.

“They have good business cases. Conservatively, I would say their payback periods can be three years,” he says.

Another potential market is in bio-agriculture, which includes using biomass to create bio-fertilisers and animal feed. For instance, several companies are now using black soldier flies to manage food waste and create animal feed or organic fertilisers out of the larvae.

The rising demand for organic produce and proliferation of organic farms in Malaysia are good news for this market. It represents a good opportunity for palm oil millers, whose waste materials — empty fruit bunches, POME and decanter cake — can be composted and made into bio-fertilisers.

“You can use bio-fertilisers to plant Musang King durians, for example, where it has proved to be very effective,” says Leong, adding that one can make bio-fertilisers by mixing empty fruit bunches and POME with microorganisms.

Meanwhile, eco-products include bio-engineering, bioplastics and 3D printing filament. According to Leong, bio-agriculture and eco-products are decent business models for small and medium enterprises (SMEs) due to their shorter payback period compared with biomass power plants, which are more capital-intensive.

“If you are a bit more entrepreneurial, you can consider creating bio-food packaging products. It can be made from rice husks or even corn starch,” he says.

Biochemical products, which cover bio-sugar, zoolite and catalysts, present a good business case for SMEs because they are higher on the value chain. But they are capital-intensive and take the longest time frame for commercialisation, according to Leong.

“In this area, you can consider bio jet fuel. AirAsia has expressed interest to use this, but whether we can produce it locally is a tall order. Airlines are using kerosene-type fuels at the moment,” he says.


Challenges and solutions

A huge problem with the biomass industry is in the procurement of feedstock. If the oil palm plantation company, for instance, does not want to sell its biomass waste at a good price, the business model will not be viable.

“It depends on your relationship with the feedstock owners, the pricing of the biomass and the economic strategy,” says Leong.

A company wanting to start a biomass business will have to ensure it can get a consistent supply of feedstock at the right price. On the other hand, “the oil palm plantations can do it themselves. But some do not want to because it is capital-intensive. In this case, the best method is through a joint venture,” he says.

The government has been looking at how it can turn waste into a commodity to resolve this situation, he adds. “If everyone can buy or sell [biomass waste] easily, it will be a game-changer. I wish to see this happen and I also hope the government can play a more proactive role in unlocking the opportunities for bio-based products in Malaysia. These companies [in the biomass sector] need a national track record before they can sell overseas.”

Leong suggests that the government create green procurement opportunities to spur the industry. “If you have a policy that government-related corporations can only buy bio-based products, it will stimulate the economy. In private industry, big companies are becoming role models. As part of their sustainability reporting, they need to look at green procurement practices,” he says.

Entrepreneurs who want to enter the biomass sector can obtain government grants and incentives. Some have observed that it is difficult to get loans from banks because the financial institutions do not understand their business models. This is true for some projects, such as biomass power plants or waste-to-energy plants, which have had bad track records in the past.

“But under the Green Technology Financing Scheme, we have precedence from the projects that were approved to finance biogas, biomass pellet and fuel switching projects. Of course, right now, if you talk to bankers about bio jet fuel, nobody might know [how to value it],” says Leong.

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