Implications of Interconnection with Tenaga Nasional Berhad (TNB) on the Operation of Palm Oil Mills

Ir Chee Meng Sang, MSc, DIC, BE(Hon), FIEM, PEng, MInstE, CEng
Director, JS Mahir Sdn. Bhd.


Small power producers are expected to

  1. Emphasise on power quality;
  2. Provide better supply reliability;
  3. Meet stricter environmental standards; and
  4. Achieve higher operating efficiency.

To meet these expectations, producers must use and pay for technology. The payback period for the investment will be longer than what palm oil millers are perhaps used to, and there will be pressures to keep production costs low. At the same time, new substation technologies will permit greater flexibility in plant operations without affecting grid stability. Grid interconnection will not then be more difficult than stand-alone operations.

The above are among the implications of grid interconnection. Rather than look at mill operations itself, this paper reviews some technical requirements. Several concepts and jargon familiar to power systems engineers are explained. It is argued that some practices taken for granted by utility companies may not be relevant to small producers – hence, the need for a high degree of understanding and co-operation between TNB and small producers.

There is insufficient awareness of the requirements associated with operating small generating sets in parallel with TNB’s network. Progress in this area has already been made overseas and investors and operators should learn from existing small generators. Grid-connected electricity generating plants using palm oil wastes are expected to be built to take advantage of the government’s policy to promote renewable energy. A co-ordinated approach must be taken to share experiences and establish a common platform to solve operational problems that arise once the power plants are in service. The formation of an association of small power producers is mooted.



The Ministry of Energy, Communications and Multimedia launched the Small Renewable Energy Programme or SREP in May this year. Through this programme, the government targets palm oil wastes as the major form of renewable energy (RE) making up the fifth fuel in Malaysia’s energy policies. RE will comprise 5% of our electricity supply, or some 700 MW, in the year 2005.

This paper was prepared from the experience of reviewing the draft Renewable Energy Purchase Agreement and the negotiations with Tenaga Nasional Berhad (TNB). It does not give details of the SREP programme as the Department of Electricity and Gas Supply (JBEG) has disseminated information on how to take part in it. It is useful, however, to list ten guidelines found in the programme as follows:

  1. SREP shall apply to all types of renewable sources of energy, including biomass, biogas, municipal waste, solar, mini-hydro and wind.
  2. Project developers will have to negotiate the Renewable Electricity Purchase Agreement with the relevant Utility, including the selling price on a willing-seller, willing buyer basis, based on take and pay.
  3. The RE electricity producer shall be given a licence for a period of 21 years, to be effective from the date of commissioning of the plant.
  4. RE electricity producers will be responsible for all the costs of the grid-connection, the relevant Utility system reinforcement (electric cables, transformer, switchgears and other protection equipment) and the necessary metering installation. The distribution grid interconnection shall be made at a voltage between 11 – 33 kV.
  5. The small RE power plant shall be located within a distance of 10km from the nearest interconnection point.
  6. No stand-by charges shall be levied. However, if back energy is requested by project developers, it will be charged accordingly with the prevailing tariff.
  7. Power generation through co-generation technology shall be given special preference.
  8. Maximum capacity of a small RE power plant designed for sale of power to the grid shall be 10 MW. A power plant can be more than 10 MW in size, but the maximum capacity that will be allowed for power export to the distribution grid will be no more than 10 MW.
  9. The small RE power plant must be ready for grid-connection within 12 months from the date of approval for such grid connection. This is applicable for existing plants that wish to connect to the grid. However, in the case of proposals for setting up new RE power plants (or where "re-powering" is proposed) that require the installation of new boilers or turbo-generator systems, the plant shall be commissioned within 24 months. The stipulated period of construction until commissioning shall be counted from the date of signing of the Renewable Electricity Purchase Agreement (REPA) between the developer and the utility.
  10. The RE power plant must meet all environmental regulations set by the Department of Environment (DoE), and the developer of the project is responsible for obtaining the necessary approval of DoE, and any other statutory approvals required.


Learning from the IPP Experience

To know what to expect from the new relationship with TNB, we can learn from the independent power producer (IPP) experience. Indeed, TNB admits that the Renewable Energy Purchase Agreement has been drafted based on the Power Purchase Agreements (PPAs) between it and the IPPs. It is inevitable that some of the terms of the agreement should apply only to the large power producers. Further negotiations should be held to cater for site-specific issues and to drop certain provisions that do not apply to the small producers.

To begin with, the existing IPPs in Peninsular Malaysia use gas turbines (GTs) which are fired by natural gas. Two of them are in simple cycle mode while the other three are combined cycle plants which use waste heat boilers to extract energy from the flue gas to produce steam to turn steam turbine generators. (Figure 1.) The biomass plants supplying steam and power to the mills will burn fibres, shell, empty fruit bunches (EFB) or gas from palm oil mill effluent (POME). IPPs and the small power plants are quite different in terms of technology. A comparison between them is given in the appendix.

The PPAs define the relationships between TNB and the IPPs. JBEG then came up with the Grid Code that provided the technical requirements of interconnection. In the case of small power producers, a new Distribution Code may similarly determine the paralleling requirements.

Foreign engineers, advisors and operators played a big role in the development of Malaysian IPP projects. To safeguard their investments, the lenders forced IPPs to engage international O&M companies which had to enter into technical services agreements with foreign service providers or OEM. But these companies must have a programme to substitute foreign staff with locals after 5 years or so. However, even after 8 years, some existing and new IPPs still use foreign engineers when there should be enough local expertise.


Power Plant Operation in a Typical Palm Oil Mill

On the other hand, the operation of power plants within a palm oil mill is not complex. These plants are staffed by local steam drivers and engineers. There’s no reason why the same staff cannot run the grid-connected power plants.

Take the case of a typical 60-tonne FFB (fresh fruit bunches) per hour mill operating 20 hours a day (Figure 2). A total of 23% by weight EFB (Empty Fruit Bunches) or 13.8 tonnes of EFB per hour is sent back to the estate to mulch in the fields.

The fuel used in the power house comes from:

The power requirement of the mill is 15-17 kW per tonne FFB or 1,020 kW. This is typically met by a non-condensing turbine using steam with a pressure of 21 bar gauge and exhausting at 3 bar gauge. The size of the generator is about 1.2 MW.

When the mill is not in service, a diesel generator takes over to supply security lighting and domestic supply. Two units are usually installed: one of 800 kW and another of 250 kW. In a mill break down which may last a while, the large diesel generator will be operated to supply power to some plants in the nut station, effluent plant, water works, lighting etc.

The diesel generating sets are not required if the mill is close to TNB’s grid and is connected to it.

New schemes for grid-connected power plants under the Small Renewable Energy Programme involve the construction of boilers burning EFB and producing up to 10 MW of power which can be sold to TNB. It’s envisaged that such a plant will serve several mills. Another concept is to produce methane gas from POME, and burning the gas in boilers, gas engines or gas turbines. It has been shown that such plants can meet the power and steam needs of the mills and still allow power export.

Two Terms used in Power Utilities

Let us turn our attention to two important terms contained in the proposed purchase agreements which impact on the viability of business of power generation and govern the design and operation of grid-connected generating plants.


Dispatch refers to an instruction or signal communicated to the power producer by the control centre directing (manually or automatically) the plant to commence, increase, maintain, decrease or cease the delivery of electricity into TNB’s system.

Renewable energy plants should not be subject to dispatch unless in an emergency. This is because of their priority over fossil fuel power plants. Hence, the power producer is expected to have the right, and not the obligation, to sell all the energy generated, while TNB has the obligation to purchase all the energy.

What it means for the Seller is that it can sell all the energy it can make available. Unlike an IPP, which earns revenue by making its capacity available, the small power producer is not paid for its capacity. It can stop producing when, say, fuel is not available. On the other hand, TNB will be required to take all the energy produced even though there are situations it can get it from the grid system.

This is the "Take-and-Pay" concept. While not objecting to this principle, TNB is less agreeable where the plant capacity is greater than 10 MW. On the other hand, millers do not seem to understand this important concept.

Prudent Utility Practices

This seemingly innocuous term cover all the practices, methods and standards generally followed by the electric utility industry in Malaysia with respect to the design, construction, operation and maintenance of electricity generating equipment, and equipment necessary to receive and utilise fuel, and which practices, methods and standards generally conform to operation and maintenance standards recommended by the plant’s equipment suppliers and manufacturers.

The term was used since the first IPPs for want of a better phrase to refer to acceptable norms in the industry. It cannot be enforced in practical terms. If one says to obey the laws of Malaysia, one can read up the laws of the country and comply with them. But would you expect to know what to do when you’re asked to follow the good practices of a place? You’d first want to find a "good practice" code and know what is entailed by good practice. Likewise, prudent utility practice must be in evidence. Moreover, the small power producer is not a power utility just as a large consumer is also not one. On the other hand, the Malaysian Grid Code has served as a guide to govern the relationship between TNB and IPPs. The new Malaysian Electricity Distribution Code, which establishes guidelines for distributors and embedded generators connecting to its distribution system of 33kV voltage and below, may be used by the small power producer.

By being subjected to prudent utility practices, its obligations become rather onerous and the costs to comply with the requirements go up. Among others, these relate to testing, supply of ancillary services, re-connection, and maintenance.


Implications on Operations of Palm Oil Mills

There are five key areas where the interconnection with TNB will affect the operation of palm oil mills and of the industry itself. These are:

Quality of supply and operations

The power purchase agreement spells out the electricity characteristics the generators must have. Whether or not "Prudent Utility Practices" are followed, the modern power plant, however small, must adopt world-class standards in producing quality power. In terms of good operation practice, there will be emphasis on costs and revenues. Plant availability and reliability will be kept high through good maintenance using concepts such as reliability centred maintenance or RCM.

In a cogeneration plant visit, the author observed two plant trips. This was apparently an accepted fact of life and quite unlike what utility owned plants were expected to exhibit.

Human Resource

During the author’s tenure at the National Electricity Board (NEB), the predecessor of TNB, formalised on-the-job training was not emphasised. As a shift engineer, he was expected to receive training at a simulator. However, each time his turn came, he was not released because, ironically, he was rostered for shift duty. In those days, Mechanical Engineers were permitted to carry out switching up to 275 kV only after 3 years of service and without formal training. This was a far cry from what the IPPs do today.

Only competent people should operate the power plants in palm oil mills. There should therefore be greater stress on training. The industry can perhaps collectively invest in power plant simulators or avails itself of TNB’s existing training facilities.

The tendency for IPPs and bankers to use foreign engineers to run power plants was referred to earlier. There is no reason why small power producers should adopt this practice. No doubt, foreign bankers will insist on engaging foreign service providers but Malaysians have no reason to take such a highly untenable position.

Environmental Compliance

TNB and the IPPs are required to carry out Environmental Impact Assessment (EIA) studies and comply with strict environmental regulations. In fact, some power plants have already obtained ISO 14000 certification for environmental management.

It makes sense for the small power producer to meet and even exceed such standards, even though power plants below 10MW are exempted from an EIA. Continuous emissions monitoring should become the norm. Many of the anti-pollution systems now in use are imported. This means also that the cost of setting up the power plants will be high and promoters of biomass plants should consider this fact when negotiating the tariffs with TNB.

Use of Automation and Technology

Depending on their age, many power plants operate predominantly on manual mode. In these days of precision equipment and sophisticated processes, it’s difficult to imagine how we can still do things manually. In fact, only a skeleton staff need to operate some power plants whereas hundreds were required previously. We’ve got used to automatic data logging and trouble shooting, and energy management programmes which are close to being expert systems. Plant information systems are readily available because prices are very low. Due to the emphasis on efficiency, these systems can be made capable of computing costs of production so that operators can modify operation patterns to achieve lower costs. Real time data can now be collected, validated and aggregated to be transformed into business information. In short, plant information systems can improve the return on investment through

The quality and integrity of power supply in the grid is sensitive to the output of generating plants. TNB will rightly insist on certain standards in the equipment used. It is envisaged that technology of interconnection facilities will advance so that there is as little impact of one on the other.

New technology in HVDC interconnection solves some of the existing problems. It offers new levels of performance caused by voltage variations, harmonics, etc. Using an HVDC link, for example, the disturbances emitted by the load will be isolated to the station connected to the load. Also, it may be cheaper to add new capacity by DC, as a DC cable needs less space than an AC overhead line, and can carry more power than an AC cable. Laying an underground cable is easier, a cable does not change the landscape or devalue adjoining property, and it is possible to use existing permits. This may not necessarily be the way to go, but new ways of doing things should certainly be explored.

New Business Opportunities

Lastly, the ability to sell excess power to the grid is a new business opportunity that the palm oil sector should seize. The plantation sector is a very seasonal business while power generation offers steady income. Renewable energy should become a more acceptable form of energy based on the government’s target to achieve 5% of grid-connected power by 2005.


Conclusion – Need for Mutual Understanding

Discussions with millers and TNB have revealed that there is insufficient awareness of the requirements associated with operating small generating sets in parallel with TNB’s network. While the government and TNB have shown their commitment to make the SREP programme work, there is still a wait-and-see attitude before investors rush into it. Progress in this area has been made overseas and it will help if investors and operators learn from the few existing small generators in Malaysia or elsewhere.

It is timely to form an association of small power producers. The government and TNB can heighten their commitment to renewable energy usage by supporting such a move. A co-ordinated approach to share experiences and establish a common platform will put generators in a better position to deal with TNB to sort out operational problems that are bound to arise.



I wish to thank Mr Ravi Menon of the Malaysian Palm Oil Board for giving valuable feedback in the writing of this paper.


About the Author

Ir. Chee Meng Sang, 44, is an energy consultant and has previously worked in two large thermal power plants. Since 1992, he has been involved in various aspects of the IPP development in Peninsular Malaysia. He recently advised MPOB in negotiating the Renewable Energy Purchase Agreement.

An engineering graduate of the University of Malaya in 1980, Ir Chee has an MBA from Imperial College London. He is a Grade One Steam Engineer and Technical Advisor in the Manufacturing Support Component of the Malaysian Industrial Energy Efficiency Improvement Project. Ir Chee is an active member of the Institution of Engineers, Malaysia, being a Fellow and Executive Committee Member, as well as Chairman of the Energy Task Force. He is also a member of the UK Institute of Energy.

Ir Chee can be contacted at


Implications of Interconnection with Tenaga Nasional Berhad (TNB) on the Operation of Palm Oil Mills


Differences between Small Power Producers and an Independent Power Producer (IPP)

The government has announced a 5% target of grid-connected power to be supplied from biomass-fuelled power plants in the year 2005. The necessary legal and commercial framework has been prepared so that investors will find it viable to build and operate these plants.

Biomass projects are different from IPPs in the following manner:

  1. The major IPPs in Malaysia use fuel gas brought into the plant by pipelines. Petronas Gas has developed an extensive pipe network with the Peninsular Gas Utililisation project (PGU). Natural gas is processed in its plants at Kertih. All IPP projects require a long term gas supply agreement which give the IPP an assurance on availability, pricing and heating value, the three most important elements of fuel supply. The price of gas is controlled by the government and is currently subsidised. A price review is expected at the end of 2001.
  2. On the other hand, biomass fuels do not enjoy the predictability offered by gas. It is difficult to ensure a long-term supply of oil palm wastes. Its availability depends on the generation of these wastes, which in turn is also dependent on the economics of palm oil production. This is a big variable. There are emerging uses of wastes, which could alter the pricing of these fuels.
  3. Because of the technology used by IPPs (mostly combined cycle gas turbines or CCGT), they are very reliable (availability is as high as 94% per annum). The maintenance regime is ‘scientific’, that is, gas turbines have to be inspected and overhauled at predetermined levels where parts are changed rather than serviced. The capacity factor (similar to utilisation rate) of these plants can be very high – Malaysian IPPs usually plan for 80%. These are advantages exploited by gas turbine manufacturers so that they become the most popular generators in use for private power. Prices in US$ terms have actually fallen this past decade. Finally, IPP plants are designed to be dispatched. This means that TNB’s control centre (or Grid System Operator) dictates when or how much they are run. Even though part load efficiencies are low and hence the cost per unit generated higher, the power purchase agreements permit larger energy payments per unit when the plant is run at lower loads. Payments are also made for start-ups beyond a number of free starts.
  4. Biomass power plants are thermal plants with boilers and steam turbine generators. Utility-owned thermal plants are technologically proven and use oil, coal or gas - fuels that are easily handled. The power utility has usually accumulated years of experience in operating such plants. Biomass power plants require greater maintenance attention, especially in the areas of fuel handling and emissions control. Technology is less proven. The use of the superior fluidised bed boilers means higher capital costs and more difficulty in securing funding, and hence not suitable for Malaysia. Compared to IPP plants, operational assumptions have to be modified as follows:

  1. Commercially, IPPs get paid by making capacity (MW) and electrical energy (kWh) available. Even if their plants are not dispatched, they will still be paid through the capacity payments structured to recover the investment costs. The biomass power plants are not dispatchable because they are paid on the basis of electrical energy delivered. If they are not run, the investor will not be paid. Moreover, the ability of the plants to run is dependent on the supply of fuel. The supply of palm oil wastes is not guaranteed.