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The Energy Policy of Malaysia is determined by the Malaysian Government, which address issues of energy production, distribution, and consumption. The Department of Electricity and Gas Supply acts as the regulator while other players in the energy sector include energy supply and service companies, research and development institutions and consumers. Government-linked companies Petronas and Tenaga Nasional Berhad are major players in Malaysia's energy sector.

Governmental agencies that contribute to the policy are the Ministry of Energy, Green Technology and Water, Energy Commission (Suruhanjaya Tenaga), and the Pusat Teknologi Hijau Negara, formerly known as Pusat Tenaga Malaysia). Among the documents that the policy is based on are the 1974 Petroleum Development Act, 1975 National Petroleum Policy, 1980 National Depletion Policy, 1990 Electricity Supply Act, 1993 Gas Supply Acts, 1994 Electricity Regulations, 1997 Gas Supply Regulation and the 2001 Energy Commission Act.

Policy Overview
The Ministry of Energy, Green Technology and Water has identified three principal energy objectives that would be instrumental in guiding the development of its energy sector.

To ensure the provision of adequate, secure and cost-effective energy supplies through developing indigenous energy resources both non-renewable and renewable energy resources using the latest cost options and diversification of supply sources both from within and outside the country.

In pursuit of the supply objective, policy initiatives, particularly with respect to crude oil and natural gas, we have aimed at both extending the life of domestic non-renewable energy resources, as well as diversification away from oil dependence to include other forms of energy sources.

To promote the efficient utilization of energy and discourage wasteful and non-productive patterns of energy consumption.

The policy's approach to realize this objective is to rely heavily on the energy industry and consumers to exercise efficiency in energy production, transportation, energy conversion, utilization and consumption through the implementation of awareness programs. Demand side management initiatives by the utilities, particularly through tariff incentives, have had some impact on efficient utilization and consumption.

Government initiatives to encourage cogeneration are also aimed at promoting an efficient method for generating heat energy and electricity from a single energy source.

To minimize the negative impacts of energy production, transportation, conversion, utilization and consumption on the environment.

The environment objective has seen limited policy initiatives in the past. All major energy development projects are subjected to the mandatory environmental impact assessment requirement. Environmental consequences, such as emissions, discharges and noise are subjected to the environmental quality standards like air quality and emission standards. However, Malaysia's environmental standards are not as stringent as in many developed countries. This is due to the assumption that its environment has immense assimilative capacity and can still serve as a sink for further development.

Renewable energy policy
The Malaysian government is seeking to intensify the development of renewable energy, particularly biomass, as the 'fifth fuel' resource under the country’s Fuel Diversification Policy. The policy, which was set out in 2001, had a target of renewable energy providing 5% of electricity generation by 2005, equal to between 500 and 600 megawatt (MW) of installed capacity. The policy has been reinforced by fiscal incentives, such as investment tax allowances and the Small Renewable Energy Programme (SREP), which encourages the connection of small renewable power generation plants to the national grid.

The Small Renewable Energy Program allows renewable projects with up to 10 MW of capacity to sell their electricity output to TNB, under 21-year licence agreements. Numerous applications for the program have been received, mainly involving biomass, and of these over half are for palm oil waste. In 2005 there were 28 approved biomass projects involving the installation of 194 MW of grid-connected capacity. There were also four approved landfill gas-based projects, with 9 MW of capacity, and 18 mini hydro-electric projects offering 69.9 MW of total capacity.

Energy consumption
Power generation capacity connected to the Malaysian National Grid is 19,023 MW, with a maximum demand of 13,340 MW as of July 2007 according to Suruhanjaya Tenaga. Total electricity generation for 2007 is 108,539 GW·h with a total consumption of 97,113 GW·h or 3,570 kW·h per capita. The generation fuel mix is 62.6% gas, 20.9% coal, 9.5% hydro and 7% from other forms of fuel.

In 2007, the country as a whole consumes 514 thousand barrels (23.6 million tonnes) of oil daily against a production of 755 thousand barrels (34.2 million tonnes) per day.

Energy efficiency
Industrial consumers use about 40% of primary energy, as well as about 55% of the electricity (which consumes about 38% of primary energy) used in Malaysia. This means that industrial consumers use about 60% of the total energy used in Malaysia. The Malaysian Energy Commission has set up various energy efficiency programs.