KUALA LUMPUR: Due to adequate reserve margin at 30 per cent and flat economic fundamentals, the power sector does not see much growth in 2018 even though the distribution side is still keeping pace with supply connections to new areas and new demands.
Structural changes in the economy, depreciation of the ringgit, as well as increases in electricity tariff, have dragged electricity demand and capped earnings.
To recap, for the first nine months ended Sept 30, 2018, utility giant Tenaga Nasional Bhd
(TNB) made a net profit of RM3.86 billion or 68.01 sen per share, on the back of RM37.85 billion in revenue.
It has proposed a dividend of 30.27 sen per share.
While the world's economy is projected to grow 3.9 per cent in 2018, growth on the home front has been revised downwards with the World Bank and International Monetary Fund projecting Malaysia's real gross domestic product at 4.7 per cent compared with a higher forecast earlier.
Hence, for the power sector to enter the new year with changes in policies and regulations, as well as newly introduced programmes and schemes, just to ensure Malaysia is kept safe environmentally and economically, will be something monumental moving forward.
While the government aims to accomplish three agendas via the Malaysia Energy Supply Industry (MESI) 2.0, most of the power companies are embarking on expanding their plans or continuing with existing strategies to produce more renewable energy.
The three agendas, namely to increase industry efficiency; future-proof the industry structure, regulations and key processes, and empower consumers, democratise and decentralise the electricity supply industry, are to be undertaken by a special-purpose agency MyPower (Malaysia Programme Office for Power Electricity Reform).
MyPower, with 12 to 20 employees, is tasked with engaging with industry players, as well as stakeholders for the industry reforms, and the company is expected to close once it completes its mission.
Energy, Technology, Science, Climate Change and Environment Minister Yeo Bee Yin said the government was confident that the electricity supply industry transformation programme in areas such as future generation, which included green energy and electricity energy efficiency and grid for the future, would enhance the customers' experience, as well as propel the country forward.
Besides the reforms agenda, the year also saw the new government pushing the reset button on the country's power industry and returned the sector to the black-and-white period by scrapping all the bad seeds in the industry.
Among the biggest being highlighted was the termination of four new independent power producer (IPP) contracts in Oct 25, awarded by the previous administration through direct negotiations.
If no action were taken on the IPP issue, Yeo said there would be overcapacity of electricity in the future, leading to increased reserve margin and imbalanced demand and supply.
On that note, she pointed out that future power generation projects were to be awarded through open tenders only, where the bidders would have to compete against each other.
Meanwhile, the government decision to continue implementing the balance-cost-pass-through (ICPT) mechanism throughout this year to adjust tariffs based on the changing fuel prices required for electricity generation every six months in the form of rebate or surcharge was a welcome move.
This has helped power producers, who rely mostly on fossil fuel, primarily coal and gas to generate electricity, to remain flexible against any price changes besides being able to cushion the price impact and provide a reliable energy supply.
The ICPT, which kicked off with its first regulatory period (RP) starting from January 2015 to December 2017, is now in the second regulatory period (RP2) for another three years starting 2018 to 2020.
Eight cycles of the ICPT were announced for the March 2015-December 2018 period, with the first seven ICPT cycles involving rebates.
The rebate of 2.25 sen/kWh was announced in 2015 and 1.52 sen/kWh in 2016, 2017 and January to June 2018.
However, due to higher fuel and generation costs, additional surcharge of 1.35 sen/kWh is imposed on domestic customers with monthly usage of above 300kWh from July to December 2018.
But, thankfully, the surcharge for 81.7 per cent of domestic customers is subsidised by the Kumpulan Wang Industri Elektrik (KWIE) fund, totalling RM114 million.
However, with the KWIE fund now at RM600 million and only enough until next half-year, the government should come up with new measures, according to an analyst.
“No matter how efficient your market is or how well your infrastructure plan is, if the market is heavily dependent on fossil fuel which is influenced by the global fuel prices, the fluctuation of electricity prices is something that is beyond their control.” he told Bernama To assist the current issues on electricity surcharge, he said the affected companies should shift to renewable energy (RE) that would not just help stabilise electricity tariff but also reduce carbon emissions.
With companies such as TNB, Siemens Malaysia Sdn Bhd, Wah Seong Corporation Bhd, Visolar Group Bhd, Leader Solar Energy (LSE) Sdn Bhd and KNM Renewable Energy Sdn Bhd, embarking or growing their RE segments during the year, Malaysia can now dream of achieving the 20 per cent RE efficiency target by between 2025 and 2030 from the current two per cent.
Based on the Energy Commission's statistics, Malaysia's electricity generation for 2016 was derived from gas (43.5 per cent), followed closely by coal (42.5 per cent), while hydro made up 13 per cent of the power generation mix.
Based on the notes from research firm Protege Associates, Malaysia has a renewable capacity of 7.3GW (gigawatt) in 2017, of which 82 per cent was contributed by hydropower.
In September, Siemens Malaysia, which is set to expand its business portfolio in RE, said that it would come up with solutions for the solar portfolio and be ready to jump on the bandwagon when the government announces its RE project.
Chief Executive Officer (CEO) Indranil Lahiri had said that the RE industry was seen to be picking up momentum in 2018.
“The last few months have seen decisions moving away from solar FiT (Feed-in-tariff) ? as grid parity approaches ? towards concrete plans to make renewable solar energy attractive in all segments ranging from large-scale towards residential.
“The prospects for 2019 look favourable, given the reducing costs for solar and storage technologies, incentives to improve uptake and possibilities to ease funding.
“RE industry will see growth in solar segment in 2019 ? thanks to large scale solar (LSS3) tender,” he told Bernama.
Lahiri said a few factors would weigh in, to promote increased uptake of RE.
For one, a higher selling rate/kWh for exporting renewable energy will encourage solar installations.
“This now forms part of the revised net energy metering (NEM) concept, effective 2019, permitting export back to the grid on a one-to-one offset with energy imported.
“Besides that, allowing third-party investors to put up solar installations without any upfront costs for the residential owners, through solar leasing mechanism, as being promoted through the Supply Agreement for Renewable Energy (SARE), will also help to increase renewable ramp-up,” he added.
He said the company along with the industry players would look forward to having the Energy Efficiency Act to be tabled in Parliament in mid-2019.
“We also believe that enabling smart grid applications will allow small consumers to become part of the system, for example, through rooftop solar or blockchain-enabled transactive energy platform (as implemented by Siemens in Brooklyn, the US), which could become a game changer for the industry and economy as whole,” he said.
Besides, the interest shown by Petronas to diversify into the renewable energy space, will also help drive the industry and contribute more to government revenue.
As for developments during the year, LSE has officially launched the commercial operation of its net 29MWac Solar Power Plant in Kedah in November and with the plant's annual net energy output of up to 61 million kWh, it is sufficient to supply electricity to about 11,000 homes.
The LSE solar power project will eventually save the environment from approximately 40,000 tonnes of carbon dioxide emission annually that might otherwise be created from fossil fuel power generation.
On Nov 23, TNB commenced operations on the country's largest Large-Scale Solar (LSS) photovoltaic plant which is expected to generate 1,700 MW of RE by 2025.
This project, which came under the 11th Malaysia Plan, was secured by TNB Sepang Solar Sdn Bhd through competitive bidding process.
The LSS, which is expected to help the government hit its RE target, has the capacity of 50 MWac, utilises 230,000 solar panels and will help increase TNB's RE capacity in the national grid to 72.3 MW.
Going forward, with Moody's 2019 outlook on Asia's power sector, which has been stable since 2009, reflects its expectations for stable business conditions in Malaysia (A3 stable).
Power demand is expected to be stimulated by economic growth, rising incomes and ongoing urbanisation, it said.
“Growth in power demand will likely remain steady at 0.5 per cent to two per cent in Malaysia, reflecting the high base of comparison in 2018 and slowing GDP growth in the country,” it said.
Meanwhile, power utility provider NUR Power Sdn Bhd CEO Datuk Abd Rahim Md Noh said the fundamentals in 2019 would be similar to 2018 but with growth in RE, in line with the government's initiatives in this area.
“However, for Kulim Hitech Park (KHTP) where NUR Power has the exclusive right to generate and distribute electricity, there will have new growth areas, as well as demand from existing customers,” he told Bernama.
Abd Rahim said lower inflation would lead to higher consumption, which in turn, would result in higher manufacturing activities, while domestic and commercial growth would create additional demands in these sectors, in future.
“Growth in world economy will also spur growth in local demand of electricity in Malaysia as quite a lot of our manufacturing activities are for export, especially in KHTP.
“Introduction and growth of electric vehicles will increase electricity consumption, while greater usage of the Internet of things and development towards industry 4.0 will create new demand for electricity,” he added.
For NUR Power, moving forward, the company will continue to invest in power distribution network to meet organic and inorganic growth in KHTP.
“With that, recruitment of new staff and enhanced training activities will be the focus agenda for the year 2019,” he said.
In its resolve to produce more green energy, the government is set to introduce measures such as cheaper electricity for solar power users, pollution charges on businesses, as well as unveil the green financing roadmap, next year. - Bernama
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