KUALA LUMPUR: Tenaga Nasional Bhd (TNB) must have the necessary financial strength to continue undertaking huge capital expenditure (capex) investments to expand the system for growth and development while maintaining stability in the country’s electricity supply.
Besides ensuring energy security, TNB would be well-placed to contribute a healthy RM31bil to Malaysia’s gross domestic product over four years beginning 2021, arising from capex returns from a wide array of power development projects.
This includes a capex of RM7.3bil this year and the forecast RM24bil from 2022 to 2024.
Such high investments would ensure widespread spillover benefits to the Malaysian economy which is currently facing a downturn, no thanks to the crippling effects of the Covid-19 pandemic.
The national power company’s large-scale investments would help create some 194,000 badly-needed jobs annually for the country or about 584,000 jobs in the 2022-24 period.
However, its financial ability to undertake large capital investments lies in the new Incentive-Based Regulation (IBR) guidelines for a three-year regulatory period (RP3) from 2022-2024, which TNB is currently proposing to the Energy Commission (EC).
Among other things, the outcome of RP3 will determine how much TNB is expected to earn from its regulated business of electricity distribution and transmission where the bulk of TNB’s assets (regulated assets) lies.
The IBR is a mechanism for electricity tariff setting with incentives to improve TNB’s efficiency while providing greater transparency to customers.
Regulated assets refer to TNB’s transmission and distribution assets. The regulators prescribe a fixed internal rate of return for these assets and also ensure that TNB meets certain key performance indicators (KPIs).
If the EC dictates that TNB should get equitable returns for its investments, then it would place TNB’s balance sheet in a better position to get cheaper financing.
This would translate to TNB being able to make the necessary investments to upgrade and enhance its power grid system and infrastructure for a better Malaysia.
Analysts opined that this decision is critical for TNB to be able to make the necessary investments in the future of the country’s power security and development, as neglecting investments in electricity does not bode well for the future growth of the country.
As experience has shown, such underinvestments even by advanced economies such as the United States, United Kingdom and South Australia have led to massive power outages due to collapsing systems and failure in the provision of utilities.
Malaysia must take heed of the lessons from the failure resulting from underinvestments by advanced economies and take steps to prevent them from happening, thus ensuring a secure power supply especially during these trying times.
It was encouraging to note that in December 2020, with the protracted pandemic, TNB had received the EC’s approval to extend the RP2 to Dec 31,2021 under fair terms, and negotiate for RP3 for the 2022-2024 period.
The extension indicates the resilience and effectiveness of the IBR mechanism to maintain stability in the power industry, thus benefiting the rakyat, both in the short and long term.
The Main-Board listed utility firm is expected to invest in the growth of the energy system, in key areas such as maintaining a safe and resilient network and system to ensure uninterrupted power supply to customers, supporting the development of industrial and economic zones, introducing smart meters, and supporting the transition to renewable energy.
The pandemic has elevated the need for accelerated digitisation and automation, and the introduction of smart meters helps to support future pandemic responses.
This includes ensuring the safety of meter readers during the movement control order (MCO), minimising billing errors and empowering customers to monitor and control their energy consumptions through their fingertips via myTNB web and mobile application.
As far as renewable energy (RE) is concerned, significant grid investments are required to realise the 31% RE target, which means that the country’s power grid must be prepared in RP3 to meet the demand while maintaining the stability of the system.
TNB’s power grid is a key enabler towards achieving Malaysia’s energy transition.
To accommodate the injection of RE into the grid and its distribution network, TNB needs to develop the Grid of The Future, a more advanced and digitalised energy superhighway – one that has the flexibility as well as reliability to be able to support bi-directional, intermittent energy flows while preserving voltage stability. — Bernama