Human Writes: We are paying for electricity that we don't use

Even as the world is moving away from burning coal to produce electricity, Malaysia has been increasing imports of coal. — Filepic/The Star

Psst, Malaysia, wanna save more than a billion ringgit a year? We surely need to save money what with the government’s debts and liabilities rising to record highs due in part to the Covid-19 pandemic.

Every year, folks, we lose at least RM1.2bil in energy industry deals, observers say. We have way too many power plants. Our capacity to generate power (which we pay for) is way more than the maximum power used (peak demand) – a difference known as the “reserve margin”. The 2021 margin is set to be 48%, says a report by an energy planning body in the Energy and Natural Resources Ministry (specifically, the Planning and Implementation Committee for Electricity Supply and Tariffs, known as JPPPET, its Malay acronym).

The RM1bil loss is calculated on the excess above retaining a 25% reserve margin. But many other countries keep much lower reserve margins, at 15%.

Also, this figure does not include fuel costs. Worse, it will increase with recent new deals for gas plants.

Why on earth are we building more power plants when our reserve margin is so high – among the highest in the world? And why gas, not solar?

Guess who pays for all this? You. And the planet. You pay in the tariffs in your electricity bill, which could be a lot lower. And the planet, and everyone on it, pays with climate change.

Such profligate waste is just irresponsible. Let me remind you: We have a very narrow window left to limit global warming. If countries do not drastically cut emissions of heat-trapping greenhouse gases by 2030, we face irreversible, catastrophic climate change. We’ve just had the four hottest years on record, but emissions are still rising globally!

The energy sector is central to reducing greenhouse gas emissions. Energy use accounted for 80% of Malaysia’s emissions in 2015.

On Nov 11, 2020, during question time at the Dewan Rakyat, Minister Datuk Seri Mustapa Mohamed said the government will begin a study on the energy sector to determine the path forward. This is welcome news. But we must make the right choices. We need far more renewable energy, with solar just 0.4% of our energy mix.

One thing is crystal clear – we don’t need ANY MORE fossil fuel power plants or deals favouring Independent Power Producers (IPPs). Current deals commit us to buying power and paying IPPs a “capacity charge” (akin to rent), whether we need the power or not. And more such deals are being considered.

Singapore has done away with capacity payments. We must be able to choose if we need power and to go for greener options.

One way to cut the reserve margin and slash carbon emissions is to retire coal-fuelled plants early, as they are the most polluting, inefficient and inflexible (in ramping production up or down).

The government has to negotiate with IPPs, offering compensation and perhaps future incentives (eg, partnerships in future solar projects). IPPs should also be realistic about compensation.

In a recent paper, the Institute for Democracy and Economic Affairs (Ideas) called for reducing carbon emissions by replacing coal with natural gas, which is half as polluting as coal and a better bridge towards cleaner energy.

Crazily, as noted in the Ideas paper, Malaysia has actually quadrupled the use of coal since 2000 (from 11% to 44% in 2017) while reducing the use of natural gas – despite having to import coal and having our own natural gas supplies!

Ideas proposes a carbon tax on coal, given its high social cost. Coal is actually the biggest global contributor to climate change, contributing to almost half of all carbon emissions.

Anyway, coal plants are fast becoming “stranded assets”, as they are increasingly uneconomical to run because solar and wind energy is now so cheap. In time, natural gas plants too will become stranded assets. Yet we just signed deals for more gas plants – madness!

Fossil fuels are dying; 2020 accelerated that. In the first half of 2020, Petronas recorded a loss after tax of RM21bil, compared with a profit after tax of RM15bil in the same period in 2019. The new energy policy must carefully consider energy transition trends.

Policy matters. It can move mountains. Germany’s decision to demand solar energy and China’s decision to produce it led to the price of solar energy falling by 80%. Shenzen’s decision to go electric led to 16,000 electric buses and even more electric taxis in the city – and far lower fuel costs as well as cleaner air.

Investing in electric buses is a great option. We’d stop using polluting diesel while putting that excess power capacity to good use.

Our utilities must prioritise public needs and the environment better. Concessionaries for water and electricity supply have made billions – but at what cost?

The government must carefully consider long-term trends and impacts rather than short-term gain in the new energy policy: our future, and the planet’s, depends on it.

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Human Writes columnist Mangai Balasegaram writes mostly on health but also delves into anything on being human. She has worked with international public health bodies and has a Masters in public health. Write to her at [e-mail]. The views expressed here are entirely the writer's own.