Fuelling the electricity debate

  • Nation
  • Sunday, 30 Apr 2017

The story of the Malaysian electricity supply industry is worth retelling.

It started in 1900 or thereabouts with private generation companies powering the tin mines.

In relatively quick successions, the post-war Central Electricity Board was renamed the National Electricity Board in 1965 with the present-day Tenaga Nasional Berhad (TNB) being the product of the utility’s 1990 corporatisation.

Two years later, partial liberalisation gave us Independent Power Producers (IPPs). Malaysia’s electricity industry has since evolved from a monopolised market to an integrated version of a purchasing agency.

As the generation sector offers a high return to the investor, this segment of electricity has always attracted bidders.

In ensuring fair play, the Energy Commission of Malaysia (set up in 2001) introduced competitive bidding for new power plants (2011), ring-fenced Single Buyer (2012), Demand Side Management and the New Enhanced Despatch Arrangement (2015).

With nearly all Malaysians enjoying access to electricity, the real challenge is sustainability; that is, ensuring the security and reliability of the energy supply and diversifying energy resources.

This, in turn, is about increasing access to affordable energy. And to achieve the mix of energy resources and technologies that will one, reduce adverse environmental effects and, secondly, maintain sustainable development at minimum cost.

In essence, generation-mix impacts our electricity bill and the environment. The cost of imported fuel is determined by the exchange rate. That we have not been too successful in the area of generation-mix points to a need for a deep analysis and a robust debate.

Past generation-mix in Peninsular Malaysia tended to feature a dominant fuel strategy. Oil reached the 85% mark before the 1977 oil crisis wrecked the equation.

Natural gas took over as the leading fuel, repeating yet another seven out of 10-equation in 2001.

The depletion of natural gas reserves and curtailment of gas supplies by Petronas, plus high and uncertain prices have then made coal an attractive fuel strategy despite being deemed to be environmentally hazardous.

As of today, coal capacity in Peninsular Malaysia stood at 51% of total generation mix.

Coal is entirely imported. Given its low price and abundant supply, the Energy Commission’s Peninsular Malaysia Electricity Outlook 2016 projects see the growing importance of coal.

We hope there will not be a repeat of another “roller coaster” involving coal. We should pursue a better diversification of generation mix.

With coal, the world seems conflicted. The European Union has pledged to do away with coal power plants after 2020.

Asean and Japan are in favour of coal. Japan’s Prof Ken Koyoma is chair of Energy Economics of Energy Commission Malaysia, and chief economist and managing director of Institute of Energy Economics, Japan.

During a visit to Universiti Tenaga Nasional last month, he said that Japan will continue developing coal power plants. This is especially so after the Fukushima Nuclear crisis.

Some 52% of Japanese public were against nuclear rehabilitation. The Fukushima incident is also changing opinions and decisions in Malaysia.

Chief executive officer of the Malaysian Nuclear Power Corporation, Dr Mohd Zamzam Jaafar, said the nation was now targeting the launch of the first COD unit by 2030, the earliest.

The world is committed to producing “Clean Coal” as demonstrated in the COP21 Paris Agreement of December 2015.

High Efficient and Low Emission (HELE) technologies such as supercritical (SC), ultra-supercritical (USC) and advanced ultra-supercritical coal-fired power plants are designed to operate at higher steam temperature and pressure to improve efficiency. Hence more electricity can be produced using less coal.

Japan and China have been the most active countries in building the USC plants.

In Malaysia, USC coal-fired power plant was commissioned by TNB Janamanjung Sdn Bhd in April 2015 (1,010 MW) and Tanjung Bin Energy in March 2016 (1,000 MW).

The high cost of HELE technologies present a major policy challenge. A study reveals that the Levelised Cost of Electricity (LCOE) for USC in Australia is 45% higher than the average wholesale cost of electricity in 2015 – 2016.

What are the alternatives then? High cost and low capacity could limit the contributions of Renewable energy in the Malaysian generation mix.

As such, the authorities are looking at new strategies. The Feed-in Tariff (FiT) for solar photovoltaic is ending soon and will be replaced by Net Energy Metering and Large Scale Solar offering much lower rates.

Optimum planning to balance the conflicting objectives of economics, power system reliability and environmental impact is a difficult task. Consumers worldwide expect top quality services at low rates.

By extension, the cost of electricity influences household expenses and spending. At the same time, there is this issue of uncertainties in our future generation-mix.

As Malaysian electricity supply industry reform continues, the big question is what shall be our next major fuel for electricity generation? Are the Government, TNB, IPPs and consumers ready to face the new risks and challenges?

A win-win Imbalance Cost Pass-Through (ICPT) mechanism was introduced by the Government in 2014 to insulate TNB and consumers from the fluctuations of fuel price.

The ICPT enables the Government to increase or reduce electricity rates based on the underlying prices of coal, gas and crude oil.

A “rebate” of RM766.33mil has been declared for the period between Jan 2 and June 30 this year.

This is derived from the net savings of lower gas and coal price, the commissioning of USC coal-fired plants and a reduction in the use of gas in electricity generation. The six-month revision is due pretty soon.

Dr Nofri Yenita Dahlan is a senior lecturer from Faculty of Electrical Engineering, Universiti Teknologi MARA (UiTM) Shah Alam, specialising in energy economics. Her research focus is on power generation investment in liberalised electricity market, energy policy, clean energy technology and energy savings and efficiency.

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