Malaysia: Fuelling the electricity debate
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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Link to Original Article:
http://www.thestar.com.my/news/nation/2017/04/30/fuelling-the-electricity-de
bate/
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John Diecker
APT Consulting Group Co., Ltd.
www.aptthailand.com
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