Malaysian energy at the crossroads

• Malaysia’s natural gas supply is depleting, and LNG will have to be fully imported
• Sarawak hydro potential can be developed, but cost of transmission is a barrier

By Stephen Ng

East Malaysia’s Bakun Dam has attracted energy guzzlers like aluminium smelters and steel and gas industries (photo credit: Cahaya Dalam Kegelapan)

Thirty years ago, Malaysia discovered natural gas. That good fortune benefitted the power-hungry industries of Japan, Korea and Taiwan, which drew up long-term supply contracts. It also led the country’s utility company Tenaga Nasional Berhad (TNB) to depend greatly on natural gas to fire its power plants.

Last year, something totally unexpected happened to TNB which caused it massive losses. Malaysia’s power sector had invested RM30 billion in gas-fired plants for a total electricity generation capacity of 12.2 GW. They require a total of 1,744 million standard cubic feet a day (mmscfd) of gas to operate, but Petronas, the national oil company, could only offer 1,150 mmscfd. 

Even after the commissioning of re-gasification terminals later this year, supply will only be reinstated to 1,350 mmscfd, still short of some 400 mmscfd. TNB was badly hit in 2011, when gas volume supplied decreased by 17.5% to 924 mmscfd compared to 2008, while electricity generation increased by 10.6% from 94,251GWh to 104,220 GWh.

Che Khalib Mohamad Noh: Long-term alternatives needed for planning new power plants (photo credit: GPA Photo)

This has caused some serious rethinking of future directions for the country’s power producers. Datuk Seri Che Khalib Mohamad Noh, TNB president and chief executive officer, sounded the clarion call at the recent National Energy Security Conference organised by the Energy Commission of Malaysia in Kuala Lumpur: 

“It is crucial for us to decide on how to move forward, so as to provide clarity for the power industry. Prices of gas will ultimately determine the future energy mix and plant-up policy. TNB had suffered losses in the short term, but in the longer term, it will have to look for other alternatives when building new power plants.”

What then are the alternatives, as shared at the conference?

Evolution of power generation mix by fuel type

Source: Tenaga Nasional Bhd

• Hydroelectricity from Sarawak

This East Malaysian state has abundant hydro resources, and its biggest hydro project, the Bakun Dam, has attracted some of the biggest energy guzzlers to its shores. What’s more, the state has some 20 hydro projects in the pipeline.

Years back, there was talk of a submarine cable to supply Bakun electricity to Peninsular Malaysia. But Torstein Dale Sjotveit, chief executive officer of Sarawak Energy Berhad, which runs Bakun, says the issue is the high cost of building the undersea cable, which brings up the cost of transmission.

 • Review of dependence on gas

Head of Gas and Power Business at Petronas, Ezhar Yazid Jaafar, says from Petronas’s standpoint, Malaysia needs to review its high gas dependency in the energy mix, especially in the
power sector.

This means the pendulum is being shifted back to coal, which produces twice the amount of CO2 per kWh compared to gas. This will work against Malaysia’s Copenhagen commitment on reducing carbon emission intensity by 40% by 2020.

The challenge now is for TNB to be able to incorporate supercritical boilers for coal-fired plants. But coal has to be fully imported, and again, it is subjected to the vagaries of supply and demand forces which affect price stability.

Nuclear energy

Former executive director of the International Energy Agency Nobuo Tanaka favours nuclear to ensure energy security. He says lessons must be learned from Japan’s Fukushima accident to ensure safer nuclear power deployment in Asia. He also underlined the golden age of gas, with special mention of shale or unconventional gas supplies from the US and China.

Nobuo Tanaka: Points to nuclear and unconventional gas for energy security (photo caption: GPA Photo)

Malaysia Nuclear Power Corporation’s chief executive officer Dr Mohd Zamzam Jaafar says the Nuclear Power Infrastructure Development Plan presents a positive case for nuclear energy in Malaysia. He says nuclear energy is cost-competitive, and is cleaner than coal and gas. However, he did not address the problems of maintenance, the long-term cost of storing radioactive waste, and looking after retired plants.

Renewable energy

Malaysia’s target is to achieve a 5.5% contribution to its energy mix from renewable energy (RE) sources by 2015. So far, solar photovoltaic (PV) is the most popular “fuel” in the country’s feed-in tariff (FiT) scheme launched last December. 

Biomass and mini-hydro are not generating as many applications, although there are moves afoot to marshall these resources.

Whether RE will be developed over the long-term will depend largely on the government’s ability to persuade consumers to agree to pay more in electricity bills. This is Malaysia’s approach in funding the FiT. When the question was raised, Malaysia’s Minister of Energy, Green Technology and Water, Datuk Seri Peter Chin, was non-committal about raising FiT using government funds to provide a dollar-for-dollar match to the amount contributed by consumers to the RE fund. 

Peter Chin: Malaysia needs to put more emphasis on biomass (photo credit: GPA Photo)

Chin says the country should focus on biomass, considering the huge amount of municipal waste and biomass generated by oil palm plantations.  

Given that the country has now attracted five major solar panel producers, Panasonic Malaysia managing director Jeff Lee opines that the quota set by SEDA on solar PV below 12kW could be increased to encourage more households to invest in its own power generation. Otherwise, the benefits from the cheap water and electricity tariffs enjoyed by the solar manufacturers will not translate into long-term economic benefits for ordinary citizens.

Energy efficiency as sixth fuel

Currently, Malaysia’s long-term objective is to meet a 3% per annum increase in electricity demand, from a current 15 GW to 20.8 GW by 2030. The Energy Commission is now going through tender exercises for 4.5 GW. 

Ahmad Fauzi Hasan: Strong energy-efficiency programme essential (photo credit: GPA Photo)

The Commission’s chief executive officer Datuk Ahmad Fauzi Hasan points out the importance of a strong energy-efficiency programme in the overall development of national economy. 

Since 2008, the Commission, empowered by the Efficient Management of Electrical Energy Regulations 2008, has required power utility companies to alert the commission to big energy guzzlers. These companies have been asked to employ energy managers to manage, and ultimately reduce, their energy consumption.

Perhaps, as one conference participant pointed out, “energy efficiency should be at the core of any effective energy planning”. Before talking about generating more power, the country’s administrators should place more emphasis on achieving energy efficiency first.