THE Federal Government retained the existing electricity tariffs of two sen/kWh rebate for residential customers and surcharge of 3.7 sen/kWh for non-residential customers. The Government invoked the rising cost of coal import to justify the high surcharge on non-residential customers.
To explain, Malaysia utilises “Incentive Based Regulation” and “Imbalance Cost Pass Transfer” (IBR-ICPT) methodology to determine electricity tariff. The base cost to produce one unit of electricity is 39.45 sen/kWh. Surcharge and rebate are imposed based on the increase and decrease of fuel prices respectively.
Analysis at macro-level on the IBR-ICPT methodology exhibits no potential to reduce electricity tariffs. However, micro-level analysis of IBR-ICPT reveals plenty of opportunities and solutions to reduce the electricity tariff.
Monetise hot wastewater from powerplants
According to a report from the Energy Commission (EC), the average thermal efficiency for coal and fossil-gas powerplants ranges between 28.75% and 43.42%. Thermal efficiency is amount of dispatchable electricity generated by thermal powerplant from per unit fuel. The rest of energy is lost as hot wastewater which is dumped into the sea.
The hot wastewater is categorised as high temperature but mid pressure. The hot wastewater does not have sufficient pressure to spin an electricity turbine but have sufficient temperature for certain industrials process. Certain domestic industries require heat energy for its manufacturing process.
The hot wastewater from powerplant can be monetised by piping and selling it to these industries. The cost of fuel can be proportionally shared between electricity and hot wastewater. Subsequently, the fuel cost component within the electricity tariff can be reduced.
Shutdown excessive IPPs
Powerplants received two kinds of payment; energy payment and capacity payment. Energy payment made to operational powerplant for generating electricity. Meanwhile, capacity payment is paid for powerplant to remain on standby. For last year, the forecasted capacity payment to be made by Tenaga Nasional Bhd (TNB) to non-TNB independent power producers (IPPs) will be around RM200 mil.
According to a report by EC, the reserve margin for Peninsula Malaysia in the year 2021 was about 50%. Reserve margin is the measurement of reserve powerplants based on the all-time maximum electricity demand. Reserve powerplant is necessary as backup when operational powerplant undergoes maintenance or repairs.
This reserve margin is calculated based on all-time maximum demand anomaly of 18,808MW that occurred on March 10, 2020 at 4.30pm. Throughout rest of the year, daily peak demand hovered around 15,000 MW to 17,000MW. Thus, the daily reserve margin varied between 50% and 75% throughout the year.
Peninsula Malaysia breached the 18,000MW mark less than 14 days per annum scattered within the month of March and October during hot season, as air conditioners works harder to cool offices and home. This peak demand anomaly will go down with rising rooftop solar installation. Higher rooftop solar output during hot season will curtail electricity demand. By 2023, rooftop solar installation can chip off up to 1,300MW off daily peak demand.
Thus, Peninsula Malaysia should limit the amount of powerplants at 20,000MW to shut down 6,000MW of excess fossil fuel powerplants. This will translate to a daily reserve margin between 10% and 25% throughout the year, saving hundreds of millions of ringgit in future capacity payment.
Large Scale Solar (LSS) 3 and 4 were costly mistakes
Effective Jan 1, 2019, Peninsula Malaysia adopted “true net energy metering” for rooftop solar to replace the displaced cost. This allowed excess electricity generated by solar PV to be exported back to the grid on a “one-on-one” offset basis. This policy changes increased rooftop solar adoption tremendously amongst industries and commercial sectors.
TNB grid cannot accept solar penetration more than 27% of its daily peak demand without smart grid. Meanwhile, the Government gave out 1,313.94MW of large-scale solar (LSS) quota under Large Scale Solar (LSS) 3 and LSS 4 projects. Electricity generated by LSS built on agriculture land in rural areas needs to be transmitted through TNB grid to high consumption regions.
The transmission of electricity increases the wear and tear of TNB electricity grid demanding higher operational cost (opex) and capital cost (capex). Between 2018 and 2021, TNB spent about RM21.5 bil in capital expenditure on electricity grid for non-renewable energy-based transitions such as capacity upgrades.
Meanwhile, electricity from rooftop solar is consumed first by the premise itself before any surplus is export into the grid. Thus, rooftop solar reduces the amount of electricity carried by grid. Rooftop solar will bring down capex and opex for TNB’s grid creating room for electricity tariffs reduction.
The LSS 3 and 4 were unnecessary and costly after rooftop solar boom. COVID-19 had derailed the financial closure and construction of LSS3 and LSS4. Thus, there is a window for the Government to review and reallocate solar quota from large scale quote to existing rooftop solar.
Off peak rebate for households tariffs
The Government should couple Time of Use (TOU) Rebate with the existing progressive tariffs for residential customers. TOU rebates can provide residential with rebate of 20% for electricity usage during off-peak period such at nights and weekends. The TOU tariff scheme for residential was slated for Peninsula-wide adoption in Q1’2020 but there is no news of its execution to date.
Electricity generation and transmission during peak period is more expensive compared to off-peak period. The TOU rebate prevents residential customers from paying the more expensive pro-rated cost. The TOU rebate can shift planned usage such as washing machines, dishwashers, handphone charging, ironing and vacuum machines from peak period to off peak period.
These change in electricity consumption pattern is known as positive load-shifting. Load shifting reduces the burden and bottleneck on the electricity grid during peak period. Positive load shifting leads to longer lifespan of the electricity grid bring operational and capital cost for TNB. Load shifting also reduces daily peak demand further reducing the number of expensive standby powerplants.
Moving forward
Politicians and policymakers should not concede that the only direction prices of goods and service can move is upwards. Lower electricity tariff leads to cheaper goods and service, whole increasing purchasing power and international exports.
Putarajaya can bring electricity prices down by monetising hot wastewater from powerplants, shutting down excessive powerplants, reallocating large scale solar as rooftop solar and introduce time of usage tariffs for residentials customers.
Sharan Raj is human rights activist, environmentalist and infrastructure policy analyst.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
