Sabah: Greening the power supply

Text size +-

In a dramatic move on February 17, the state government halted bidding for a new 300-MW coal-fired power station in Lahad Datu, citing environmental concerns. Sabah Chief Minister Musa Aman told local press that, “Sabah needs to increase power supply to meet the increasing development, but the state cannot afford to put its natural environment at risk.” He noted that protecting Sabah’s environment was crucial for the growing tourism sector, particularly given the state’s efforts to promote nature tourism.

The proposal to replace the old Lahad Datu facility with another coal plant was widely criticised both locally and internationally due to environmental concerns over the power source. Furthermore, the new plant was to be located on the shoreline, adjacent to the exceptionally biodiverse Coral Triangle and only 20 km from the Tabin Wildlife Reserve, home to several rare species of animals. However, with coal ruled out for future projects, natural gas expected to become an increasingly important part of Sabah’s energy mix. The state is working to boost power capacity, while also enhancing sustainability and environmental protection under Malaysia’s New Economic Model (NEM). With electricity demand expected to grow by an annual average of 7.7% until 2020, and supply shortages currently leading to occasional blackouts, the need for substantial investments in energy is clear and initiatives to increase supply are under way at the state and federal levels.

On February 21, national press reported that the state-owned energy giant Petronas and Tenaga Nasional, Asia’s largest electricity utility firm – also publicly owned – were working together to harness liquefied natural gas (LNG) for a replacement power project, potentially to be located near the city of Sandakan. Musa explained that utilising LNG would help tackle the state’s electricity problems and reduce the cost to Tenaga Nasional of subsidising diesel for power generation on the east coast, which he said was running to RM2m ($627,000) per day.

The state government’s proposal is to use LNG from a plant in Bintulu in the neighbouring Malaysian state of Sarawak, to Sabah’s south-west. The plan stems from a directive from Malaysian Prime Minister Najib Razak, whose government is putting an increasing emphasis on sustainability and environmental protection, as well as boosting the country’s energy capacity, particularly in Sabah.

While located in Sarawak, the Bintulu LNG plant sources its natural gas from fields off the coast of Sabah. The gas is transported through a 500-km, RM1.6bn ($524.82m) pipeline stretching from a terminal in Kimanis on Sabah’s west coast, where it is brought to land. Musa has suggested that the processed LNG could be shipped back to Sabah by sea to the proposed plant and that this would obviate the need for expensive new pipeline infrastructure.

Whatever decision is taken – and given the cost of new infrastructure and the incumbent federal and state governments’ preferences, shipping LNG from Bintulu seems to be the most likely option – the new plant will add much-needed capacity to the power grid in Sabah. With the government promoting the growth of manufacturing and tourism in the state, and with domestic demand on the rise, it is not expected to be the last such project.

Outside of local considerations, the decision to opt for a greener energy sources seems set to pay dividends abroad as well. Daniel Kammen, an energy expert at the University of California, Berkeley, who directed an energy and environmental impact assessment of the power plant project, described the decision to shift away from coal as “a turning point” and said that it would increase Malaysia’s opportunities to forge international partnerships at the UN Framework Convention on Climate Change’s Conference of the Parties, set to be held in Durban, South Africa, in December.

Sabah is diversifying its energy mix further, with a strong focus on renewable sources, which account for around 3% of the generation for Sabah Electricity, compared to 0.5% nationally. In January, Musa said that the state aimed to become a renewable energy leader through investment in a number of projects. A RM280m ($91.84m) biomass plant is already under construction at the Lahad Datu palm oil industrial cluster. The project, developed by the state government-owned Palm Oil Industrial Cluster Sabah and a South Korean consortium, will run on oil palm waste. This is expected to help reduce greenhouse gas emissions, as well as serve as a model for further clean energy development in Sabah and South-east Asia, according to Musa.

In its efforts to meet rising energy demands, Sabah is demonstrating flexibility and the ability to think creatively to address local problems with local resources. This may give it an extra edge as it seeks the investment needed to expand capacity.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart

Read Next:

In Asia

Myanmar: Open for business

A new foreign investment law that offers investors broader access to Myanmar’s economy, as well as useful tax breaks, is expected to add new impetus to the country’s development and is a landmark...

In Energy

The emerging technologies that could herald a greener future for...

With fossil fuels still powering roughly 99% of global shipping, the sector is seeking to reduce emissions through cleaner fuel sources – including methanol, ammonia and wind – that could soon see...


Myanmar: Open for business

A new foreign investment law that offers investors broader access to Myanmar’s economy, as well as useful tax breaks, is expected to add new impetus to the country’s development and is a landmark...