Rapid economic growth over the last few decades has propelled Malaysia into the ranks of the major Asian manufacturing and industrial centres. Demand for power has been increasing sharply with this, particularly in urban clusters on the peninsula and, increasingly, in Sabah and Sarawak. Meanwhile, as per capita incomes rise, household demand for power has been surging upwards.
According to data from the sector regulator, the Energy Commission (EC), total consumption of electricity for the country stood at 747 kilotonnes of oil equivalent (ktoe) in 1980, which more than doubled to 1714 ktoe by 1990, then increased again to 5263 ktoe by 2000. By 2010, the figure had risen by more than 50% to 8993 ktoe, with the most recent figures for 2013 showing a total of 10,590 ktoe – which stands at 14 times the original 1980 figure.
Consumption
In terms of electricity consumption, the peninsula is by far the main market. EC data shows that in 2010, 94,666 GWh of power was consumed there, while Sabah consumed 4127 GWh and Sarawak 5730 GWh. These figures had risen to 105,861 GWh, 5097 GWh and 12118 GWh respectively by 2013, the last year for which the EC has published data. For that year, per capita electricity consumption stood at 4462 KWh in the peninsula, 1423 KWh in Sabah and 4646 KWh in Sarawak. These three areas are distinct in terms of their energy grids and power providers.
On the peninsula, the main provider is the state utility Tenega Nasional Bhd (TNB), while in Sabah, it is the Sabah Electricity Sdn Bhd (SESB) – which is 80% owned by TNB and 20% by the Sabah state government. In Sarawak, Syarikat SESCO Bhd (SEB), a subsidiary of Sarawak Energy, is the primary state utility. Northern Utility Resources (NUR), in Kedah, also operates on the peninsula, and holds generation, transmission and distribution rights within the Kulim High-Tech Park (KHTP). The 1Malaysia Development Bhd (1MDB) was until recently another major player, but has exited the power business, selling its assets to China General Nuclear Power Corporation.
The main fuel for electricity generation has traditionally been natural gas, but in recent years, coal and coke have taken the lead. EC statistics showed natural gas responsible for 13,530 ktoe of input to power stations in 2013, while coal and coke accounted for 15,527 ktoe. Hydroelectric power accounted for 2688 ktoe, diesel for 623 ktoe and fuel oil for 392 ktoe. Ten years before, natural gas had been responsible for 10,893 ktoe and coal and coke just 4104 ktoe. Since 2011, natural gas has seen its market share fall, with periodic gas shortages leading to a switch to coal and even fuel oil, with corresponding cost increases.
Capacity
Total installed capacity at the end of 2013 was 24,105 MW in Peninsular Malaysia, 2196 MW in Sabah and 3446 MW in Sarawak. On the peninsula, independent power producers (IPPs) accounted for 63.4% of capacity and TNB for 28.4%, with the rest divided between co-generation, self-generation and small renewable energy power programme or feed-in-tariff (FIT) projects. The latter are mainly solar power ventures that have been receiving FITs under government schemes to promote renewable energy (see analysis). In Sabah, the IPPs were responsible for around one-third of electricity generation and in Sarawak, for around 52%. Self-generation is a major category in Sabah, given inaccessible terrain in many areas and persistent difficulties with looping onto the state’s grid. Some 30% of installed capacity fell under this category for the state in 2013.
This capacity has since had to meet with continuously increasing demand as well. TNB reported a 3.2% growth in electricity demand in the first quarter of 2016, down from 3.3% growth from the same period in 2015, but higher than the overall 2015 growth figure of 2.2%. However, the total is still well above peak demand. In 2013, figures in the 11th Malaysia Plan showed that peak demand on the peninsula stood at 16,562 MW, in Sabah 874 MW and in Sarawak, 1783 MW. Projected figures for 2015 put installed capacity at 22,070 MW for TNB, 1522 MW for SESB, and 4581 MW for SEB, while peak demand was expected to be 17,697 MW, 983 MW and 2935 MW respectively. That translates into reserve margins of 24.7% for TNB, 54.8% for SESB and 56.1% for SEB. These are extremely comfortable buffers, indicating a large amount of surplus generation capacity, in Eastern Malaysia in particular. Meanwhile, actual peak demand for 2015 on the peninsula, according to TNB figures, was 16,822 MW, down 0.5% year-on-year, suggesting that the projected figures may be over-estimates. Nonetheless, despite the surplus, Malaysia’s overall generating capacity continues to expand.
Coal
On the peninsula, Project 3B in Negri Sembalan is a two-unit, RM11bn ($2.7bn) greenfield 2000-MW coal-fired power station project that TNB took over from 1MDB in 2015. The start date for this project is now 2019. A further coal-fired unit, reported as 73% complete in the first quarter of 2016 and due to come on-stream in October 2017, is also being added to the Manjung power station in Perak, which saw its fourth, 1000-MW unit come online in April 2015.
In Sarawak, the 300-MW Balingian 1 and 2 coal-fired plants are scheduled to come online from 2018 onwards, using coal from the Balingian basin. A major hydroelectric dam building programme is also under way, with the RM9bn ($2.2bn), 1285-MW Baleh dam seeing project-package tendering in July 2018, while the 944-MW Murum dam began operations in July 2015. Construction of the proposed Baram dam was cancelled in March 2016 after vigorous protests by indigenous people and environmental groups.
Much of the imbalance in supply and demand in Eastern Malaysia may be corrected with the Sarawak Corridor of Renewable Energy and the Sabah Development Corridor. These heavy industrial projects are expected to drive a surge in local consumption.
Back on the peninsula, TNB reported that units 1 and 2 of its 265-MW Hulu Terengganu Hydro project completed in December 2015, with units 3 and 4 due for completion in March and April 2016. The 372-MW Ulu Jelai hydro project was 95% completed in the first quarter of 2016, with unit 1 due to begin in June 2016. Two gas-fired projects, the 385-MW Connaught Bridge and 1071-MW Prai, were due for completion in early 2016. In Pasir Gudang, Johor, the status of two combined-cycle gas-turbine plants, the 1000-MW Track 4A and 2000-MW Track 4B, remains in doubt at time of writing, after project pull-outs by TNB and YTL Power International, two of the three partners in the consortium that won tenders via direct negotiation, rather than competitive bidding. At the KHTP, too, NUR Power is also planning a new, RM2.5bn ($618.8m), 1000-MW power plant for the park.
Transmission & Distribution
Sabah and Sarawak are also working on developing their respective grids. On the peninsula, the electrification rate was 99.7% in 2013, while in Sabah it was 92.9% and in Sarawak 88%. However, projections for 2015 put the new rates at 99.9%, 95.1% and 94%, respectively, demonstrating the positive effects of continued investment in rural electrification programmes by state and federal authorities.
In early 2014, a new incentive-based regulation (IBR) system for setting tariffs was introduced. This comes as part of a ongoing restructuring of the sector begun by the EC, which aims to phase out fuel subsidies. These had reached some RM28bn ($6.9bn) by 2013. The IBR system creates a single buyer and system operator, while also enabling the true cost of inputs and capital expenditure by the generating companies to be more accurately reflected in the tariff. This imbalance cost pass-through system did, however, mean electricity price rises, with a hike of RM0.05 ($0.01)/KW hike in January 2014.
On the other hand, lower costs for liquefied natural gas and improvements in the efficiency of power stations also meant no price rises for the first half of 2016, according to Maximus Ongkili, the Minister for Energy, Green Technology and Water. Indeed, efficiency and productivity have both been increasing for some time across Malaysia. The system average interruption duration index (SAIDI) for TNB has been falling steadily in recent years, from 148 minutes in 2005 to 64.2 minutes in 2013 and 55 minutes in August 2014. This was broadly similar to that of European countries such as the UK and France. In Sarawak, SEB reported a decline in SAIDI from 419 minutes in 2002 to 168 minutes in 2013, while SESB reported 424 minutes in 2013, down from 2867 minutes in 2009.
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