KUALA LUMPUR (Dec 14): Putrajaya has already begun work to lay the foundation needed to liberalise Malaysia’s electricity market to pull in more renewable energy investments to fuel the nation’s energy transition agenda.
The government has identified three key agendas moving forward, namely amending the Electricity Supply Act 1990, reforming the electricity tariff structure, and carving out a single buyer from national utility giant Tenaga Nasional Bhd (TNB), said Mareena Mahpudz, senior undersecretary of the Electricity Supply Division under the newly carved out Ministry of Energy Transition and Public Utilities.
The division was previously under the Ministry of Natural Resources, Environment and Climate Change, which has now split into two, one being the Ministry of Energy Transition and Public Utilities under Deputy Prime Minister Datuk Seri Fadillah Yusof, and the other being the Ministry of Natural Resources and Sustainability, remaining under Nik Nazmi Nik Ahmad.
“Next year, the first biggest task [for the ministry] is the amendment of the law, that is definite," Mareena told a panel discussion at the release of IDEAS' report, Competitive Neutrality in the Malaysian Power Sector: Removing Barriers for a Greener and More Innovative Energy Industry, on Thursday (Dec 14).
The ministry is currently reviewing the Electricity Supply Act 1990 together with the Energy Commission as well as the Attorney General’s Chambers (AGC). “We started it a few months ago, so it's still in the early stages, and there’re already so many issues that have been raised — especially from the AGC. This is an ongoing process and we hope that we can resolve it as soon as possible,” she said.
The second task the ministry is preparing for is to "address and reform the tariff structure because if we want to go to market, especially towards third-party access (TPA), it has to be at market price”.
“If you seriously want to do the TPA and want to have a market, then we need to have an independent market aggregator — as previously announced by Nik Nazmi, carving a single buyer out of TNB,” Mareena said.
In an interview with The Edge in November, Nik Nazmi had said that Malaysia would soon have an energy exchange with an independent single buyer who would manage it, instead of a free market structure. The proposal had been approved by the Cabinet as the government believed an independent single buyer would provide market confidence, according to him.
He had also said that the single buyer was already preparing the energy exchange and was working together with the Energy Commission and the ministry to make it happen.
The ministry acknowledges Malaysia’s need for competition to create a market and the need for more investments, Mareena said on Thursday.
Malaysia requires at least US$415 billion (RM1.9 trillion) to achieve carbon neutrality by 2050, according to Dr Renato Lima de Oliveira, assistant professor of business and society at the Asia School of Business, citing the International Renewable Energy Agency (Irena).
Back to the review of the Electricity Supply Act 1990, she said it would take time. Citing as example the Energy Efficiency and Conservation Act (EECA) that was recently passed in Parliament, she said it took six years from preliminary work in 2018 to getting it tabled in Dewan Rakyat this year.
Even so, work on the EECA may not be over yet, said former Malaysian Gas Association secretary general Rosman Hamzah, who was also taking part in the panel discussion, as he said the second and third reading of the bill in Dewan Negara was postponed from the current sitting.
A proposed legislation must also be debated and passed by Dewan Negara before it can be submitted to the Yang di-Pertuan Agong for his assent before it can be gazetted into law.
Cabinet has decided on the next round of IPCT for Jan-June 2024
The energy ministry is also looking into reforming the tariff structure for electricity to make it more cost-reflective together with a plan to implement a targeted subsidy system, said Mareena.
Putrajaya has already begun laying the groundwork for this in the current Imbalance-Cost Pass Through (ICPT) mechanism period, by imposing a higher tariff on high-consumption households — a tariff surcharge of 10 sen per kilowatt hour (kWh) on domestic users who consume more than 1,500 kWh per month, from the second half of 2023.
"[Reforming the tariff] is not only about the readiness of industry players but also all Malaysians.
"You can’t hope that in the future it's going to be cheaper and cheaper. No, it doesn’t work that way. So, everybody must be ready to be very open-minded. There is no market in this world that's getting cheaper and cheaper,” she added.
Mareena also said the decision on the next round of the IPCT for the January to June 2024 period has been decided in the Cabinet meeting held on Wednesday (Dec 13), but noted that she was unable to disclose the decision.
The government, she said, is of the mindset that a very targeted subsidy is needed, one that gives "only to those who need help".