Tricky balancing act in competitive energy markets

For security and to protect the environment, regulators must ensure a balanced energy generation mix, an energy expert told CEPSI 2018


An adequate electricity supply buffer and a good mix of energy sources are among issues critical to the energy security of a nation. However, it can be a tricky balancing act in competitive energy markets.

Institute of Energy Economics Japan chief economist/MD Dr Ken Koyama said there is a need for a supply buffer to cater for the fluctuations in energy demand.

“We need to have a buffer. When demand fluctuates, there is a need for a surplus. The creation of a surplus supply capacity is a problem in a competitive market.

“There must be a mechanism to ensure there is a capacity balance. This is very important and this is the role of the regulator,” he told the 22nd Conference of the Electric Power Supply Industry (CEPSI 2018) in Kuala Lumpur last week.

Speaking in a panel session entitled “Future Utility and Sustainable Development”, he underlined the importance of having diverse energy generation sources, cautioning against over dependence on a single source.

“From the viewpoint of security and protecting the environment, the regulatory body needs to be careful to ensure there is a balanced energy generation mix. These are complicated issues in a competitive energy market,” he said.

(From left) Daly, gammons, Sharbini, Kotouc and Koyama speaking at a panel session (Source: CEPSI)

For energy markets undergoing reforms, Koyama said reforms cut both ways and they have been known to fail in some countries.

In a separate session, Energy, Science, Technology, Environment and Climate Change Minister Yeo Bee Yin told the 2,000-odd delegates of the conference that a second wave of the Malaysian Electricity Supply Industry reform initiative (MESI Reform 2.0) will be launched — which is expected to minimise the government’s role in determining tariffs in the electricity sector.

She said MESI Reform 2.0 will implement strategies in the next three years which would enable market-driven electricity tariffs.

“By the end of the three years, we can see a more structured and transparent system which could determine cost-based tariffs. But for an automated tariff system, it will take longer than MESI Reform 2.0, maybe 3.0 and 4.0,” she said.

An agency under the ministry — MyPower Corp — would be reintroduced to drive the reform agendas. MyPower stands for Malaysia Programme Office for Power Electricity Reform, an independent company limited by guarantee set up under the ministry to design and implement the reform programme.

In the same panel session earlier, Sarawak Energy Bhd (SEB) group CEO Sharbini Suhaili said to drive socio-economic transformation, an organisation needs to balance three elements: Energy security, sustainability security and affordability security.

In the quest to deliver the transformation, he said it is crucial to have the right people and with the right mindset. At this juncture, SEB has a multidisciplinary workforce of 5,000 people.

“Apart from that, combining with great leadership, smart technologies could create an adaptive organisation. People need to embrace and use available technologies in order to improve productivity and to serve customers with better experiences,” he said.

SEB is a fully integrated power utility and energy development company wholly owned by the Sarawak state. Generating power through hydro and thermal, both indigenous coal and gas, it serves a population of 2.7 million.

Another panellist, IBM global MD for energy, environment and utilities Brad Gammons, said sustainability is a core element in ensuring business growth, and has to be aligned with the overall living requirement and create value across the entire ecosystem.

“An organisation needs to create an environment and platform to support the ecosystem by taking advantage of abundance of available data to achieve higher business objective,” he said.

On energy transition, Gammons said it encompasses the technological, societal, cultural, economic and environmental aspects of the shift from the current system to one anchored in renewable energy sources.

At the same time, he said it must maximise the opportunities available from increased energy efficiency and better management of energy demand.

The session, moderated by McKinsey & Co senior partner for Malaysia Eoin Daly, was also joined by BMW Group head of product management for BMWi Dr Alexander Kotouc.