Pilot project to open coal market set for 4Q

The idea to open the supply of fuels for the power-hungry plants is part of Malaysia’s push to liberalise the electricity industry


THE government may open the coal market for power plants as Putrajaya seeks to reduce the cost of electricity generation in the country.

A pilot project to open the coal market to supply the natural resources to fuel the power plants is expected to start by the fourth quarter (4Q) of this year, said Energy, Science, Technology, Environment and Climate Change Minister (MESTECC) Yeo Bee Yin.

The idea to open the supply of fuels for the power-hungry plants is part of Malaysia’s push to liberalise the country’s electricity industry. Fuel costs — which typically comprise coal and natural gas — account for about 40% of electricity tariffs and nearly 70% of power generation costs.

Yeo said trials on natural gas supply last year were successful through a partnership between Shell Malaysia and Tenaga Nasional Bhd (TNB), registering savings of over RM5 million in just two weeks involving two plants.

TNB Fuel Services Sdn Bhd and Petroliam Nasional Bhd are currently the sole providers of coal and natural gas supplies respectively.

“If you look at the timeline, by 3Q we should have the framework (for coal) and in 4Q, we will do a pilot project on that, for people who would like to do a pilot project on coal,” Yeo told reporters at a news conference after the launch of MESTECC Initiative 2020 in Kuala Lumpur yesterday.

The government now faces the challenge of creating incentives that will push independent power producers (IPPs) to source for cheaper fuels.

“Right now, every sen of the fuel cost is passed through the power purchasing agreement. So, the question now is, how do we incentivise IPPs because no matter how much they source and what they source, they will eventually pass it to consumers, so there is no incentive to source for cheaper fuel.

“We are confident there will be more suppliers (for fuel) but the question is whether there is a will from the demand side. We will be engaging with the IPPs. There is no conclusive decision yet, so we will continuously engage with them,” Yeo said.

The trial is part of the government’s 10-year plan to reform the power industry. The master plan — known as Malaysia Electricity Supply Industry 2.0 (MESI 2.0) — aims to liberalise the electricity industry in Peninsula Malaysia across the board from fuel sources to generation, transmission and retail.

Earlier, Yeo announced 130 initiatives her ministry plans to carry out for the year, comprising targets to increase Malaysia’s renewable energy (RE) capacity by 470MW and to offer RE quota of 1,480 MW, among others. The ministry is also expected to table an act on transboundary pollution in 2020.

Haze from forest fires in Indonesia last year was among the worst in recent history, raising concerns on public health, affecting tourist movement and airline operations.

This prompted Putrajaya to consider its regulation to take action against companies responsible for the annual smog.

Yeo said the legal framework, which was scheduled to be discussed in Cabinet yesterday, would not only cover transboundary haze but also waterway pollution in the region.