MyPOWER Corporation CEO Siti Safinah Salleh says achieving net zero by 2050 is feasible with dedication from all stakeholders. This ensures an equitable energy transition, addressing Malaysia’s energy trilemma effectively.
THE recent World Energy Congress 2024, hosted by the World Energy Council, is the premier global policy event addressing the world’s most pressing energy issues. The century-old council notably coined Energy Trilemma, a policy framework to balance Security, Sustainability and Affordability objectives,
Themed Redesigning Energy for People and Planet, three imperatives were highlighted for an equitable energy transition — not losing sight of users as the primary focus, being realistic according to each country or regional realities, and collaboration through thousands of small steps rather than big moves. This aligns with MyPOWER Corporation’s refreshed reform strategy to prepare Peninsular Malaysia’s electricity supply industry (MESI) for the future shift in demand and supply.
On the demand side, consumption is increasingly diverse. This includes green-conscious consumers with varied green energy preferences, value-conscious consumers with different quality expectations and cost-conscious consumers.
Peninsular Malaysia’s current maximum demand for electricity is 20GW, with over 70% from industries and businesses. High-value manufacturing, AI-driven data centres and transport electrification are set to grow further, whereas household growth tapers, being more sensitive to living costs.
This increasing demand complexity requires a change in long-term power sector planning, alongside industrial and economic policies, especially in expanding competitive clean energy offerings and promoting sustainable consumption.
On the supply spectrum, net zero policies and rapid innovation are transforming electricity technologies. MESI today has an installed capacity of 27GW with a healthy reserve margin of around 40%.
Reserve margin is an insurance for system risk (the higher, the better) with a premium (the higher, the more expensive). Its value is subjective depending on risk. Solar capacity has increased from 965MW to 3,648MW installed capacity over the past five years with over 2,000MW in the pipeline, while fossil fuel generation remains substantial at 37% from coal and 40% from gas, reflecting solar’s intermittent nature.
Historically, gas was the primary generation as a relatively low-cost fuel with a fixed price policy, before 2009. The shift to coal enabled affordable electricity as the gas price was changed to a proxy market price given the outlook in declining domestic gas supply.
While gas prices increased 6.4% over the subsequent 10-year period, electricity tariffs grew at a modest 2.3% in line with inflation. These are policy tradeoffs, affordability and security as coal and gas are stable, at the expense of environmental sustainability.
Today, Malaysia has pledged to curb GHG emissions. First, by not building new coal power plants. A major hurdle lies in replacing existing coal capacity, which currently contributes 12GW of the critical 14GW baseload while adding new capacities with the same stability.
Second, by ramping up renewable energy (RE) capacity to 40% by 2030 and 70% by 2050. Variable RE such as solar is unlikely a like-for-like baseload replacement, even with (still costly) battery energy storage that helps mitigate hourly mismatches but not for long-term security, unless very long-duration options become available. Regardless, increasing variable energy requires significant changes to the grid network both in software and hardware.
Another possibility is returning to gas, which offers stability and some flexibility to support intermittent RE at lower emissions than coal. However, gas will become costlier, notwithstanding it would increase our reliance on imports.
This poses security risks amid rising national protectionism, a tough experience for us during Indonesia’s short-term coal export ban in 2022, and as seen in Europe’s energy crisis due to acute gas shortages. When risks go up, higher insurance is needed.
Energy transition demands a diversified and flexible approach to tackle the many changes. Learning from other countries is vital, but there is no one-size-fits-all approach. Navigating the uncertainties in demand, technology readiness, climate change and socio-economic considerations are among some of the challenges.
Moving too aggressively risks inefficient costs and reliability. Moving too cautiously could mean missed investment opportunities and worsening climate issues.
These uncertainties require agility and looking at all possibilities to prepare for different scenarios. Policymakers and regulators recognise this and the need for taking cautiously bold and measured steps as the status quo is no longer workable.
Among others, the old big-build, centralised, capital-risk-free model of today no longer works and necessitates innovation in financing. Since these decisions affect many generations, balancing between today and future is essential.
Thus, MyPOWER has outlined structural changes required to reform tariffs for cost-reflective and equitable pricing, industry structure for a fit-for-purpose market, governance for cohesive and pragmatic policies, and planning for a more complex and uncertain phase ahead.
While these changes are neither exhaustive, quick nor easy, achieving net zero by 2050 is feasible with dedication from all stakeholders. This ensures an equitable energy transition, addressing Malaysia’s energy trilemma effectively.
Disclaimer: Malaysia Programme Office for Power Electricity Reform (MyPOWER) is a special-purpose agency under the Ministry of Energy Transition and Water Transformation providing strategic research, advisory and coordinating initiatives for Peninsular Malaysia’s electricity supply Industry. The insights and views shared are independent of the ministry, as other factors beyond the scope are considered in the final policy decisions. n High-value manufacturing, AI-driven data centres and transport electrification are set to grow further
This article first appeared in Star Biz7 weekly edition.
