This issue is crucial. If third-party access rates are set too high, making it non-competitive for the private sector to offer products and services via the grid, the liberalisation of the energy sector could stall. — MUHAMAD SHAHRIL ROSLI/The Star
LAST week, the proposed rates for third-party access to the national electricity grid were released, causing a stir among private sector players who claim the rates are too high.
For renewable power producers injecting “non-firm” renewable energy into the grid, the suggested rate is 45 sen/kWh. This rate drops to 25 sen/kWh if the producer manages the intermittency of energy production (such as the lack of solar energy generation at night) independently, thereby selling only “firm output” of energy through the grid.
It’s still unclear if these rates are final or if there will be opportunities for review based on industry feedback.
Third-party access to the grid is a significant step in liberalising the energy sector. It allows producers to sell renewable energy directly to end users using the existing national infrastructure.
While the energy from solar plants merges with conventional “brown” energy on the grid, this is tracked through certificates issued to the off-taker, reflecting the amount of renewable energy purchased from private producers, even though it passes through the national grid.
This method is currently the most cost-effective way for renewable energy to reach consumers, prompting governments worldwide to invest heavily in their grids.
Relying solely on the dominant national producer to meet all renewable energy needs is undesirable; competition is necessary to foster a dynamic market without requiring new infrastructure.
However, this presents a complex challenge: if any private entity is allowed grid access — or, in a more liberalised scenario, allowed to own the grid — how will the grid’s integrity be safeguarded?
Today’s grids, originally built for coal and gas-fired power plants, require significant investments to transition to support a decarbonised energy future.
On the newly proposed third-party access charges, are these rates, as industry players suggest, excessively high?
For instance, the 25 sen/kWh charge exceeds the 12.44 sen/kWh that Tenaga Nasional Bhd
(TNB) has set as its transmission and distribution costs. The grid owner receives energy similar to how it is produced by traditional power plants.
The 12.44 sen/kWh figure appears in the breakdown of charges contributing to the overall electricity supply cost in the country, currently 39.95 sen/kWh, excluding imbalance cost pass-through (ICPT) charges.
The 45 sen/kWh fee also appears high compared to current green energy rates in the country.
If producers must pay 45 sen/kWh to access the grid, the end price for consumers could reach approximately 65 sen/kWh, which is more expensive than any green energy tariff currently available in the market.
More transparency on how these access charges are calculated could clarify whether the grid owner genuinely needs to allocate funds for grid investments, which should be detailed.
This issue is crucial. If third-party access rates are set too high, making it non-competitive for the private sector to offer products and services via the grid, the liberalisation of the energy sector could stall.
Such an outcome would deter investments, as companies continuously seek accessible and competitively priced green energy sources.
Additionally, there is concern over reports that producers in this third-party access programme must find “new investment buyers” in Malaysia and are barred from selling to existing facilities.
If true, this would be a significant setback, effectively excluding current investors — who have long contributed to Malaysia’s economy through job creation and economic activity — from taking part in new green energy initiatives.
These companies, already under pressure from stakeholders to increase their use of green energy, should have access to all new schemes.
Conversely, there is also a case against the full liberalisation of the energy sector.
The UK, with one of the most liberalised energy markets, transitioned to private ownership of all energy network infrastructure in the 1990s.
Today, there is growing dissatisfaction over private companies setting energy rates, which some argue are too high, and concerns over perceived underinvestment in grid infrastructure by these private entities.
This is particularly pressing as governments worldwide plan to shift energy sources to renewables. Consequently, the UK government is considering re-nationalising some of its energy infrastructure.
Thus, finding the right balance in managing energy infrastructure is essential, but it is no easy task for any government.
This article first appeared in Star Biz7 weekly edition.
