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Siew 2014 RoundTable B
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MALAYSIAN ELECTRICITY SUPPLY INDUSTRY (MESI) REFORM INITIATIVES
By
Datuk Ir. Ahmad Fauzi Hasan
Energy Commission
30 October 2014
IEEJ Roundtable for SIEW 2014:Electricity Market Reform in Asia – Opportunities and Challenges
The Energy Industry Policy and Regulatory Framework
Regulator
Regulatees
(Peninsula and Sabah)
Electricity SupplyIndustry
• Sets Electricity Supply Policy• Prescribes Electricity Supply
Regulations• Approves Electricity Supply
Licences and Tariffs
Minister of Energy, Green Technology and Water
Minister of Petroleum
Energy Commission• Advises the minister on matters relating to the
energy sector• Develops legal frameworks• Implements policy• Issues licences and certifications • Regulates the electricity and piped gas supply
industries
Po
licy
Exe
cuti
on
&
Ind
ust
ry
Re
gula
tio
n
• Sets Piped Gas Supply Policy• Prescribes Piped Gas Supply
Regulations• Approves Piped Gas Supply
Licences and Tariffs
Downstream Piped Gas SupplyIndustry
Po
licy
Fo
rmu
lati
on
Policymakers
Electricity Generation Capacity and Fuel Mix
Sabah
MFO/Diesel
Hydro
RE
Gas
GENERATION
CAPACITY
(MW)
PEAK
DEMAND
(MW)
RESERVE
MARGIN
(%)
Pen.
Malaysia
20,944 16,901 24%
Sabah 1,392 907 53%
Sarawak 3,725 1,758 112%
Need /
Benefits
Efficiency Operational efficiency Better price signals Improved investment
Transparency Dispatch Pricing Tariffs
Choice Retailers Products and services Pricing
Fairness Access Dispatch Tariffs
Drivers of Electricity Supply Reform
Evolution of MESI
Distribution
“Vertically Integrated”
Dominated by National Utility-TNB
Early 1990’s -Fully Regulated
TNBG & TNBH
Transmission and Distribution by TNB
Privately-owned IPPsallowed to participate in the generation sector
Mid 1990’s -Multiple Generation
Players
IPPs
Transmission(system operator)
TNBDistribution
Retail
Present
IndependentPower
Distributors /Retailers
Energy Commission
Generation
Transmission
Transmission and Distribution by TNB Privately-owned companies allowed to
participate in generation and limited areas of distribution
Transmission
Distribution
TNB Generation IPPs
Current MESI Structure – Single Buyer “Managed Market” Model
Single Buyer (SB)
A ring-fenced entity in TNB responsible for
procurement of electricity from Generators
and scheduling of generation to meet
demands based on least cost.
Generation Despatch
Daily despatch of IPP/TNB plants based on
variable costs provided in PPA/SLA
Merit order of despatch based on least
variable cost in half-hourly tranche.
Cogen and RE generators sell electricity based
on contract rates/FiT rates.
Grid System Operator (GSO)
A ring-fenced entity in TNB responsible for
the real-time operation of the Grid System in
a safe, secure and least-cost manner.GSO
SB
IPPsCogen, RE
Gencos
Consumers
Franchise Distributors
TNBGeneration
Transmission(Grid Owner)
Planning
Distribution
Consumers
ENERGY COMMISSION
Gradual phasing-out of gas subsidy with stabilization
mechanism
Incentive-based electricity tariff regulation with regulatory
accounts unbundling, performance incentive scheme and
imbalance cost pass-through mechanism
Competitive framework for new generation capacity
development
IPP generation efficiency savings sharing framework
Generation fuel security policy framework
Ring-fencing of single buyer and system operator with
market rules and regulatory oversight
Gas third party access framework
Enhanced time-of-use and cost-reflective tariffs framework
New enhanced dispatch arrangement
Ongoing MESI Reform Initiatives
Current Dispatch Arrangement
New Enhanced Dispatch Arrangement
New Enhanced Dispatch Arrangement (NEDA)
Introduction of Price-based
Bidding to complement current
PPA/SLA arrangements:
Generators with PPA/SLA can offer optional reduced heat rates & VOR. If dispatched, generators will be paid at cost using the lower of the PPA/SLA or optional offer of heat rates & VOR.
Non-PPA generators bid to sell energy to the Single Buyer. If dispatched, generators will be paid at Price as Bid.
In addition to sales of energy, non-PPA generators can offer term-based capacity for short-term system reserve, if required by regulator
Single Buyer Single Buyer
Generators with
PPAs/SLAs
Generators with
PPAs/SLAs
Price
Non-PPA Generators
PPA/SLA ratesPPA/SLA rates
or optional offer of reduced rates
Current Reform Initiatives Are Based On “No Regrets” Steps Approach
Existing situation No regrets stepsMarket implementation
Status quo – Managed market
Improvements to the status quo that have benefits in and of themselves
Initiatives required for trading to commence
Benefits flow from the market introduction rather from the individual initiatives
The reform process consists of two distinct phases:
No regrets steps
Market implementation steps
A possible future MESI structure change in 2020
TNB Transmission
Co
TNB Gen Cos. IPPs
ST Close
oversightIMO / ISO
TNB Distribution Co
Retail Cos.
Non-
contestable
Consumers
Contestable
Consumers
Generation
IPPs
TNB
Transmission
Distribution
Current “Managed Market”
Consumers
Future Liberalised Market
THANK YOU