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PRESS RELEASE: ENERGY SUPPLY SECURITY AND HOW IT IMPACTS OUR ELECTRICITY PRICE?

Date: 25th NOVEMBER 2018 (SUNDAY)

ENERGY SUPPLY SECURITY AND HOW IT IMPACTS OUR ELECTRICITY PRICE?

Changes in energy resources’ prices gives direct impact to electricity pricing mechanism. We are aware that the fuel cost is a pass through. Let us review 4 main issues that directly impact energy supply security and electricity tariff.

ISSUE 1: OPEC AND CARTEL PRACTICE
In late 2014, Organisation of the Petroleum Exporting Countries (OPEC) which is a cartel organisation decided to increase oil production and caused oil price to tumble. However, in late 2016, OPEC has decided to reduce the production to push up the oil price. Instability such as this causes countries like Malaysia to be affected adversely in the aspect of economy and development of energy sector. In addition to that, low oil prices also caused electricity generation using Non-Renewable Energy (NRE) resources to be cheaper and has caused investment into Renewable Energy (RE) to be more expensive relatively. This situation can happen to any of our energy resources or technologies that are associated to energy resources. This type of actions increase risk to our energy supply security.

ISSUE 2: IMPORT MARKET RISK
When we import energy resources or technologies associated to it, it will increase risk to our energy supply security. For example, we do not own coal resources. Therefore, we will be dictated by world coal prices and pricing set by countries that we purchase coal from. Price volatility as well as possible cartel practice (like what OPEC did) will cause the coal prices to be volatile and increase energy price. In addition to that, technologies also can give us impact such as this. While we have a lot of sunshine, Malaysia does not own solar technology. We have to buy these technologies from foreign companies. Technical and economic barriers placed by certain technology owner and their country of origin are still making environmentally friendly technologies expensive for countries like Malaysia.

ISSUE 3: RINGGIT FLUCTUATION
When we import products, services and resources, we need to use foreign currency to purchase them. For example, between January - March 2014, the coal price was USD (US Dollar) 79.55 per Metric Tonne (MT) which is RM 256.73/MT at 3.2273 exchange rate. During the same duration in 2016, the coal price dropped to USD 57.30/MT which is a drop amounting to USD 22.25/MT. Unfortunately, the coal price was RM 243.43/MT at 4.2487 exchange rate. This means while there was a global drop in coal prices, we in Malaysia could not enjoy the saving due to weaker ringgit. This is another form of risk to our energy supply security. In 2018, coal price is getting higher and the Ringgit is still weak. This will cause the input cost from coal to the tariff becomes higher and burdening.

ISSUE 4: ALL FUEL COST IS A PASS THROUGH
Any fuel cost incurred during electricity generation process is a pass through to tariff. Therefore, it is important for Malaysia to have an equitable and smart electricity generation planning as well as implementation. It is also equally important to have more efficient electricity generation power plants as old power plants waste a lot of energy resources.

On the other hand, what do Malaysians think about going for more RE? Are Malaysians willing to pay higher electricity bill for RE usage? Based on National Energy Security Survey (NESS) data by AWER, 13.08% of Malaysian says they are willing to pay higher electricity bill for environmentally friendly RE and the balance 86.92% says they are not willing to pay higher electricity bill for RE usage.

As part of rebalancing of our energy supply security, there will be a time where RE can be made more affordable especially when GRID PARITY is achieved. Grid parity for RE can be achieved when the generation cost of RE reaches similar or lower cost compared to the generation cost of NRE. Furthermore, fossil fuel will deplete one day as these are finite resources and cannot be replenished in short period of time. Therefore, it may increase the electricity cost in the coming future if we continue to use these resources. Malaysia needs to explore smartly into RE resources and slowly become technology owners.


Piarapakaran S.
President
Association of Water and Energy Research Malaysia (AWER)

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 
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