BRIEF OUTLOOK ON MALAYSIAN ELECTRICITY SUPPLY INDUSTRY, TNB & MALAYSIA NATIONAL COMMITTEE OF CIGRE (MNC-CIGRE)

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1 PLENARY SESSION FOR POWER INDUSTRY, AORC-CIGRE TECHNICAL MEETING, 3 SEPTEMBER 2013 GUANGZHOU, CHINA MNC BRIEF OUTLOOK ON N ELECTRICITY SUPPLY INDUSTRY, TNB & NATIONAL COMMITTEE OF CIGRE (MNC-CIGRE) DATUK SERI IR AZMAN MOHD - CHAIRMAN, MNC-CIGRE - CEO/PRESIDENT, TENAGA NASIONAL BERHAD

2 CONTENT ELECTRICITY SUPPLY INDUSTRY (M-ESI) & TNB ELECTRICITY DEMAND GROWTH INTRODUCTION OF GAS TO POWER SECTOR & CURRENT ISSUES FUTURE ENERGY MIX MNC-CIGRE 2

3 ELECTRICITY SUPPLY INDUSTRY (M-ESI) Malaysia s economy or real GDP expanded by 7.4%, 5.1% & 5.6% in 2010, 2011 &d 2012 consecutively after contracted 1.7% in With government s ETP implementation in full swing, Malaysia s economic recovery is well on track with forecasted GDP for 2013 to be a respectable 4.1%. Malaysia ESI has nevertheless remained vibrant. Energy security has been an utmost priority in spite of rapidly depleting indigenous energy reserves (eg gas & oil) as well as implementation challenges of alternative fuels nuclear, hydro & renewable energy. Future challenges s may rising cost of supply & subsidy, resulting in volatile fuel prices and IPP payments, as well as earnings below cost of capital. Zainudin Ibrahim, TNB, 3 rd Power Plant World Asia 2012 as cited/quotedverbatim from Sapphira Chan 3

4 ESI Structure in Peninsular Malaysia TNB Generation - Thermal plants - Hydro planrs - Generation SPV IPPs Current ESI structure remains the same with TNB & IPPs as key players in generation sector However, business activities of TNB is segmented into 5 business entities in anticipation of full implementation of Incentive Based Regulation (IBR) in 2015 Grid System Operator Single Buyer TNB Transmission (Grid Owner) System Operator & Single Buyer are in process to be ring-fenced to enhance transparency, independence and fair play in generation scheduling & dispatch Franchised Retailers TNB Distribution Retail Source: Energy Commission s Peninsular Malaysia Industry Outlook

5 Governance of - ESI 5

6 ASEAN Power Grid Inception under ASEAN Minister of Energy (AMEM) & implemented under HAPUA Existing Interconnection Peninsular Malaysia Singapore (1986, 2 x 200 MW) Peninsular Malaysia Thailand HVAC Bukit Ketri Sadao (1981, 85 MW) HVDC Gurun Khlong Ngae (2001, 300 MW) 6 Potential Interconnection Peninsular Malaysia Sarawak (2022) Peninsular Malaysia Sumatera (2018) Peninsular Malaysia Thailand (2015, 2 nd 300MW HVDC) Rantau Panjang Sg. Kolok (under discussion) Sarawak and Sumatera interconnections are viable options to increase energy security The Singapore & Thailand Interconnections have enhanced system security for all parties Note: HAPUA Head of ASEAN Power Utilities and Authorities

7 Introduction to Tenaga Nasional Berhad Three Major Utilities in Malaysia MD: 16,562MW * Includes IPPs PENINSULAR Tenaga Nasional Bhd (TNB) 21,749MW* SINGAPORE 11,506MW 1,237MW BRUNEI 695MW SARAWAK Sabah Electricity Sdn Bhd (A 83% TNB Subsidiary) 1,141MW* SABAH Sarawak Electricity Board (SEB) FY 09 FY 10 FY 11 FY 12 1HFY 13 TNB -Peninsula Installed Capacity (MW) 11,530 11,530 11,530 11,462 11,462 Total units sold (GWh) 87,780 95,197 97, ,132 52,129 Total customers (million) Total employees 29,149 30,535 31,935 33,568 34,353 Total assets (RM billion)

8 TNB s transmission network performance has shown remarkable improvements over the years System minutes No. of transmission related tripping System minutes System minutes

9 Interruption/Delivery Points Minutes/Delivery Points (minute) MNC Maintaining the excellent achievements is the new challenge to TNB s Transmission ivision Transmission SAIDI FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 Transmission SAIFI FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012

10 Demand Forecast & GDP Outlook Peak Demand is expected to grow 3.7% annually until 2015 Year GDP (%) Peak Demand (MW) Generation (GWh) , , , , , , , , ,420 GDP is still the key variable driving the demand forecast Peninsula GDP is projected to grow at 5.6% in 2013 Source: In the long term, the GDP is Energy Commission s Peninsular Malaysia expected to remain strong at Industry Outlook % p.a. ( ) and 6.2% p.a ( ) 10

11 Electricity Demand Forecast by Sector 100% 90% Historically, the Industrial sector has been dominating the electricity sales 80% 70% 60% 50% 40% 30% 20% 10% 44% 41% 38% 47% 34% 36% 39% 30% 19% 20% 21% 21% Others Industrial Commercial Domestic However, this scenario would change as the nation becomes more service oriented in the future The Industrial sector has seen a steady decline since : 47% 2011 : 44% 2020 : 41% 0% Source: Energy Commission s Peninsular Malaysia Industry Outlook 2013 It is envisaged that the Commercial sector would overtake Industrial by

12 TNB is committed to deliver the Malaysia- ESI s objectives 1 SECURITY OF ELECTRICITY SUPPLY Ensuring system reliability amidst fuel supply adversity 2 EFFICIENTLY-PRICED TARIFF Achieving performance and efficiency-driven tariff reflecting true cost of service 3 EXCELLENT CUSTOMER SERVICE Striving towards best-inclass customer service STRONG DOMESTIC UTILITY Fulfilling the national economic agenda whilst pursuing opportunities to become a regional champion

13 TNB has delivered continuous improvements in Malaysia s security of supply - 40% Supply Disruptions - 25% Losses - 23% Unplanned Outage SAIDI Minutes/customer/year T&D losses Percent Unplanned outage rates Percent % % % Distribution Transmission & Distribution Generation 1 Based on SAIDI (System Average Interruption Duration Index)

14 with Malaysia now ahead of other emerging/developing markets and in line with some developed markets Security of supply (blackouts) 1 Minutes/customer/year 3, , Malaysia is ahead of many emerging/ developing economies and comparable to some mature markets Mexico Malaysia UK Indonesia Brazil Phillippines South Africa 1 As indicated by SAIDI (System Average Interruption Duration Index); latest available data 2 Philippines SAIDI is 160 minutes for Meralco in major areas, while rural electrification by cooperatives average at 1,080 minutes Source: IEA, World Energy Outlook, World Bank

15 Being a strong domestic leader, TNB will help the country achieve national economic agenda, meet customer s aspiration & increase shareholder value Strong domestic leader Powering the nation s progress Benefit Ensure universal access to power Develop power supply to enable national and economic development Delight our customers Deliver secure and reliable supply Excellent customer service that exceeds customer expectations Inspire our people Large, growing and admired employer of choice International mobility opportunities and wordclass capability building Increase shareholder value Fair and stable returns in Malaysia return on RAB > 9% p.a. Robust growth of business net profit growth of 7-11% p.a.

16 CONTENT ELECTRICITY SUPPLY INDUSTRY (M-ESI) & TNB)) ELECTRICITY DEMAND GROWTH INTRODUCTION OF GAS TO POWER SECTOR & CURRENT ISSUES FUTURE ENERGY MIX MNC-CIGRE 16

17 ECONOMIC GROWTH IS THE KEY DRIVER TO ELECTRICITY DEMAND Period Average period growth rates, %pa GDP Sales Generation Peak demand

18 ELECTRICITY DEMAND IS EXPECTED TO GROW UP TO 3% PER YEAR OVER LONG TERM HORIZON 18

19 Electricity Demand by Sector '000 GWh MNC COMMERCIAL & INDUSTRIAL SECTORS ARE FORESEEN TO REMAIN AS KEY PROPELLERS TO ELECTRICITY DEMAND GROWTH Industrial Commercial Domestic Public Lighting Agriculture Mining Steady electricity demand growth in turn drives the fuel demand for power generation especially coal and gas 19

20 CONTENT ELECTRICITY SUPPLY INDUSTRY (M-ESI) & TNB& TNB ELECTRICITY DEMAND GROWTH INTRODUCTION OF GAS TO POWER SECTOR & CURRENT ISSUES FUTURE ENERGY MIX MNC-CIGRE 20

21 NATURAL GAS WAS OFFICIALLY BROUGHT TO THE POWER SECTOR WITH THE INTRODUCTION OF FOUR FUEL POLICY, 1981 National Energy Policy, 1979 National Depletion Policy, 1980 Four-Fuel Policy, 1981 Five-Fuel Policy, late 90 s National Green Technology Policy 70 s Oil Crisis Oil Price Crunch The National Energy Policy (1979) was formulated to create an efficient, secure and environmentally sustainable supply of energy. Comprises three principle objectives. National Depletion Policy (1980) was intended to conserve the country s energy resources, particularly oil and natural gas Four-Fuel Policy (1981) Reduced dependence on oil as fuel for electricity generation Gas becoming primary fuel 4 5 Five-Fuel Policy (late 90 s) Renewable Energy and Energy Efficiency as the fifth fuel and to further diversify energy base and to create a sustainable energy future National Green Technology Policy To attain energy independence and promote efficient utilisation whilst conserving and minimising the impact to the environment 21

22 MNC THE POLICY DRIVES THE FUEL MIX EVOLUTION FROM OIL DOMINANT TO GAS DOMINANT OVER A FEW DECADES Malaysia has been highly dependent on fossil fuels: Oil (1970s) Natural Gas (1990s to 2000s) Coal?? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Oil Distillate Natural Gas Coal Hydro Hydro Coal Natural Gas Distillate Oil 0% 22

23 Peninsular Malaysia s Total Generating Capacity 1 by Plant Type Gas fired power plants are still dominating As at 31 st Dec 2012 As at 30 th June 2013 HYDRO 1,870 MW (9%) OCGT 2,331 MW (11%) HYDRO 1,869 MW (9%) OCGT 2,338 MW (11%) THERMAL 7,756 MW (37%) CCGT 9,122 MW (43%) THERMAL 7,755 MW (37%) CCGT 9,149 MW (43%) Note: 1.Total generating capacity as per Tested Annual Available Capacity (TAAC) 2. TNB s Janamanjung and KEV plants are regarded as IPPs Owner TNB 6,526 MW (31%) 6,540 MW (31%) IPP 2 14,553 MW (69%) 14,571 MW (69%) Total 21,079 MW 21,111 MW 23

24 OVERDEPENDENCE ON GAS IS DEEMED RISKY AS THE POWER SECTOR WAS BADLY HIT BY GAS SHORTAGES IN RECENT YEARS Several breakdowns of gas infrastructure led to severe gas shortages to the power sector This is made worse by the fast depleting domestic gas fields The supply shortages of up to 26% adversely impact the power sector operationally and financially Annual Average: 1250 mmscfd - 10% Annual Average: 1122 mmscfd - 26% Annual Average: 1150 mmscfd - 12% Annual Average: 924 mmscfd Annual Average: 1012 mmscfd 24

25 CONTENT ELECTRICITY SUPPLY INDUSTRY (M-ESI) & TNB) ELECTRICITY DEMAND GROWTH INTRODUCTION OF GAS TO POWER SECTOR & CURRENT ISSUES FUTURE ENERGY MIX MNC-CIGRE 25

26 GAS/LNG MAY HAVE AN IMPORTANT ROLE TO PLAY IN THE FUTURE FUEL MIX Gas/LNG may help to diversify the fuel mix which indirectly helps to maintain and improve the security level of energy industry LNG may also provide a cheaper alternative to distillate and MFO in the event of domestic gas supply shortages 26

27 THE LANDSCAPE OF FUTURE FUEL MIX IS VERY MUCH DEPENDENT ON FUEL AND TECHNOLOGY COSTS Based on current domestic gas price, CCGTs provide the most competitive generation cost for the base load Nevertheless, as the gas price gradually moves to the market price, coal fired plants are expected to take over as cheapest option for base load 27

28 CONTENT ELECTRICITY SUPPLY INDUSTRY (M-ESI) & TNB ELECTRICITY DEMAND GROWTH INTRODUCTION OF GAS TO POWER SECTOR & CURRENT ISSUES FUTURE ENERGY MIX MNC-CIGRE 28

29 MNC-CIGRE Role of Tenaga Nasional Berhad (TNB) in Malaysia ESI and MNC-CIGRE TNB, being the premier power utility, had mooted the idea of forming the Malaysian National Committee of CIGRE (MNC-CIGRE) in Being the precursor, TNB took a leading role and hence formed a protem committee in 1995 with an objective of carrying the roles with regards to the forming of the MNC-CIGRE, which was fully realised in

30 MNC-CIGRE The Malaysia National Committee of CIGRE (MNC-CIGRE) has a membership that ranges from power engineering-related industry to local higher learning institutions. It has been actively involved in many initiatives to promote high voltage power engineering research, development and training in Malaysia. It has also been a platform discuss & share important issues on electrical power systems. Reaching out. We also aspire to enlarge our community and welcome new members especially young engineers. 30

31 MNC-CIGRE Activities Regionally and internationally, MNC-CIGRE has been active in the Asia - Oceania Regional Council (AORC) of CIGRE as well as in some other CIGRE-related activities Future activities We support efforts to have the AORC-CIGRE History book. For next year, MNC-CIGRE shall join force with our sister organization CIRED Malaysia in the 2014 Tenaga Expo, a major domestic event showcasing Malaysian ESI. More knowledge sharing sessions. 31

32 MNC-CIGRE Suggested activity Virtual efficiency power plant (EPP) initiative as a game-changer in electricity supply industry Background: Faced with growing scarcity of resources, decreasing availability of land for electricity infrastructures and transmission routes and wayleaves, innumerable difficulties in dealing with stakeholders, growing financial constraints as well as increasing load and aging infrastructure, how do power utilities around the world adjust to the need to beef up supply? Would virtual efficiency power plants (EPPs) be an imperative option? EPP is a concept that allows aggregated savings in energy, similar to generation of a physical power plant, through harnessing of energy-saving technologies, but it is virtual as it does not exist physically and encourage deferment of investment. It is smart (part of smart grid paradigm) and chic (to policy makers and regulators). Scope (each to be addressed in its respective session): Conceptualizing EPP as energy saving and demand-side management instrument and deferred investment Creating definitive framework for EPPs in utilities Getting EPPs regulatory-ready Utility s imperative: fast-tracking EPPs in addressing energy efficiency Panel session at the end of the Colloquium 32

33 THANK YOU MNC 33