Malaysia risks electricity tariff hikes from foreign coal dependence

The full operation of TNB’s Jimah East Coal Power Station raised the demand for foreign coal to 37.4 million Metric Tonnes per annum to generate 2/3 of Malaysia’s electricity demand. The coal price rally between late 2016 – early 2020 was a serious headache for TNB before Covid-19 caused the price of coal to crash.

TNB will spend about RM10 billion by the end of 2020 (equivalent to 0.6% of national GDP) to import coal. TNB sources its coal from Indonesia (66.5%), Australia (19.1%), Russia (12.8%) and South Africa (1.6%). TNB relies extensively on Indonesian coal due to lower freight costs from a shorter distance.

Table 1: Coal Price Paid & Imported by TNB (2015-2020f)

Average Coal Price (RM/MT)236.0231.1314.7388.1326.3261.6
Coal Import (million MT)22.225.427.430.828.8*37.4
Coal Cost (RM’ million)5,239.25,869.98,622.811,953.59,397.49,783.8

Source: Tenaga Nasional Berhad, Nov 2020
*Outage at TNB Janamanjung (Unit 2) reduced coal demand

Indonesian miners will reduce coal production by 9% this year to boost prices. China has signed a RM6 billion deal to import Indonesian coal to replace Australian coal imports. Coal import costs may reach RM15 billion per annum once prices begin to rebound from late 2021.

Kumpulan Wang Industri Elektrik (KWIE) was used to fund Bantuan Prihatin Elektrik (BPE) so Putrajaya’s ability to subsidise coal imports is limited. Thus, TNB will be forced to increase electricity tariffs especially for the industrial and commercial sectors causing goods prices to increase, hurting our people and our exports.

Malaysia should conduct fuel switching from foreign coal to natural gas. Fuel switching is a minor renovation to the coal power station to burn natural gas instead of coal. The Gas Supply Act 2016 allows the government to regulate natural gas prices for power plants to our peoples’ interests.

Parti Sosialis Malaysia (PSM) urges Perikatan Nasional (PN) to protect Malaysia’s long-term energy security and affordability by ditching foreign coal.

Central Committee
Parti Sosialis Malaysia (PSM)

State Secretary 
Parti Sosialis Malaysia Negeri Melaka (PSM Melaka)

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