Electricity tariff increase imminent because of foreign coal dependence

On December 2020, Parti Sosialis Malaysia sounded the alarm about a potential increase in Indonesian coal prices which would have an adverse impact on our domestic electricity prices. However, elected representatives failed to pay attention to the early warning on electricity tariff hikes.

Malaysia lost our energy sovereignty after Barisan Nasional (BN) approved 10,000MW of new baseload coal power plants in the last decade. The coal power plants owned by Edra Energy, Malakoff and TNB had been granted a Power Purchase Agreement (PPA) for 25 years.

This move shifted Malaysia away from domestic gas to foreign coal, exposing our electricity tariffs to geopolitics, currency fluctuations and fossil-fuel volatility. Malaysia’s coal imports will cost nearly RM150 billion for the next 10 years which is unsustainable for the currency, cost of living, economy, and environment.

In 2020, Tenaga Nasional Berhad (TNB) derived 66% of its electricity from foreign coal with Indonesian coal supplying about 42%. Semenanjung is facing an unavoidable electricity price hike in 2022 as Indonesia raised its coal price to US$115.35 (RM480) per metric tonne (MT), the highest in 10 years. Meanwhile, the benchmark coal price set in the base tariff for electricity generation is only US$67.45 per MT.

During the first 3 months of this year, coal produced about 62% of the electricity but represented 72% of TNB’s total fuel cost. The government passes the coal price increase onto the people as higher electricity tariffs through the Imbalance Cost Past Transfer (ICPT). The federal government is slated to announce new electricity tariffs to be enforced from 1st January 2022.

The government must undertake fuel-switching from coal to biomass for all baseload coal power plants. Fuel-switching is the process of modifying the combustion chamber to combust biomass instead of coal for electricity generation. Fuel-switching from coal to biomass is cheaper, faster, and easier than building new gas powerplants.

Biomass such as solid palm oil waste can generate 88TWh of electricity which is more than the electricity generated from coal, that is 81TWh per annum. Solid palm oil waste as fuel for power plants would surely be cheaper than coal. Failure to transition away from foreign coal for domestic biomass by the end of 2022 will put long-term upward pressure on the electricity tariffs raising our cost of living and doing business.

Central Committee
Parti Sosialis Malaysia
State Secretary
Parti Sosialis Malaysia Negeri Melaka

Leave a Reply

Your email address will not be published. Required fields are marked *