Energy consumption in Malaysia is high. RM14.5 billion was spent to buy fossil fuels in 2011. Energy, Green Technology and Water Ministry secretary-general Datuk Seri Ir Dr Zaini Ujang discusses on Astro Awani’s ‘Agenda Awani’ show how electricity can be conserved and how money on electricity tariffs can be saved
Question: If we talk about sustainable energy, this is not a new topic in terms of policy and this has long been seen as serious by the government. But, it is not very popular compared with talking about electricity tariff increases, which are done every six months. So, in that perspective, we broadly see how it is linked to each other. Datuk Seri, may we start with the popular notion first.
Answer: Electricity tariffs in Malaysia are largely determined by gas prices and foreign exchange rates when we buy coal. These two sources account for more than 78 per cent, because 22.5 per cent of our energy is sustainable energy while 78 per cent is energy generated from the gas and fuel that we need to buy.
Some gas supply we obtain from Petronas, some from locally-produced gas, and we also buy from abroad. We also rely heavily on coal, which is almost fully imported because there is very little coal mined in Sarawak. When the foreign exchange is not in ringgit's favour or the price rises at the international level, it has a great impact on us.
That’s why the government is looking at how best to cushion the tariff hike, and for this, we have formulated several mechanisms that we deliberate on from time to time.
Question: Datuk Seri, if we talk of the electricity tariff today and from time to time, related agencies and the Energy, Green Technology and Water Ministry, have stated that we have the lowest tariff compared with other Asean countries. Earlier, Datuk Seri showed that if seen in a global context, we are the fourth lowest in terms of tariff ranking compared with Sweden.
Answer: I have always spoken of this matter concerning consumers who use less than 300 kilowatts (kW) monthly. We are among the nations with the lowest tariff, maybe among the five lowest when compared with our neighbours Indonesia and the Philippines.
They may impose a higher tariff, double ours, on their customers. But, the issue is, why is it cheaper in Sweden? Because they depend more on renewable energy. Primarily, they use hydro electricity, nuclear, wind turbines and they also use a lot of biomass, which is solid waste.
Indirectly, we have to shift our focus now from depending on fossil fuel to a more sustainable source of energy. And the transition must be done well. Otherwise, it will cause a lot of problems in terms of reliability and the quality of our electricity supply. So, I would like to state a few things from the pricing aspect.
The average electricity price in Peninsular Malaysia is 38.53 sen. The cheapest that we can supply electricity at is by generating it through the use of coal, which costs 25 sen.
So, if at this price, we can sell at 38 sen and make a profit.
Gas is around 34 sen, 33 sen, 35 sen, 36 sen and lately, 37 sen. At 37 sen to 38 sen, the difference is just 1 sen. But, if we go for other fuel or sources, it will be more expensive. For example, if we go for solar energy on a large scale, the cheapest price is 40 sen.
So, even then we have to ensure that the tariff level stays at 38.53 sen. This is specific, as at more than 38.53 sen, it will cause a steep rise or surge in our price.
A lot of people have asked me, or the ministry, why they cannot manufacture or install solar energy in their areas or factories and, more often, their shops.
By using the feed-in-tariff (FIT) mechanism, it is an incentive tariff and not a real tariff. So, how do we get this tariff, for example, solar, to start from 52 sen and through FIT, it reaches 74 sen? So, we produce and sell to the utility company. If in the peninsula, TNB, and then we use at 38 sen only.
The profit is huge. So, many people are of the opinion that this is a good method for a new source of income, a new business.
It needs to be clarified that this is an incentive tariff. To get this incentive tariff, we must secure the money from other consumers or domestic consumers using more than 300 kw/h monthly. They will be levied a 1.6 per cent charge that is channelled to our renewable energy fund. Commercial and industrial consumers will be charged 1.6 per cent, even if the usage is small.
Question: In this aspect, that means we can have a gradual and systematic transition towards adopting more sustainable energy, if it's done comprehensively and uniformly in the future.
Answer: Why are we making a fuss about sustainable energy? There are two things. One, we cannot fully depend on fossil fuel. The whole world is shifting from fossil fuel to environmentally-friendly fuel.
And, the most suitable is gas, and gas is more expensive. If we depend on gas, it will cost 37 sen and we sell at 38.53 sen for a small profit of one sen.
Question: Some are saying that if we have sustainable energy, it means that there are industry players. I am also ready to adapt to solar technology usage and others. Why not use solar energy? Why can't we switch to sustainable energy? This is the perspective from the community, which wants the transition to be done immediately, but for policymakers at the ministry and other agencies, the transition must be done as smooth as possible. We need a more elaborate clarification on this, Datuk Seri.
In the earlier session, we discussed the increase in electricity tariff in Malaysia, which is still among the lowest in Asean. If we look at the five countries with the lowest tariff, the benchmark or success story is Sweden. Sweden is among the countries that is frequently used as the best example and model on how it used solid waste management and turned it into renewable energy or sustainable energy. They are so successful in this aspect that they have to import 2.7 million tonnes of rubbish or solid waste from neighbouring countries to accommodate and manage their solid waste for energy. That is one good example for Malaysia, but in the case of our country, probably many would say they face the risk of foreign exchange by using two natural resources. But, Datuk Seri, to move in that direction, how will the transition from the existing system to sustainable energy be carried out?
Answer: There are two things that I mentioned earlier. One, if we depend on gas in Malaysia, we have to pay at a rate that is profitable to Petronas.
Yes, it is our homegrown company. The royalty from Petronas will be paid to the government for various purposes. Secondly, we have to find other methods on how to address the issue of cheaper energy and find a replacement to coal. Coal is cheapest, at 24 sen.
In the current situation, our tariff is fixed at 38 sen, coal 24 (sen). Whatever is above 24 (sen) should be balanced so that we get 38 sen.
The more expensive the energy, the more coal we are forced to use to generate electricity. And, this is what we use everyday. The balancing happens daily.
There are sustainable energy sources that are cheap and are not dependent on the entry of foreign products and attract foreign exchange.
For example, small hydro, not big hydro, which needs huge dams. Where there's a river, you can generate at any part of the river.
And, I have been informed by TNB that they can generate up to two megawatts (MW) using the stream of a big river. They divert the water and generate power.
If we can generate, let's say, 100MW or 200MW, which does not require a dam or foreign exchange, continuously, it means that we buy the machine only once, say from Japan or Germany, not for now as it is not sustainable as we still depend on feed from fuel that we import ... that will be cheaper.
Secondly, we have an abundant supply of biomass. Biomass from wastes, biogas is a major part of solid waste from many sources that are biodegradable.
And, when there's biodegradation, the major portion of it is biogas. We can produce biogas and this can be converted to electricity later.
We also have solar energy, but the most expensive is solar because the capital expenditure or cost at the initial stage in installing solar panel is very high, but in the long run, it's cheap.
Hence, to calculate the feed-in-tariff mechanism, we have fixed the profitability at 10 per cent throughout 21 years, or whatever the number of years we have given. So, regardless of the type, the profit is 10 per cent.
It means that even though people asked why small hydro gets 24, 26 sen only and solar panel gets 52, 74, so many people go for solar, whereas with small hydro, you get the same profit in the long term.
Question: In this respect, if we speak about sustainable energy, the challenge often faced is the need for sustainable demand, but financial sustainability is also another matter.
Answer: Companies that want to pursue such projects must be supported with financing from financial institutions.
The ministry has embarked on several initiatives to ensure we obtain the full support of financial institutions. I am getting Bank Negara to conduct a workshop for financial institutions to explain the requirements to them.
Many financial institutions are not clear about the investment risk involved in such projects.
They are very cautious. For example, tariffs were supposed to have been revised, but this was not the case.
According to their calculation, the review was supposed to have been done, but the government did not do so. They are wary as to what will happen to their investments.
Many financial institutions are cautious about investing in sustainable energy. We will take up the matter with Bank Negara. We will issue the first sukuk for green technology soon. And, before I delve further, I want to clarify another matter. There are three elements to sustainable energy.
One element is electricity generation supply; second is demand, which must be handled well; and, third, the financing element, which is tied to investment.
I want to speak about demand. But, before I speak about demand, I want to touch on financing. As an example, if I am a consumer and want to invest in sustainable energy, it can be done.
As an example, we have the feed-in-tariff (FIT) and net energy metering (NEM) if we want to tap solar energy. (FIT and NEM are methods designed to accelerate investments in renewable energy technologies.)
The FIT quota for industries, commercial and individuals has been taken up. We obtain 338 megawatts.
The quota is fully exhausted. What is available now is net energy metering. With FIT, we generate electricity and sell to utilities, for example, at 74 sen. Then we buy it back for our consumption at 38.53 sen. We make our profits here. But, remember, electricity generation is for between four and five hours only each day.
The electricity supply generated is not much. Second, NEM is undertaken by us for our own consumption and the excess is sold to utilities. We sell for 31 sen only.
And, this is more sustainable in terms of supply and energy planning and is a true reflection of what we can submit to the ministry's tariff. We cannot give subsidies through FIT as it is a promotion tariff.
Before we go for a break, I will like to say that NEM is open. Now, fewer than 2Mw are taken up. Our quota is 500 megawatts. A lot more quota can be used, but people say at 31 sen, there is no profit to be made but, in fact, the profits are huge.
Question 6: Just now, I interrupted Datuk Seri to talk about NEM and the huge profits that can be made. During the interval, Datuk Seri and I talked about using solar energy and before this, we talked about using solar energy at home, which we felt was expensive. Five years ago, the cost was a bit cheaper and this is our investment in the future.
Answer: I am the first person to use NEM at home. In Malaysia, people ask why use NEM and not FIT? As a civil servant who manages energy in Malaysia, I should not use FIT because the profit factor is obvious. NEM is more sustainable and this is what we want to promote and that's the reason why I’m using it at my home. For four kilowatts (kW) of energy generated by solar panels, our investment is about RM27,000. The cost is going down (now), probably RM26,000 or RM25,000.
I was told three years ago the cost was doubled, so it was not profitable. At my home, based on the calculations made between three and four years ago, we have an estimated return on investment. We use some for our consumption and we sell the balance to Tenaga Nasional Bhd.
How do we reduce our dependence? We can reduce the number of energy blocks to cut usage.
There are prices for five energy blocks.
For the first block of 100 kW, it costs 23 sen; the second 200 kW, 34 sen; the next 300 kW, 51 sen; and the next 300 kW, 54 sen; and after 900 kW, 57 sen.
So, if we could reduce the usage of energy blocks, from the 54-sen block to 34-sen block, as an example, by using NEM, we are paying for the block at a cheaper price of 34 sen.
This will indirectly reduce consumers' burden when using electricity and, at the same time, we do not burn fossil fuels, which produce carbon materials that add to global warming. This is a pressing issue.
For example, the United Kingdom will ban the use of fossil fuel for all vehicles by 2040. This is related to our discussion today.
Question 7: Datuk Seri talked about Transformasi Nasional 2050 (TN50), the way forward is green technology, which needs to be explained more accurately and clearly. From that aspect, if we're talking about TN50, we need to start today. Lifestyle changes can be made. What is our analysis and understanding of the way forward?
Answer: We have the National Green Technology Master Plan 2017-2030. By 2030, we expect energy efficiency to increase by 15 per cent compared with 2015. This means using energy-efficient electrical items and gadgets.
The ones we have now may not have star ratings, but the ones in the future will have five-star rating. To be more specific, there is a regulation in place that allows only electrical products with four- or five-star ratings to enter Malaysia. We do not allow those rated below to enter the country.
We also have the Energy Commission label that serves to remind people that these are the materials or equipment that can be used. We also have the Malaysian Green Technology Corporation indirectly promoting certain items and certain labels.
On the whole, not only do we control or manage in terms of energy and its generation, we also control in terms of usage.
We want to reduce energy demand by 15 per cent, so if everyone can decrease their requirement by 15 per cent by using solar energy and energy-efficient equipment, we can minimise electric consumption. For example, open the windows during the day, instead of turning on the lights. This will help to minimise electric consumption and indirectly decrease fossil-fuel based electricity generation, thus cutting down on carbon emission. Bernama