Attempting to transform an industry as established as a nation’s electricity supply industry is no easy task. That’s why a phased and managed approach is vital for the success of the Malaysia Electricity Supply Industry (MESI) 2.0 reforms, argues Minister Yeo Bee Yin, Malaysia’s Minister for Energy, Technology, Science, Climate Change and Environment (MESTECC).
At the centre of the reforms is a strong message for local power players: innovate or be disrupted. In a recent interview with Energy Watch, Minister Yeo said that the MESI 2.0 reforms and other upcoming initiatives have been drafted so that players in the electricity industry can take advantage of disruptive technologies and trends emerging in the global energy ecosystem.
“If there is one thing I ask industry players or potential players, it’s that how do you further innovate. The power industry has always been seen as a very rigid industry… But we have disruptive technologies in the Fourth Industrial Revolution [IR4.0] that you can actually take advantage of. And the reforms are drafted in such a way that you can take advantage of those innovations.”
Currently, Malaysia has set a renewable energy target of 20% by 2025. To meet this target, MESTECC has introduced several green initiatives that encourage both consumers and power providers to participate. For consumers, net energy metering and peer-to-peer (P2P) energy trading will be introduced, offering access to green electricity supplies.
The recently launched Malaysia Green Attribute Tracking (mGATS) and MyGreen+ platforms also provide an option for low-carbon power sourcing. mGATS and MyGreen+ are both renewable energy platforms, that enables anyone, anywhere to buy renewable energy. mGATS specifically, offers companies an easy way to source Renewable Energy Certificates (REC) that allow them to be part of a rising group of sustainably-driven businesses. The platform also provides another commercial avenue for industry players to capitalise on the growing desire of consumers to access greener electricity.
The Minister believes these types of initiatives will attract large companies and multinational companies (MNCs) to Malaysia, as low-carbon credentials become an increasingly core element of modern business policy. These platforms can support parallel initiatives such as the nation’s anticipated RE100 scheme, which brings together businesses committed to 100% renewable electricity.
Aside from sustainable initiatives, the MESI 2.0 reforms are centred on principles of liberalisation – aimed at designing to support a more competitive industry, where fair practice and market-driven economics can enhance efficiency while driving down costs. The expanded liberalisation is targeted not only at delivering consumer benefits, but unlocking value for the electricity industry as a whole.
“So if there is one thing I ask from the players, all potential players, it’s how do you innovate more?”
One key reform predicted to benefit industry players is the opening up of fuel procurement for power producers, including Malaysia’s national power provider TNB, by 2021. At present, 42% of our current electricity tariffs – which averages to about 29.5 sen (7 US cents) per kilowatt hour – stem from fuel procurement. One of the minister’s goals with MESI 2.0 is to create an incentive mechanism that spurs Independent Power Producers (IPPs) into sourcing their fuel at competitive prices. The compelling case for transformative competition doesn’t only apply on a national scale, but could also lead to global opportunities.
“If you can gain competitiveness through this reform, and thrive in this reform, then you will be able to say maybe I will be able to compete not only in the Malaysian market, but outside of Malaysia. That is what we hope our players can do…. and to be able to say these are the top-notch services I can offer to the world.”
On top of the reforms and new initiatives, the minister also offered another area of involvement for private companies. “We have for ages in Malaysia tried to solve rural electrification, or deep rural electrification, by government funding, yet it is not sustainable. So, [if] you want to make sure it’s sustainable, the only way is to make sure there is a sustainable business model, and the project itself is bankable,” said Minister Yeo.
By establishing a sustainable business model, private companies are encouraged to step in and take over efforts to electrify deep rural areas of Malaysia in a manner that is sustainable in the long-term.
Better business opportunities is a common thread that runs through MESI 2.0 reforms, like it has in numerous markets across the world – each on their own journeys towards a more liberal electricity supply industry. However, as the MESTECC Minister explains, today’s business environment involves more than just economies of scale or access to new markets; it is also important to embrace innovation as a driver of success.