Below-market pricing of fossil fuels discourages energy efficiency efforts

(from left) Ali, Anand and Hamdan believe that the stick approach is the only way to get everyone on-board for energy efficiency.(From left) Ali, Anand and Hamdan believe that the stick approach is the only way to get everyone on-board for energy efficiency.

When it comes to energy efficiency, Malaysians tend to pay lip service to most efforts and policies to promote power conservation into action. Instead, most are happy to continue a lifestyle that embraces all-day air-conditioning and use of inefficient lighting in their offices and homes.

This, says Think City’s Executive Director Hamdan Abdul Majeed, is a result of both apathy and the lack of clear commitment from both the government and society.

“Pervasive consumption rules and so we have come to accept this behaviour as an inherent right,” he pointed out at the Industry Speaks Forum on Does Cheap Oil Weaken The Case for Energy Efficiency organised by the Economic Transformation Programme (ETP) recently.

The Industry Speaks forum was held at the Content Malaysia Pitching Centre in Kuala Lumpur and the panellist included Hamdan, Siemens Malaysia Chief Technology Officer Anand Menon, and Chief Operating Officer of Sustainable Energy Development Authority Malaysia (SEDA) Dato’ Ir. Dr. Ali Askar Sher Mohamad.

The panellists agreed that low fuel price is no friend to energy efficiency, especially in Malaysia, where this is not a top priority. In fact, it could be said to discourage energy efficiency efforts.

“We are living in the age of intensive energy use, consuming more than we need and generally choosing not to change,” said Hamdan.

As for industries, while there is a move towards conservation and energy efficiency, many are still held back by the lack of commitment, cost and concerns about its impact on the bottom line, said Anand.

In agreeing with his fellow panellists, Ali pointed out that fuel to produce electricity is highly subsidised, resulting in much cheaper pricing when compared with other countries in the region.

Currently 84% of electricity is generated through the thermal method. In the fuel mix for generating electricity in Peninsular Malaysia, piped natural gas and Liquefied Natural Gas (LNG) make up the biggest contributors, at about 50% to 55% of the mix.  Seventy percent gas for electricity generation is contributed by piped natural gas fixed at the subsidised price of RM15.20/mmBtu, compared with the market price which is about 50-60% higher.

He further explained that due to cost reasons and the fluctuating price of gas, there is also a growing dependency on coal. At the current rate of consumption, there is a possibility that the usage of coal could go up to 65% in the fuel mix for electricity generation by 2020. “This would be detrimental for the environment,” said Ali.

Paying the price

Both Ali and Hamdan believe that the only way to force behavioural change is by either the force of law or increase in pricing.

“People will be forced towards energy efficiency if they have to pay the real price of electricity,” said Ali.

He added that apart from low pricing, there was also a lack of a holistic national plan that can effectively and consistently implement and enforce policies on energy efficiency as well as promote it via incentives and financing.

He emphasised on the need for comprehensive law on energy efficiency including mandatory requirements and incentives.

The most recent effort towards efficiency is the implementation of the 500 megawatts (MW) of capacity for net energy metering (NEM) beginning 2016 until 2020, with 100MW capacity limit a year in Peninsular Malaysia and Sabah.

This was recently approved by the Ministry of Energy, Green Technology and Water after engaging with various parties including Tenaga Nasional Bhd (TNB) for about a year, said Ali.

NEM not only allows people to generate electricity for their own consumption through the use of the solar photovoltaic (PV) system but also sell off excess energy generated to utility companies.

However, he said that there is a quota of 20 % for residential unit and 40 % each for industrial sector and commercial building, adding that this quota can be reviewed in the medium term if there was an increase in demand from consumers. NEM will be implemented in January next year, whereby applications can be made through an online system.

As for the limit in capacity for NEM, he said this was due to TNB’s request as implementation NEM could affect TNB’s revenue and the company has invested extensively in infrastructure.

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