KUCHING: National power company Tenaga Nasional Bhd (Tenaga) may have to seek alternative sources if plans to tap on hydroelectric power from Bakun Dam into peninsular Malaysia fail to materialise.

MASSIVE POWER GENERATION: The 2,400MW Bakun Dam hydroelectricity project is projected to be fully operational by next year, with the first of its eight turbines to be commissioned by the fourth quarter of this year.

Research unit from Maybank Investment Bank Bhd (Maybank Research) said this in its research report yesterday, adding that there was little hydroelectric potential in the peninsula apart from the upcoming 250-megawatt (MW) Hulu Terengganu and 372MW Jerai dams to be commissioned between 2014 and 2015.

As such, new fossil-fuel plants would be needed to meet power demand growth in the peninsula, with the preferred fuel likely be coal due to easier logistical management. Gas, on the other hand, would require heavier investments in infrastructure. In either case, the research house opined that both would have to be imported at market prices.

Adding to this would be supply constraints on the utilisation of gas-fired power plants. Previously, the power sector had

enjoyed more than its 1,250 mmscfd (million standard cubic feet per day) allocation under the National Depletion Policy. However, the government capped the power sector’s usage at this amount as of last year, diverting the balance to industrial users.

The share of gas was set to fall further when the first generation power purchase agreements (PPAs) expire, starting with the 1,212 megawatt YTL Power plants

over 2015 to 2016. Maybank Research also mentioned that national petroleum company Petronas was reportedly not keen to renew the gas supply agreements at subsidised prices. Also, it stated that given these ageing gas fields, declining flow rates might even see renewal at commercial prices unlikely.

It is within this framework that hydroelectric power supply from East Malaysia would be crucial if some element of power tariff price stability was to be retained, said the research house. It added that the cost of generating hydroelectric power was mostly fixed and inevitable, being the cost of development, with low running costs.

At this point, it observed that with subsidised gas running out and the implicit government guarantee less valuable, there would be no option but to pass on fuel costs to consumers.

Spread across Tenaga’s 7.6 million consumers, RM1 billion per annum would just be RM135 annually per consumer or less than RM12 per month.

On this, the research house said Malaysia could continue to defend low power prices for a few more years but it would be at the risk of having to make a difficult adjustment to reflect global prices when its reserves were depleted.

On the other hand, it mentioned that certain initiatives had been proposed by the government as a way to address the matter, one of which would be the phasing-out of subsidies as part of the New Economic Model.

With power consumption at subsistence levels by the low- and middle-income population segments it could continue to be charged at low rates.

Currently, 55 per cent of households that consumed less than 200 kilowatt per hour (kWh) per month were charged only 21.8 sen/kWh or less than RM43.60 per month.

These households should remain protected against higher tariffs, as they had been since 1997. Conversely, the tariff hike could be applied across the balance heavy household, commercial and industrial consumers.

On the Bakun Dam project, Maybank Research reiterated the heads of agreement signed by Sarawak Energy Bhd (Sarawak Energy) and Tenaga in 2008, in which the former was to sell 3,000MW of power to Tenaga from 2017 to 2020 and an additional 5,000MW from 2021 to 2030.

The electricity was to have been transmitted to peninsular Malaysia via submarine cables, of which the first two, capable of transmitting 800MW each, were slated for completion in 2016 and 2017.

Due to little progress seen on these programmes, the research house underlined reports saying power from Bakun Dam might not be delivered to the peninsula after all. Instead, it would seek to retain the capacity to power its aluminium smelters, of which two in the pipeline would need up to 1,800MW power requirements.

Quoting the state’s Deputy Chief Minister, Datuk Patinggi Tan Sri Dr George Chan, Maybank Research said the Bakun power would first be used to power the smelters until the submarine cables were ready. Subsequently, these smelters would be supplied from new dams when the Bakun power was transmitted to peninsular Malaysia.

The new dams would consist of the 944MW Murum dam located upstream of the Bakun dam would be scheduled for completion by 2013. Two more dams, namely Baram (1,200MW) and Balleh (1,400MW) would be completed in 2015 and 2016, respectively, in addition to three smaller dams-Pelagus (410MW), Limbang (245MW) and Lawas (100MW).