ENERGY PLANNING CHALLENGES: FROM TNB PERSPECTIVE Regulatory Economics & Planning Division TENAGA NASIONAL BERHAD September 2014 WE VE GOT THE POWER - to serve, to deliver, to excel WE VE GOT THE POWER - to serve, to deliver, to excel
CONTENT The System Today Planning for Future Power System Recognizing & Addressing Challenges in Power System Planning Closure 2
THREE MAJOR ELECTRICITY UTILITIES IN MALAYSIA Tenaga Nasional Bhd (TNB) Sabah Electricity Sdn Bhd (80% TNB holding) Tenaga PENINSULAR Nasional Berhad MALAYSIA SARAWAK BRUNEI SABAH SINGAPORE Pen. Malaysia (2014) 1 Sarawak (2013) Sabah (2013) 6 Customers Installed Capacity TNB Capacity 2 Max Demand ~7.85 mn 21,060 MW 10,814 MW 16,901 MW Customers 3 Installed Capacity 5 SEB Capacity 4 Max Demand 5 0.504 mn 2,930MW 1,352 MW 1,758 MW Customers Installed Capacity SESB Capacity Max Demand 0.49 mn 1,241 MW 449 MW 917MW Note: 1. Source: Power Resources & Planning, Single Buyer Department, TNB) 2. TNB Capacity: Includes Janamanjung & KEV 3. Source: Sarawak Energy Berhad Annual Report 2010 4. Source: www.meih.st.gov.my 5. Source: Load Forecast Unit, SEB 6. Source: Planning Department, SESB 3
INDUSTRY OVERVIEW IN PENINSULAR MALAYSIA Generation Business TNB (Thermal, Hydro) 10,814 1 MW IPPs (Thermal (Gas) and Coal) 10,245 MW Transmission Business TNB Transmission Division Total Overhead Lines Length 19,328 circuit-km Total Underground Cable Length 811 circuit-km Total Transformer Capacity 82,130 MVA Total Number of Substations - 391 Distribution Business TNB Distribution Division Co-generators (KLIA & KLCC) Bulk Suppliers (e.g. Bandar Utama, Sunway Pyramid, Genting Utilities, KL Sentral (Wirazone)) Current Maximum Demand: 16,901MW (June 2014) Customers (Total ~ 7.85 million 2 ) Domestic 82.0% Commercial 16.9% Industrial 0.4% Public Lighting 0.8% Agriculture & mining <0.02% Generation Transmission Distribution & Retail Customers Notes: 1. Includes Janamanjung & KEV 2. TNB Annual Report 2013 4
THE STRUCTURE OF ELECTRICITY SUPPLY INDUSTRY IN PENINSULAR MALAYSIA Regulator Suruhanjaya Tenaga Generation Gg TNB Generation IPP plants Single Buyer (SB) Electricity procurement Manage PPA & SLA Carry out system planning activities Transmission TNB Transmission Grid System Operator (GSO) Distribution TNB Distribution Other Distribution Franchisee Customers Domestic Commercial Industrial Franchise customers Legend: Regulator TNB entity IPP Others Ring-fenced 5
ELECTRICITY DEMAND IN PENINSULA IS INCREASING ON Y-o-Y BASIS Current peak demand: 16,901 MW Recorded in June 2014 339 MW increase (2.0% growth) 16,562 MW Recorded in May 2013
THE DEMAND IS MET BY THE SUPPLY SYSTEM PENINSULAR MALAYSIA MAIN GRID Majority of the power plants are located along the West coast which is near to the load center. Hydro power plants are mostly concentrated in the northern Perak, Kelantan and Terengganu. Total installed capacity of the power plants is 21,060 MW These power plants are connected to the load centers via 500kV, 275kV and 132kV transmission systems The grid system is also interconnected with power system in neighbouring countries : 300kV HVDC link Gurun Khlong Ngae, Southern Thailand (300 MW) 132kV AC link Chuping Sadao, Southern Thailand (80 MW) 275/230kV HVAC link with Singapore Power grid (450 MW) LANGKAWI Chuping Kangar Kuah PERLIS POWER Georgetown PULAU PINANG PERLIS Kota Setar PRAI POWER GELUGOR Alor Setar SEGARI GB3 KEDAH Gurun Bedong Sg. Petani Butterworth Bukit Tengah Kulim Junjung Bukit Tambun Ayer Tawar Lumut JANAMANJUNG Kuala Kangsar Taiping Teluk Intan PERAK Ipoh PERGAU TEMENGOR BERSIA KENERING KELANTAN SG PIAH UPPER SG PIAH LOWER CHENDEROH Papan Batu Gajah Kampar JOR Seri Iskandar WOH ODAK SELANGOR Kuala Selangor Kuala Lipis Kuala Kubu Baru Bukit Tarek KL (N) KL (E) Shah Alam KL (S) Bentong Gua Musang Jerantut PAHANG Kota Bharu WILAYAH PERSEKUTUAN PORT KLANG CONNAUGHT BRIDGE SERDANG Hicom G Banting GENTING SANYEN Salak Seremban Tinggi Paroi PD POWER TJPS POWERTEK PAHLAWAN PANGLIMA 500kV line 500kV energised 275kV line 275kV line Tanah Merah Kuala Berang KENYIR Mentakab Kg Awah Temerloh NEGERI SEMBILAN Kuala Pilah MELAKA Kelemak Melaka Melaka Muar Gemas Batu Pahat Segamat Yong Peng (E) Yong Peng (N) Kuala Terengganu TERENGGANU Telok Kalong Muadzam Shah JOHOR Dungun Kluang Pontian Kechil Gelang Patah TG BIN Kuantan N PAKA YTL Mersing Skudai Johor Bahru YTL PASIR GUDANG 7
CAPACITY & ENERGY MIX FOR PENINSULAR SYSTEM Generation Capacity by Fuel Type Energy Generated by Fuel Type Hydro 4.9% Oil 1.3% Distillate 0.4% Hydro 9% Coal 34% Total : 21,060 MW Gas 57% Coal 43.0% Total: 111,117.16 GWh 1 Gas 50.5% Note: 1. Based on Calendar Year 2013 8
CONTENT The System Today Planning for Future Power System Recognizing & Addressing Challenges in Power System Planning Closure 9
THE ELECTRICITY DEMAND IS EXPECTED TO GROW 2%-3% PER ANNUM IN THE MEDIUM & LONGER TERM Peninsula Electricity Demand Outlook 27,000 25,000 23,000 MW 21,000 19,000 17,000 15,000 Year Demand (MW) 2015 17,579 2020 20,721 2025 22,938 2030 24,598 10
NEW GENERATION CAPACITIES ARE REQUIRED TO MEET THE GROWING DEMAND & TO REPLACE THE AGING CAPACITIES 25,000 New Capacity Projection for Peninsular System (2014-2030) 2,000 20,000 2,000 1,353 15,000 2,000 NUCLEAR MW 10,000 649-2,000 1,353 4,855 9,355 SARAWAK IMPORT HYDRO GAS COAL 2,855 5,000 5,010 6,010 8,010-2014-2020 2014-2025 2014-2030 11
AT THE SAME TIME, THE ENERGY MIX NEEDS TO BE DIVERSIFIED TO ENSURE SYSTEM SECURITY Energy Mix Projection for Peninsular Malaysia (2014-2030) 100% 90% 80% 70% 60% Coal Gas Hydro Sarawak Nuclear RE HHI 1% 2% 2% 2% 2% 2% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 2% 2% 5% 4% 5% 5% 5% 4% 4% 4% 4% 4% 10% 10% 10% 10% 10% 10% 10% 10% 9% 9% 4% 10% 9% 9% 9% 9% 9% 9% 9% 8% 29% 29% 37% 37% 34% 31% 32% 28% 5% 5% 5% 4% 4% 4% 4% 4% 4% 44% 25% 52% 24% 24% 24% 23% 23% 23% 23% 22% 22% 50% 40% 30% 20% 0.45 0.45 0.46 0.46 0.47 56% 57% 59% 50% 42% 0.50 0.50 0.49 0.48 64% 64% 62% 61% 0.50 65% 0.42 58% 0.32 0.32 0.33 0.33 0.34 0.34 0.35 0.35 0.36 48% 49% 50% 50% 51% 52% 52% 53% 54% 10% 0% 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 12
CONTENT The System Today Planning for Future Power System Recognizing & Addressing Challenges in Power System Planning Closure 13
KEY CHALLENGES IN POWER SYSTEM PLANNING ACTIVITIES Sustaining Energy Security MAJOR CHALLENGES Environmental and Socioeconomic Availability of fuel - gas & coal Limitation of alternative fuels nuclear, hydro & RE Uncertainty in Planning Parameters Impact of global economic crisis Volatility of fuel prices Land Related Issues Difficulty in securing Rights-of Way (ROW) for transmission line Limited sites for future Climate change issue linked to burning of fossil fuel Stringent emission standard and global concerns on carbon emission NIMBY syndrome power plant 14
COST OF FOSSIL FUEL IS INCREASING STEADILY EIA fuel cost projections indicated that the prices of liquid fuel and natural gas will be on the rising trend Coal and nuclear are going to be stable and low in the long run Coal in the US is stable mainly due to domestic production and high reserve Nuclear fuel is still expected to be low and stable despite import of uranium Situation is expected to be the same for Malaysia especially the natural gas prices Source: EIA US Energy Price 15
AT THE SAME TIME OUR INDIGENOUS NATURAL GAS IS DEPLETING Power sector needs 1350 mmscfd at least until 2020 Local gas resources are depleting Future gas development will be more challenging: High CO 2 Smaller fields Costly Future demand cannot be met from indigenous sources. Hence, Malaysia needs to import gas in the form of LNG 1 st LNG plant in Melaka to be commissioned in Melaka Possible 2 nd LNG plant in south-east Johor mmscfd = million million square cubic feet per day Source: PETRONAS presentation 16
HENCE, THERE IS A NEED TO IMPORT GAS TO MEET THE DEMAND SONGKHLA JDA (150 mmscfd) JDA Phase 2 300 mmscfd TTPC GELUGOR PRAI SEV / GB3 THAILAND GPPs KERTEH (2000 mmscfd) LAWIT/BINTANG (450 mmascfd) PAKA JERNEH (350 mmscfd) RESAK (200 mmscfd) ANGSI (280 mmscfd) PM-3 (220 mmscfd) Associated Gas (385 mmscfd) PETRONAS imports around 25% of our gas from West Natuna (Indonesia) and Joint Development Area (JDA) in Thailand KUANTAN DUYONG (150 mmscfd) PORT KLANG KUALA LUMPUR CONNAUGHT BRIDGE PORT DICKSON MELAKA SERDANG SEGAMAT SENOKO P. GUDANG West Natuna B (150 mmscfd) West Natuna A 100 mmscfd East Natuna 1000 mmscfd Source: PETRONAS presentation 17
EXPENSIVE LNG AND UNCONVENTIONAL NATURAL GAS CAN BE CONSIDERED AS OPTIONS Future gas could be from shale, tight sand gas, coal bed methane or conventional non associated/ associated fields PETRONAS has signed for coal bed methane gas from Australia to supply the Peninsular Gas is still expected to be one of the contributor for the future 48 shale basins in 38 nations However, there is growing evidence that the extraction and use of shale gas results in the release of more greenhouse gases than conventional natural gas, and may lead to emissions greater than those of oil or coal Source: US EIA 18
EFFICIENT MACHINES HELP TO MINIMIZE THE IMPACT OF EXPENSIVE NATURAL GAS 42% 60% & more? Plants Efficiency 1980s 1990s 2000s 2010s onwards E Class Technology E Class Technology F Class Technology H Class Technology & beyond Gelugor Power Station Tuanku Jaafar Power Station New CBPS Power Station Prai Power Station Paka Power Station Con. Bridge Power Station P. Gudang Power Station 19
THERE IS LIMITED HYDRO POTENTIAL IN PENINSULAR MALAYSIA Total remaining hydro potential in Peninsula is less than 2000 MW, mainly high cost peaking hydro All large hydro potential in Peninsula are utilized except for Lebir and Nenggiri (to be developed). Hydro is very much under the control of the State Governments. Developing new hydro projects requires strong support from the state governments TERENGGANU 1. Hulu Terengganu; 250 MW (2016) PAHANG 1. Ulu Jelai; 372 MW (2016) 2. Tekai; 156 MW 3. Telom; 132 MW 4. Raub-Bentong; 70 MW PERAK 1. Sg. Pelus; 35 MW 2. Kerian-Selama; 21 MW KELANTAN 1. Lebir (multipurpose); 270 MW 2. Nenggiri (multipurpose); 416 MW 20 20
BUT THERE S A HUGE HYDRO POTENTIAL IN SARAWAK Sarawak has the potential to generate over 20,000 megawatts of hydro-electric power With competitive price, potential in Sarawak could be connected to the Peninsular Bakun will not be connected directly to the Peninsular. The power will be used to support SCORE corridor Examples of hydro potential in Sarawak Capacity (MW) Available Year Bakun 2400 2012 Murum 900 2013 Baram 1000 2015 Baleh 1400 2019 Limbang 150 2013 Batang Ai Extension Mertjawah, Belepeh, Linau, Tutoh, Ulu Ai & Lawas 50 2011 1000 2014-2020 21
COAL WOULD BE THE BEST ALTERNATIVE ( FOR NOW) With gas moving to market price, contribution from coal is expected to increase Advancement in clean coal technology such as Integrated Gasification Combined Cycle (IGCC), Coal to Liquid which produces LNG, diesel etc. Increasing efficiency of coal technology power generation makes it more competitive Source: IEA 22
NEVERTHELESS, THERE ARE PROS & CONS WITH COAL + Points Coal is cheaper than gas Coal reserve is abundant throughout the world - Points Coal is 100% imported with 80% of the supply is sourced from Indonesia (current) Indonesia, Australia and South Africa Exposed to fuel supply risks Weather (affecting coal mines) Political (Change of policy or instability) Competition from other countries (e.g. China and India) Environmental risks due to carbon emission Higher coal price due to carbon tax 23
MALAYSIA HAS TO BALANCE BETWEEN ENERGY REQUIREMENT & ITS ENVIRONMENTAL COMMITMENS Malaysia signed the Kyoto Protocol in March 1999 and ratified the Protocol in Sept. 2002 During Copenhagen 2009, PM has indicated that Malaysia is adopting an indicator of a voluntary reduction of up to 40% in terms of carbon missions intensity by the year 2020 compared to 2005 levels subject to assistance by the Annex 1 countries Possibility of more stringent environmental regulations Locally : Clean Air Act Internationally : carbon emission limit 24
RENEWABLE ENERGY (RE) IS A FEASIBLE OPTION WITH SOLAR SEEMS TO BE THE FAVORITE AMONG THE DEVELOPERS Solar Potential: ~6,500 MW (for building integrated) Biomass Biogas Potential: ~1,340 MW by 2030 Potential: ~410 MW by 2028 RE Mini-Hydro Solid Waste Potential: ~490 MW by 2020 Potential: ~360 MW by 2022 RE requires subsidy to move forward. Government introduced Feed-in-Tariff (FiT) in 2011 Source: Ministry of Energy, Green Technology and Water, Energy Commission, MBIPV Project 25
THE AVERAGE PRICE OF A COMPLETED PV SYSTEM HAS DROPPED BY 33% SINCE THE BEGINNING OF 2011 SOURCE: SEIA website: http://www.seia.org/policy/solar-technology/photovoltaic-solar-electric
DEPARTMENT OF ENERGY US (DOE) FORECASTED SOLAR ENERGY TO ACHIEVE GRID PARITY BY 2020 [1] Grid parity (or socket parity) occurs when an alternative energy source can generate electricity at a levelised cost that is less than or equal to the price of purchasing power from the electricity grid. When you reach the point of grid parity, the free market kicks in. Government subsidies are no longer needed to spur innovation in and adoption of solar technology because the market itself creates natural demand for solar energy. Based on 30- year cost recovery period WACC = 6.6% [1] EIA, Levelized Cost of New Generation Resources in the Annual Energy Outlook 2013, U.S. Energy Information Administration, January 2013
THE CURRENT MALAYSIAN GRID CODE (MGC) DOES NOT ADDRESS THE TECHNICAL REQUIREMENT FOR GRID-CONNECTED SOLAR PV Reactive power control (within limits) and voltage regulation Fault ridethrough capability Reactive supply requirement during voltage dip Possible technical requirements for grid connected solar PV for Peninsular Grid Capable of operating continuously within the voltage and frequency variation limits Active power and frequency control by droop function *Excerpt from Mohd Yusof bin Rakob, Utility Scale Solar PV and Effect on the Grid, 23 rd December 2013 28
HIGH PENETRATION OF SOLAR PV REQUIRES ADDITIONAL ANCILLARY SERVICES TO ENSURE SYSTEM SECURITY & RELIABILITY In the light of system security and reliability, the following ancillary services are required to address the intermittency issues that come with solar PV: Higher operating reserve ; and/or Dedicated stand by capacity; and/or Transmission/Distribution network reinforcements Other measures The costs to provide those additional ancillary services must not be overlooked in assessing the utility scale solar integration
ANOTHER FEASIBLE OPTION IS TO HAVE MORE INTERECONNECTIONS WITH NEIGHBORING POWER SYSTEM Power Purchase and Economic Exchange may be possible from ASEAN power Continuous effort and collaboration among ASEAN members is on going. Nevertheless, interconnection issues will be evaluated specifically on case by case basis. 30
NUCLEAR OPTION IS STILL BEING EXPLORED WHAT IS SO SPECIAL ABOUT NUCLEAR? Energy Security and Diversification Reduction of fossil sources dependency Local sources is limited, longer fuel cycle for nuclear could provide security and allow better planning and execution Multiple sources for power generation helps distribute the risk of energy security Economic of scale for long term Longer fuel cycle results to lower fuel cost Cushion other fuel price volatility risks Nuclear levelized cost is the cheapest compared to gas and coal options Environmental concern Relatively very low or non-existence emission in comparison to other sources 0.30 0.25 0.20 0.15 0.10 0.05 0.00 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Gas CC - NO subsidy (21.40) Levelized Cost (RM/kWh) Gas CC - with subsidy (10.70) Gas CC LNG (27.00) Carbon Emission (tco 2 /MWh) Coal (USD 88/tonne) Nuclear Gas CC Coal Nuclear 31
PUBLIC CONCERNS ON NUCLEAR POWER PLANTS Not-In-My-Backyard (NIMBY) syndrome (i.e. safety, health and property related concerns) Incidents in Three Mile Island, Chernobyl and Fukushima raised the bar for nuclear safety globally (Note: Germany has decided to exit from nuclear energy by 2022) Long lead time, 10 to 15 years and high cost of investment (Risks of cost over-run and stalled project) Extensive preparation e.g.: public acceptance, regulatory, site preparation, manpower development (Readiness level) Used fuel storage issues (Environment and safety issues) Proliferation and possibility of terrorism (e.g.: Perception by neighbours) Weapons development (e.g:embargo) Thirty years on, my views have changed, and the rest of the environmental movement needs to update its views, too, because nuclear energy may just be the fuel source that can save our planet from another possible disaster: catastrophic climate change. - Patrick Moore, co-founder of Greenpeace, in the Washington Post, April 16, 2006. 32
DEMAND SIDE MANAGEMENT (DSM) & ENERGY EFFICIENCY (EE) INITIATIVES MAY ALSO SERVE AS SOLUTIONS FOR THE SUPPLY-DEMAND BALANCE DSM & EE are the cheapest, fastest & cleanest energy source. The objective of DSM is to encourage the consumer to use less energy during peak hours, or to move the time of energy use to off-peak times such as night time and weekends A strong policy and program on DSM & EE is required to spur interest in the industry, commercial and residential sector. KeTTHA is coming up with National Energy Efficiency Master Plan to spur growth in DSM and EE DSM is an approach that help utilities maintain a desirable balance between electricity supply and demand while providing value added service for customers. Examples of DSM initiatives: Load management Energy efficient building District Cooling Plant Off-peak tariff 33
KEY ISSUSES RELATED TO DEVELOPMENT OF NEW TRANSMISSION LINES We need the transmission line but cannot secure the Rights-Of-Way (ROW) or cannot get the ROW on time Compensation/Acquisition cost is too expensive thus forcing TNB to look for other options or abandon the projects Lengthy process of getting ROW which can risk the security of supply Strict rules imposed by authorities (e.g. Putrajaya) We have the ROW and we can construct the lines but: The ROW is insufficient Strong objections to having the transmission line by the public or authorities Unable to construct the lines because of illegal encroachment particularly from the squatters Note : Rights-of-Way (ROW) = Wayleave = Rentice = Easement 34 -
MAJOR CONCERNS ON LAND RELATED ISSUES Impact of urbanisation Area once sparsely settled have now become densely populated Development around existing substations/ohl makes it difficult to get public acceptance when proposing to upgrade the lines or to rehab the substations Urbanisation also exposes the line to a higher risk e.g. soil erosion, land slide, theft etc Areas suitable for development of future power plants and substations being threaten and diminishing Demands from authorities/public/customer To underground the existing OHL (EMF issue) To reduce the width of ROW Not to have lines built on common corridor To construct special towers aesthetically blended with the sensitive surroundings 35
EXAMPLES OF DIFFERENT TOWER DESIGNS IN TNB TO ADDRESS THE ROW ISSUES Monopole towers in exclusive residential or commercial areas Compact monopole towers in between elevated highways Quad circuit towers next to a conventional double circuit towers to optimize ROW 36
IN COMPARISON, CERTAIN PRACTICE DIFFERS FROM OUR NEIGHBORS Optimizing Rights-of-Way : Double circuit monopole towers in metro Manila 37
CONTENT The System Today Planning for Future Power System Recognizing & Addressing Challenges in Power System Planning Closure WE VE GOT THE POWER - to serve, to deliver, to excel 38
CONCLUSIONS Future planning for the power system in Peninsular Malaysia is becoming more challenging and demanding, internally as well as externally Changing industrial landscape High expectations from the stakeholders, e.g.: Government/Shareholders : Financially viable and efficient company with high returns Customer/Investor : Lower costs but highly reliable supply and performance Issues related with ensuring adequate fuel supply and secured fuel sources would be the focus in the future Similar concerns by other utilities in this region High generation costs would be likely. Thus, compelling utilities to explore other means and sources for power generation Securing ROW for new transmission lines would be difficult and tough, thus requiring longer project lead-time May lead to system constraints if the planned projects do not complete on-time, thus increasing the operational risks 39