The Eliminating subsidies will increase living and operating costs. That is an undeniable fact.
But are we paying the real cost? And what if there are hidden costs based on the specific tariffs imposed? Should we pay for the approach?
There are few cost-cutting measures that could complement government efforts to rationalize subsidies and perhaps cap off rising living and business costs and reduce them on a regular basis.
Measure 1: Direct negotiation through renegotiation of power purchase contracts
From 2014 to 2019, direct negotiations for several power plant projects were approved by the Energy Commission (ST). Before these direct negotiations were finalized, the Malaysian Water and Energy Research Association (Awer) had opposed the move, arguing that additional costs would be passed on to electricity bills. Last July, we proposed (during the budget consultation session) to renegotiate directly negotiated Power Purchase Agreements (PPAs). This will enable the government to save more than RM15 billion and pass on the savings to all electricity users.
Measure 2: Avoid passing on the costs of managing renewable energy intermittency to consumers
The rapid increase in renewable energy (RE) generation increases the risk of intermittent power supply. The renewable energy industry says its technology is cheaper than fossil fuel power plants and achieves “grid parity.” However, the intermittency risks and cost implications of this renewable energy technology on electricity bills are often overlooked. To reduce this risk, fossil fuel plants are placed on standby. The cost of capacity charges for these fossil fuel plants is part of the cost of the electricity bill element, and the government incorporates it into the electricity bill. In other words, the renewable energy sector has not yet reached actual grid parity costs and consumers will have to bear these additional costs.
Mr Awar has repeatedly raised the issue with the government so that corrective measures are taken.
The intermittent nature is due to the power supply from the RE depending on natural conditions. For example, if the weather is cloudy, rainy, or foggy, the solar panel will not be able to continuously generate electricity at a constant output.
Measure 3: Transparency in upstream sectors
Although ST regulates electricity transmission, distribution, and power supply services, cost transparency in the upstream sector of natural gas remains unclear. Mr Hour has mentioned this issue many times, and the government needs to increase cost transparency in the sector.
Can ST develop an incentive-based regulatory type mechanism for gas grids and regasification facilities? How can ST transparently benchmark input costs with another similar economy that relies on natural gas? Is not it?
Under the National Energy Transition Plan, natural gas will play a critical role and cause very high cost impacts with the Net Zero 2050 goal posing a bottleneck for both existing resources and proposed solutions. Masu. Can we get it back on track before the cost bubble bursts?
Measure 4: Closing duplicate agencies
Redundancy in government agencies not only places additional financial burden on governments, but also creates operational obstacles. Regarding the water sector, the Sewerage Services Department has overlapping functions with Pengurusan Asset Air Ltd., the National Water Services Board, and the Indah Water Consortium.
The water department will need to merge with the existing water department within the province that has jurisdiction over water supply. In the energy and green technology sector, the Sustainable Energy Development Authority and Yayasan Hijau may be closed. The functions of the authority are performed by his ST department. Meanwhile, the functions of Yayasan Hijau can be carried out by the Malaysia Green Technology and Climate Change Corporation (MGTC). In addition, under the 12th Malaysia Plan, an organization called Amanah Lestari Alam has been established. This functionality can be centralized under MGTC, allowing for a better coordinated implementation.
By taking these four steps, governments can reduce the impact of costs on electricity and energy prices and ultimately ensure that true costs are reached. This will also help further reduce the government’s financial burden. The energy transition has significant cost implications for citizens and businesses. It is imperative that governments act proactively and bring about rapid change in the interests of the nation, economy and people.
This article was contributed by Piarapakaran S, Chairman of Awer, a non-governmental organization involved in research and development in the field of water, energy and environment.
