ISSC 2016 - Paper 11
ISSC 2016 - Paper 11
ISSC 2016 - Paper 11
Abstract
Malaysia's energy generation mix has long depended on a single fuel. This
over-dependency harms long-term energy sustainability. This has led Malaysia
to find other alternative resources to generate electricity. Options include coal,
leading to dependency on imported coal and increases CO2 emissions; natural
gas, though Malaysia is currently facing depletion of gas reserve and gas price
fluctuations; nuclear, however the recent Fukushima incident and public
acceptance are issues; or renewable energy (RE), which is interruptible and
expensive. This paper proposes a study to determine the optimal long-term
generation mix for Malaysia using Dynamic Programming. The price of natural
gas, cost and availability of nuclear power, environmental policy and energy
security are all considered in the model. The model was tested on the Malaysian
power system. Result shows that an optimal generation mix for Malaysia in
2030 will be 40% coal, 38% gas, 11% renewable energy, 5% hydro, 5% nuclear
and 1% oil. Increasing RE target capacity and introducing a carbon tax will
affect the development of coal. On the other hand, increasing gas prices reduce
the percentage of gas and increase the proportion of coal and nuclear.
Keywords: Generation mix, Dynamic Programming, energy policy.
1. Introduction
In 1977, about 85% of electricity generation in Malaysia used oil. The global oil
crisis in the 1980s resulted in an increase in oil price. In addition to the discovery
of natural gas, Malaysia’s government was forced to introduce the Four-Fuel
Policy (1981). The four fuel diversification policy focused on oil, gas, coal and
hydro. This policy was implemented to reduce dependency on oil as a primary
114
Sustainable and Optimum Generation Mix Possibilities for Malaysia . . . . 115
Nomenclatures
fuel. Since then, the use of gas increased rapidly until it became the major
resource of electricity (~75% of generation mix) in 2001. Later, depletion of
natural gas reserves and limitation of gas supplies by PETRONAS in 2002 has
made coal an attractive fuel strategy despite being environmentally hazardous.
Hydro may be a cheap, environmentally friendly fuel, but complex technological
requirements and high costs for building dam has made such plans unattractive. In
2001, in conjunction of fuel diversification and awareness in energy efficiency,
the fuel policy was expanded with the introduction of renewable energy as the
fifth generation fuel. The focus of 5th fuel policy was securing a safe, cost-
effective, sustainable and secure energy supply for Malaysia’s power sector [1].
In 2011, it was reported that approximately 57.65% of electricity was
generated from gas, 33.3% from coal, 8.8% from hydro and 0.3% distillate [2].
Over-dependency on a certain fuel types is not a viable long-term option. This has
led Malaysia to diversify its current generation mix with various fuel types for a
more secure and sustainable electricity supply.
Genereration mix model has been developed in [3-5]. However, this paper
proposes a Dynamic Programming (DP) approach for determining optimal long-
term generation mix possibilities for Malaysia’s power sector from 2013 to 2030.
The model takes into account current fuel constraints, policy, and Malaysia’s existing
power development plan. A sensitivity analysis is performed to investigate the effect
of economical and political constraints on Malaysia’s future generation mix.
current supply of gas limited to 1,150 mmscfd, gas-fired plants are limited in
operation [2]. Furthermore, volatile global gas prices reduce investment in gas-
fired power plants, as revenue is not promising. As a consequence, more coal and
other fuels are required, affecting the future generation mix.
1.1.2 Coal
Coal used to generate electricity in Malaysia is entirely imported. In 2011, 73% of
coal was imported from Indonesia, 20% from Australia and another 8% from
South Africa [2]. The issue became worse when the Indonesian government
announced plans to limit coal exports in 2009 as domestic demand grew. A
shortage of coal and an increase in price are the main issues of coal use in
Malaysia. Moreover, coal has the highest carbon footprint among all fossil fuel
resources. In an effort to enhance energy security, the Malaysian government is
also exploring the potential for development of local coal sources, particularly in
Sarawak, as well as securing long-term supplies from abroad.
1.1.3 Hydro
Although Malaysia has an abundance of hydro potential, this generation
technology has not been considered for expansion technology in this paper,
because most of the hydropower potential is situated in Borneo and not the
Peninsular [7]. The hydro potential for Peninsular Malaysia is limited due to flat
terrain. Moreover, developing a new hydropower plant would require support
from state governments, which is not easily obtained [2].
1.1.4 Renewable energy (RE)
Renewable energy is a viable option for generation in Malaysia. However, the
main issues hampering the expansion of RE are a high cost per kWh and low
capacity. The Sustainable Energy Development Authority Malaysia (SEDA) is
targeting 4,000MW of generation from RE by 2030 [8]. The cost and availability
of RE as well as RE development policy will influence choices for RE and other
technologies in Malaysia’s generation mix.
1.1.5 Nuclear
Malaysia is considering building nuclear power plants to diversify its fuel mix.
The Malaysia Nuclear Power Corporation (MNPC) is looking into the possibility
of building a 2GW nuclear power plant, with the first 1GW expected to be ready
by 2021 [9]. However, the recent Fukushima incident and the public acceptance
are the major issues of implementation. Despite safety concerns, nuclear power
plants have some advantages over conventional fossil fuel power plants in terms
of providing a lower cost of electricity generation [10], producing a large amount
of energy, and reducing CO2 emissions.
combined-cycle power plant will use two units of Siemens H-class gas turbines to
achieve plant efficiency at around 60% compared to the efficiency of an F-class
combined cycle plant in the system at around 55%. This power plant was
expected to be commissioned by March 2016 [13]. The second track (restricted
tender) bidding process associated with six first IPP agreements saw the
retirement of three IPPs in 2015, which are YTL Power International Bhd (Paka
and Pasir Gudang) with total capacity of 1,212MW, Powertek (Telok Gong) and
Malakoff (Port Dickson) with both 440MW capacities. Meanwhile, Genting
Sanyen Power Sdn Bhd and Segari Energy Ventures Sdn Bhd, with a capacity of
720MW and 1,303MW respectively, were given an extension to their agreement
for another 10 years beginning in 2015. On the other hand, TNB’s Pasir Gudang,
with a 729MW capacity, will be extended for another five years beginning in
2017.
𝑅𝑚𝑖𝑛 ≤ 𝑅 𝑋𝑡 , ∀𝑡 ∈ 𝑇 (7)
𝑃𝑅𝐸𝑡𝑜𝑡 = 𝑃𝑅𝐸𝑚𝑎𝑥 (8)
𝑃𝑁𝑈𝐶𝑡𝑜𝑡 ≤ 𝑃𝑁𝑈𝐶𝑚𝑎𝑥
(9)
U t Ct , t T (10)
Fig. 1. The position of the technologies in the system on the supply curve
according to their marginal cost.
Figure 4. shows the result of selected plants and retirement plants from DP-
based generation mix model each year from 2013 to 2030. The upper block contains
the expansion plants selected by the DP and the power plants that have been
scheduled for expansion and extension by EC, while the lower block represents the
retirement units during the simulation. It can be seen that the committed expansion
plants, CCGT in Prai (PGEV_2) and the nuclear plant (PGEV_01) emerge in 2016
and 2021, respectively. Four IPPs plants, namely Paka Power Station (Unit_22),
Pasir Gudang (Unit_23), Port Dickson (Unit_25) and Telok Gong (Unit_31), will
retire in 2015. The extended IPPs plants at Sultan Iskandar (Unit_28) will retire in
2022 and at Genting Sanyen (Unit_18) and Lumut (Unit_20) in 2025.
Other expansion plants in Fig 4. are selected by the DP to meet demand growth
and to replace the retirement units. Another nuclear power plant besides the one
scheduled by the MNPC is selected by the DP in year 2025 to replace some units
that retire in that year. A more balance generation mix in 2030 is found with 40%
generation is from coal, 38% from gas, 11% from RE, 5% from hydro, 5% from
nuclear and 1% from oil.
100%
80% RE
60% Hydro
40% Nuclea
r
20%
0%
0 10 20 30 40
CO2 tax ($/tC)
100%
RE
80%
Hydro
60% Nuclear
Gas
40% oil
Coal
20%
0%
4.23 6.22 8.11 10.01 11.9 13.8
Gas prices ($/MMBtu)
4. Conclusions
This paper presents a least cost DP-based model to determine a long-term
generation mix for Malaysia’s industry supply from year 2013 to 2030. Four of
five fold-key points highlighted by TNB will shape Malaysia’s generation mix,
including price of natural gas, cost and availability of nuclear power, environment
policy and energy security are considered in the model. Results show that the
optimal generation mix for Malaysia in 2030 in the base case is 40% coal, 38%
gas, 11% RE, 5% hydro, 5% nuclear and 1% oil. Results of sensitivity analysis
show that introducing carbon tax reduces the contribution of coal plant in the
generation mix. However, increasing the gas price reduces the percentage of gas
power plant and increases the proportion of coal. Clearly, both incentives
encourage the development of nuclear power plant in the future Malaysia’s
generation mix. On the other hand, increasing renewable energy target reduces
dependency on the fossil fuels.
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