Why is power from IPPs still dear despite subsidies?
Regina Lee Published: Jun 23, 2011 10:31 AM
| Updated: Jun 24, 2011 8:19 AM
Think-tank Refsa also reiterates its support for the Power Purchase Agreements to be made public.
A think-tank has raised the question of why power from the independent power producers (IPPs) is still expensive despite the subsidies.
The independent Research for Social Advancement (Refsa) said that if gas subsidies in Malaysia are completely removed, the power generation cost for the IPPs would be 80 percent higher than those of power generators in Singapore, where the fuel prices are based on market rates.
Despite that, Singaporeans pay only 52sen/kWh for their electricity without the gas subsidies, compared to what Malaysian consumers would have paid to the local IPPs without the gas subsidies at a cost of 74sen/kWh.
“It might be perceived that the IPPs cost structure is particularly bloated and there are substantial inefficiencies. Refsa would be pleased to hear the Energy Commission and the Association of Independent Power Producers (Penjanabebas) explanation why Malaysian IPP generation costs are so high,” it said in a statement today.
Penjanabebas had earlier refuted claims that gas subsidies were contributing to the total profitability of its members, calling it “factually incorrect”.
It said the IPPs only generate electricity, and the fuel costs or variable operating expenses incurred are based on the instructions from the off-taker (TNB).
“Instead, the savings in gas costs (difference between international gas prices and the fixed price set by the government) are passed on directly to consumers through lower tariffs,” said the association.
“Refsa acknowledges the factual truth of this statement. However, Penjanabebas has not addressed the issue of why IPP power costs so much despite the massive subsidies given for gas,” said Refsa executive director Teh Chi-Chang.
‘Declassify PPAs’
The think-tank also reiterated its support for the Power Purchase Agreements (PPAs) to be made public .
“The declassification of the toll concessions resulted in a positive result for Malaysians - two toll rate hikes on PLUS have been deferred and it appears future hikes will be much lower than initially proposed,” said Teh.
Energy, Green Technology and Water Minister Peter Chin had previously said that the government cannot compel the declassification of the PPAs because they are agreements between two private entities - Tenaga Nasional Berhad and the respective IPPs.
“Refsa acknowledges Tenaga is a public-listed company. However, government-related entities, including Khazanah and EPF, control 83 percent of its shareholding. In addition, the government maintains a golden share, giving it control over key decisions at Tenaga.
“Given the positive outcome from the declassification of the toll concessions, Refsa calls upon the government to declassify the power purchase agreements. This would allow all Malaysians to have the pertinent facts and figures on hand and facilitate reasoned, constructive debate,” said Teh.
The independent Research for Social Advancement (Refsa) said that if gas subsidies in Malaysia are completely removed, the power generation cost for the IPPs would be 80 percent higher than those of power generators in Singapore, where the fuel prices are based on market rates.
Despite that, Singaporeans pay only 52sen/kWh for their electricity without the gas subsidies, compared to what Malaysian consumers would have paid to the local IPPs without the gas subsidies at a cost of 74sen/kWh.
“It might be perceived that the IPPs cost structure is particularly bloated and there are substantial inefficiencies. Refsa would be pleased to hear the Energy Commission and the Association of Independent Power Producers (Penjanabebas) explanation why Malaysian IPP generation costs are so high,” it said in a statement today.Penjanabebas had earlier refuted claims that gas subsidies were contributing to the total profitability of its members, calling it “factually incorrect”.
It said the IPPs only generate electricity, and the fuel costs or variable operating expenses incurred are based on the instructions from the off-taker (TNB).
“Instead, the savings in gas costs (difference between international gas prices and the fixed price set by the government) are passed on directly to consumers through lower tariffs,” said the association.
“Refsa acknowledges the factual truth of this statement. However, Penjanabebas has not addressed the issue of why IPP power costs so much despite the massive subsidies given for gas,” said Refsa executive director Teh Chi-Chang.
‘Declassify PPAs’
The think-tank also reiterated its support for the Power Purchase Agreements (PPAs) to be made public .
“The declassification of the toll concessions resulted in a positive result for Malaysians - two toll rate hikes on PLUS have been deferred and it appears future hikes will be much lower than initially proposed,” said Teh.
Energy, Green Technology and Water Minister Peter Chin had previously said that the government cannot compel the declassification of the PPAs because they are agreements between two private entities - Tenaga Nasional Berhad and the respective IPPs.
“Refsa acknowledges Tenaga is a public-listed company. However, government-related entities, including Khazanah and EPF, control 83 percent of its shareholding. In addition, the government maintains a golden share, giving it control over key decisions at Tenaga.
“Given the positive outcome from the declassification of the toll concessions, Refsa calls upon the government to declassify the power purchase agreements. This would allow all Malaysians to have the pertinent facts and figures on hand and facilitate reasoned, constructive debate,” said Teh.
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