Electricity

Malaysia is promoting coal as a fuel of choice for power generation, to free up more natural gas for export.

Malaysia has approximately 16 gigawatts (GW) of electric generation capacity, of which 87% is thermal and 13% is hydroelectric. In 2003, Malaysia generated around 79 billion kilowatt hours of electricity. The Malaysian government expects that investment of $9.7 billion will be required in the electric utility sector through 2010. Much of that amount will be for coal-fired plants, as the Malaysian government has adopted a policy of attempting to reduce the country's heavy reliance on natural gas for electric power generation.

The largest thermal project under development in Malaysia is the 2,100-MW coal-fired Tanjung Bin project in Johor province. Sumitomo was awarded a $1.5 billion contract in early 2003 by SKS Power, a Malaysian IPP, for the construction of three 700-MW generating units at the site, with the first unit scheduled to begin commercial operation in August 2006.

In 1994, the Malaysian government granted approval for the massive 2.4-GW Bakun hydroelectric project in Sarawak. Scheduled for completion in 2002, the Bakun Dam had been slated to send 70% of its generated power from Sarawak to Kuala Lumpur through the construction of 415 miles of overhead lines in eastern Malaysia, 400 miles of submarine cables, and 285 miles of distribution infrastructure in Peninsular Malaysia. In addition, expansion plans included a high voltage line south to Johor Baharu and north to Perlis, near the western Thai border. A local company, Ekran, was awarded a turnkey contract to manage the project in January 1995. In 1996, the construction contract went to Sweden's Asea Brown Boveri (ABB). However, in early September 1997, the Malaysian government announced that it was delaying the project indefinitely, citing an unexpected rise in the dam's cost due to the country's economic difficulties at the time.

In mid-1999, work resumed on the river diversion tunnels, a major component of the project, which has since been completed. The Malaysian government has taken control of the project and negotiated financial settlements with the firms involved. The subsea transmission line concept has been abandoned, and the Malaysian government is exploring the possibility of sales of electricity to Brunei and Indonesia. While it had appeared likely that the project would be scaled back from its 2,400-MW capacity, the Malaysian government announced in February 2001 that it had decided to complete the project on its original scale. Bids were received in July 2002 for the main construction work for the dam, and a construction contract was awarded to a consortium of six Malaysian and Chinese companies in March 2003. Current plans call for the 300-MW generating units to be brought online in stages, with the first capacity to come online in 2007. While electricity demand in Sarawak is modest (currently under 1 GW), the potential to use the electricity to develop a metal smelting industry in Sarawak is largely behind the renewed interest in the project.

Malaysia is considering reforms to its power sector to make it more competitive and lower costs. Currently, three state-owned utilities dominate power generation and distribution in Malaysia. The market was opened to independent power producers (IPPs) in 1994, and 15 IPPs were licensed, though not all of the projects have been built.

Tenaga Nasional Bhd, the main state-owned utility, began in 1999 to divest some of its power generation units. Eventually, Malaysia expects to achieve a fully competitive power market, with generation, transmission, and distribution decoupled, but reform is still at an early stage and the exact process of the transition to a competitive market has not been decided. The issue is still under study, and many observers have voiced caution in light of the experiences of other deregulated utility systems.

From Energy Information Administration.