Electricity supply industry reform and design of competitive electricity market in Malaysia

The Malaysian electricity industry has been a regulated monopoly system for years, and the government aimed to revise this structure to create a competitive and efficient electricity market system since the early 1990s. The reform of the electricity industry started with the privatisation of national utility company and the introduction of independent power plants (IPPS) in Peninsular Malaysia. The restructuring of the power system also considers the objectives to scale up renewables in the electricity sector as an effort to reduce fossil fuel dependence and to reduce carbon emission in the power sector.

In 2019, the government approved a 10-year masterplan to further introduce liberalisation across the power sector from fuel sources, generation to transmission and distribution and retail in Peninsula Malaysia. The government anticipated the reform of the electricity sector will allow power producers to find alternative sources to buy fuel, move from power purchase agreement (PPA) regime to capacity and energy market as well as to allow third-party access the grid infrastructures.

As Malaysia is in the process of res-structuring its electricity sector, the country is facing challenges in adopting an appropriate reform model which is compatible with government energy policy. This paper aims to explore what is the most suitable reform model for the Malaysian electricity sector and how to design and implement renewable support schemes in order to avoid or minimise distortion in the electricity market.

By: Maggie Kumar