About Malaysian Electricity Supply Industry

MESI Objectives

In the past, the Malaysian Electricity Supply Industry has undergone several reforms to meet the industry objectives. The objectives are to deliver secure and reliable electricity supply at economically competitive tariffs while ensuring environment sustainability and provides customer satisfaction through customer’s choice. The MESI objectives are summarized in figure on the right.

MESI Structure

The most recent MESI reform took place in 2010, which resulted in implementation of competitive bidding for new generation, Single Buyer Framework and Incentive Based Regulation (IBR). This reform was carried out to enhance transparency and provide a competitive environment in the power sector. The overview of current MESI structure is shown by figure on the right.

Presently, MESI operates as a Single Buyer model. Under this model, electricity produced is bought by Single Buyer either based on PPA/SLA or as per bid for NEDA participants. Long term supply is procured via competitive bidding or under certain circumstances through direct awards. Meanwhile, daily unit commitment and dispatch schedule is conducted via least cost option taking into account generator outages and system constraints.

Single Buyer Journey

Single Buyer was established as a ring-fenced department within TNB in September 2012 subsequent to the Cabinet approval on Khazanah’s proposal to restructure Malaysian Electricity Supply Industry (MESI). It is also one of the pre-requisites to the IBR Framework. Nevertheless, the Single Buyer Framework and Single Buyer Rules were officially approved on 24 June 2013, effective 1 January 2014 alongside the beginning of IBR trial period. In 2015, the Electricity Supply Act (ESA) was amended, recognizing Single Buyer as a ring fenced entity. Figure on the right summarises Single Buyer’s journey as ring-fenced department in TNB to date

Read more on ring-fencing of Single Buyer >

MESI Roadmap

The ring-fenced Single Buyer is just a part of the MESI evolution. It is a major milestone in the MESI roadmap towards a full liberalized market as shown by figure on the right. Now, MESI is on the verge of yet another reform. Suruhanjaya Tenaga has recently undertaken a study to look into governance reform of Single Buyer and Grid System Operator whereby both ring-fenced department are to be made independent of TNB. Taking cognizance of the tariff reform and upcoming challenges imposed by the disruptive forces, the industry feels that it is timely for the next step for Single Buyer to happen to continuously improve efficiency, transparency and promote competition in the industry. This move is also expected to provide greater confidence to the market participants and future investors in MESI.

The Future of Electricity

The electricity system is in the midst of a transformation, as technology and innovation disrupt traditional models from generation to beyond the meter. Three trends in particular are converging to produce game-changing disruptions:

  • Electrification of large sectors of the economy such as transport and heating
  • Decentralization, spurred by the sharp decrease in costs of distributed energy resources (DERs) like distributed storage, distributed generation, demand flexibility and energy efficiency
  • Digitalization of both the grid, with smart metering, smart sensors, automation and other digital network technologies, and beyond the meter, with the advent of the Internet of Things (IoT) and a surge of power-consuming connected devices

These three trends act in a virtuous cycle, enabling, amplifying and reinforcing developments beyond their individual contributions (see figure on the right). Electrification is critical for long-term carbon reduction goals and will represent an increasingly relevant share of renewable energy. Decentralization makes customers active elements of the system and requires significant coordination. Digitalization supports both the other trends by enabling more control, including automatic, real-time optimization of consumption and production and interaction with customers.

Source from: World Economic Forum (The Future of Electricity New Technologies Transforming the Grid Edge)

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