Smart Grid Development – A New Focus

Across the globe, utility players are actively developing smarter grids by embracing new technologies in response to industry challenges. Malaysia is one of the countries that has been putting continuous efforts in delivering reliable, sustainable, greater transparency, intelligent power-delivery systems (smart grid) which can reduce environmental impact and increase operational efficiency.

Understanding the Concept of Smart Grid and its potentials

Smart Grid could be common words that you may have heard from news or at work, but not everyone knows what the grid is, let alone the Smart Grid. The electric grid refers to a network of transmission lines, substations, transformers and others that transmits electricity utility to your home or business from the power plant. In order to make the electric grid “Smart”, the concept is using digital technology such as advanced automatic control and communications techniques and other forms of sensing along the transmission lines to allow two-way communication between the utility and its customers. It integrates innovative tools and technologies from generation, transmission and distribution to work together with the electrical grid to respond digitally all the way to consumer changing electric demand.

Abundance opportunities can be reaped from Smart Grid to move the energy industry into a new era of reliability, availability and efficiency to our economic and environmental health. Due to Smart Grid’s two-way interactive capacity, it adds resiliency to the electric power system by allowing automatic re-routing when equipment fails or outages occur. Smart grids are the key enabler for energy security and integration of renewable energy resources. Net energy metering (NEM) is a type of distributed generation which allows customer-owned renewable energy generators to produce power and allows the producer to sell excess electricity on an energy trading platform to another consumer.

Overview of Malaysia efforts on power sector transformation

Malaysia plans to generate at least 20% of its energy through renewable sources by 2025, up from 6% currently. These renewable sources are solar, biomass, biogas and small hydro energy, according to the Sustainable Energy Development Authority (SEDA). This target will only be achieved if more Malaysians are committed to using renewable energy. In order to better integrate renewable energy into the current power supply system, the smart grid becomes inevitable.

Ministry of Energy, Green Technology & Water (KeTTHA) launched the Malaysian Electricity Supply Industry (MESI 1.0) from 2010-2014 to ensure reliability, transparency, efficiency and sustainability in the electricity supply industry. MESI reform includes key initiatives such as introducing competitive IPP award tenders, Incentive-Based Regulation (IBR) with Imbalance Cost Pass-Through (ICPT), accounting unbundling, gradual rationalisation of gas subsidies and many more.

In 2019, the Ministry of Energy, Science, Technology, Environment and Climate Change (MESTECC) announced the Reimagining MESI 2.0 Reforms 2019-2025 to address the future challenges of emerging technologies that are disrupting the industry. Three segments are being looked at when considering the interventions of technologies to resolve the issues: Electrification – new technologies have resulted in increasing demand of electricity, Digitalisation – allowing better control and connectivity for consumers as well as enables dynamic and innovative energy products, and Centralisation – empowering consumers to actively participate in the electricity supply industry. The ultimate aim of MESI 2.0 is to drive efficiency across the value chain. Among the key reform initiatives for MESI 2.0 are:

  • Efficiency – Allow generators to source own fuel to optimise costs and move from Power Purchase Agreement (PPA) regime to capacity and energy market
  • Green/ Sustainability – Facilitate green energy producers and consumers
  • Customer Experience – Establish Third Party Access (TPA) framework and network charges for the grid to facilitate participation
  • Security – Maintain reliability and system security through continuous investment in the system, continue support for targeted segments and establish Supplier of Last Resort framework to ensure continuous electricity supply to customers

TNB is aggressively installing Advanced Metering Infrastructure (AMI) or smart meters across Peninsular Malaysia

Tenaga Nasional Berhad (TNB) aims to maximise the efficiency and reliability of the country’s national power grid by enhancing its digital and technological advancements. Capital allocation of RM 18.8 Billion has been secured in 2018 to invest in its transmission and distribution grids, including AMI and grid automation. AMI or simply known as the smart meter will allow every household to track their power usage and patterns. Currently, TNB had successfully installed 300,000 smart meters in Melaka under the Regulatory Period 2 (RP2) Phase 1 in 2018, while another 1.2 million will be installed by 2020 in Selangor, Kuala Lumpur and Putrajaya/ Cyberjaya under RP2 Phase 2. The future plan of TNB is to install 9.1 million smart meters by 2026 (RP4) in the Peninsular households to facilitate full AMI benefits for its customers, as mandated by the Energy Commission.

SEDA introduced peer-to-peer (P2P) energy trading programme to encourage more people to use renewable energy such as solar power

Sustainable Energy Development Authority (SEDA) Malaysia is conducting 8-month sandbox for P2P trading pilot run across the electric network (TNB’s grid) at the distribution level, starting from November 2019 to June 2020. The sandbox was approved by the Energy Commission with only solar PV under NEM programme is allowed to participate due to the existing NEM holders available is only with solar PV. P2P energy trading occurs when Prosumer sells excess solar electricity on energy trading platform to another consumer at a rate competitive to retailer’s tariff. Power Ledger (PL) will be the only platform provider for P2P energy trading over the pilot run. The pilot run is conducted in two phases: Alpha and Beta runs. The Alpha will run for two months and during the period there will be no financial transaction as the objective is to test technical operability on energy trading. The Beta will be conducted for the next 6 months in which there will be a financial settlement between NEM prosumers and consumers via TNB electricity bills.

In short, smart grid development has become a priority for most utilities’ provider. According to Smart Grid Index (SGI) by SP Group Singapore, Asia-Pacific region has improved the most in terms of smart grid development progress in relative to the rest of the world. Malaysia’s TNB has scored 52% in SGI 2019, an improvement of 1.79% from last year. Other Asia countries that are leading in terms of SGI include State Grid Beijing – China (79%), KEPCO – Korea (73%), State Grid Shanghai – China (73%), TEPCO – Japan (73%), Tata power-DLL – India (71%), CLP – HongKong (70%) and others. Malaysia has huge room for improvement and this required continuous efforts from various agencies and stakeholders to move Malaysia’s power system towards sustainable and reliable by tapping into emerging technologies.

Written by Ee Wei Yuan, Principal Consultant at 27 Advisory

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