Are Malaysian IPPs inefficient? Research by the non-profit think tank, Research for Social Advancement (REFSA) seems to suggest so. Melisa Idris speaks to Teh Chi-Chang, Executive Director of REFSA, on the matter. 

Recently in the news report "IPPs do not benefit from gas subsidy", the Minister of Energy, Water and Green Technologies Datuk Peter Chin, along with Tenaga Nasional Berhad's chief operating officer, Azman Mohd, had reportedly said that Malaysia's average electricity tariff s 47.31 sen per kWh is gas prices were to be allowed to rise to the market level of RM 40.70 per mmBTU.

According to REFSA, Encik Azman could be quoting an average for all independent power producers (IPPs) including the ones that use coal. And with a sole focus on coal, REFSA has estimated that gas IPP power would cost 59 sen/kWh with gas at RM40.70 per mmBTU.

REFSA's 59 sen/kWH estimate of the cost of gas IPP power is calculated as follows:

a) For the six months ended Feb 2011, the IPP's charged an average of 25.4 sen. This was with gas being priced at RM10.70/mmBTU;
b) The total fuel bill for the IPP's, with gas at RM 10.70, was RM2.973bn.
c) If the gas priced is raised to RM40.70, the total fuel bill will be RM11.307bn (40.70/10.70 x RM2.973);
d) So, there would be an additional RM8.335bn (RM11.307bn-RM2.973bn) of fuel cost that IPPs will pass-through;
e) Based on the 24,858 GWh of power generated by the IPPs, that works out to an additional 33.5 sen/kWh;
f) So, IPP power would cost 59 sen (25.4 sen + 33.5 sen)

For more information, please visit www.refsa.org

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