Development of upstream market models for Malaysia electricity supply industry using system dynamics approach / Norlee Husnafeza Ahmad

The Malaysia Electricity Supply Industry (MESI) has become increasingly dynamic and sophisticated after the privatisation of Tenaga Nasional Berhad (TNB). In light of the government's efforts to reform MESI, a comprehensive model of the Malaysian generation market is necessary to evaluate the cause and effect of the reformation of the base electricity tariff in Malaysia. A generation market model – also called as upstream market model; can provide an overview of the industry and assist the government and power utilities in planning the future of the MESI. Three research objectives are being pursued in conjunction with this study. First, using the System Dynamics approach to develop an upstream market model of MESI as an evaluation tool for MESI. In general, energy market modelling is recognised as a dynamic and complex system; thus, System Dynamics is extensively used in this work as a planning and evaluation tool for the electricity market model. The first model, often known as the base case model, is an evaluation tool developed utilising Malaysia's current market model – the Single Buyer (SB) market framework. In this approach, a government-backed central body is in responsible of purchasing electricity from TNB Generation and independent power producers (IPPs), typically via term contracts. The second objective is to formulate two new models, the hybrid market model and the open market model, which incorporate wholesale market trading. These models are created with the goal of analysing market models that may be suitable for MESI as part of their market reformation planning. The hybrid market model incorporates two market frameworks – the SB market and the wholesale trading market – making it a model of a somewhat competitive market because it includes merchant generators who participate in the trading market as well as existing generators who are bound by the Power Purchase Agreement (PPA). Meanwhile, the open market, the model is built around the concept of a completely competitive market. In this market model, the participating generators will compete to sell their electricity based on their net present value (NPV). The study is then followed by the third objective, which is to build market models that incorporate the policy and incentives provided to RE generators, in line with Malaysia's spectacular expansion of renewable energy (RE), particularly after MESI began to gradually integrate RE into its system. The expansion of RE generation has been thoroughly evaluated in their most recent report on generating development plans in order to address coal supply challenges and fuel price hikes. To examine the impact of the RE policy and incentive deployment on the MESI base electricity pricing, the carbon tax (CT) and the investment tax allowance (ITA) have been adopted. The findings show that the three market models react differently to change. Because the base electricity rate is the main outcome examined in this study, the hybrid market model delivers the highest tariff of the three models. Nonetheless, despite its origins as a fully wholesale market, the open market model offers a lower base tariff than the hybrid market. Meanwhile, the incorporation of CT and ITA into MESI models demonstrates that it has an impact not just on the base tariff, but also on the system's generating mix.