Declining gas production will drive up power prices, says Rafizi

Electricity prices are likely to keep rising over the next five years as Malaysia runs short of domestic gas while phasing out coal-fired power plants, warns Rafizi Ramli.

The former economy minister said the issue went far beyond Tenaga Nasional Bhd (TNB) or the burden of monthly electricity bills, describing it instead as a pressing energy-security challenge.

“This is not just a TNB problem. This is a national problem,” he said during a recent episode of the Yang Berhenti Menteri podcast.

Rafizi said Malaysia’s power-generation system was designed decades ago, when the country had an abundance of gas.

However, he said domestic gas supply in Peninsular Malaysia was now increasingly insufficient, forcing the country to rely more on liquefied natural gas (LNG) imports.

He said the impact was already evident in gas pricing, with Tier 2 gas surging sharply from a reference level of about RM46 per million British thermal units (MMBtu) to between RM70 and RM80 per MMBtu, following the disruption around the Strait of Hormuz.

According to Rafizi, the sharp price increase suggested that domestic gas supply was not enough to meet electricity-sector demand, even at around 800 million standard cubic feet per day.

“Malaysia has to import gas. That means the gas balance is already a problem,” he said.

Rafizi said recent government measures to cushion electricity bills should not be seen as a permanent solution.

Prime Minister Anwar Ibrahim recently announced that electricity bill protection for domestic users would be expanded from 600kWh to 800kWh per month from this month to Dec 31.

Under the move, domestic users consuming up to 800kWh a month will be exempted from the Automatic Fuel Adjustment (AFA), retail charges and sales and service tax.

However, Rafizi warned that the underlying problem would only deepen as domestic natural gas production continues to decline, forcing Malaysia to rely more heavily on imports to meet demand.

Peninsular Malaysia’s electricity supply is anchored mainly by three sources: coal, gas and renewables.

Recent data showed coal making up about 57.9% of electricity generated, followed by gas at 34.9%, while hydro and solar accounted for 4.7% and 2.5% respectively.

Rafizi said Malaysia could not continue relying on coal as a long-term solution, noting that the country has committed to net zero emissions by 2050.

He said high-carbon power generation could also expose Malaysian exporters to carbon taxes in markets such as Europe, Japan and South Korea, reducing their competitiveness in the global market.

At the same time, he said solar power could not be scaled up quickly enough to fully replace coal because of constraints involving land, battery storage, financing and the slow rollout of rooftop solar systems.

“We cannot turn the whole country into a solar field. We still need land for padi, palm oil and other uses,” he said.

The warning comes as the government is also studying the potential role of nuclear energy in Malaysia’s future energy mix.

Deputy prime minister Fadillah Yusof said in March that MyPOWER Corporation Malaysia was undertaking a comprehensive assessment of Malaysia’s potential nuclear energy programme, covering policy development, legal and regulatory frameworks, project feasibility, industry participation, stakeholder engagement and human capital development.

Rafizi said gas was supposed to act as the transition fuel while Malaysia expands renewable energy and gradually phases out coal.

But he said this created a contradiction because Malaysia did not have enough domestic gas.

Rafizi added that greater reliance on imported LNG would lead to higher cash outflows because purchases are settled in US dollars, putting pressure on the ringgit if Malaysia had to spend billions annually to secure gas imports.

He warned that dependence on imported gas would also weaken Malaysia’s energy sovereignty, pointing to Europe’s reliance on cheap Russian gas before the Ukraine-Russia war.

“We have seen what happened to European countries when they depended too much on cheap gas from Russia,” he said.

Rafizi said the burden would eventually fall on consumers because the government cannot subsidise electricity costs forever.

He said the AFA mechanism should therefore be understood in a wider context, as electricity bills are likely to become more exposed to movements in fuel prices and foreign exchange.

Rafizi said gas shortages, rising import costs and the transition away from coal meant electricity tariffs would remain under pressure unless Malaysia accelerated renewable energy deployment and addressed the country’s long-term gas balance.

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