Implementation of New Enhanced Dispatch

Arrangement NEDA
- Improve Generation Cost Efficiency and
Facilitate Short-Run Competition -

ASEAN Power Plants Management Forum

17 November 2015
OUTLINE

• Background

• Salient features of NEDA

• Implementation

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Consideration for The Way Forward

 Step of reform to improve the competitiveness, efficiency & transparency

of the ESI ; create a competitive environment.

Towards a market / competitive Based Arrangement

Desired features:

1. Improve productivity and efficiency in operation, utilisation of resources

and management of assets
2. Increase transparency in planning, scheduling, operation, and generation
dispatch.
3. Provide a level playing field and a competitive environment conducive for
investment in MESI
4. Ensure electricity is competitively priced
5. Promote efficient technology such as co-generation
6. Facilitate optimal use of regional resources

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 Other countries that have implemented industry reforms have
generally aimed to address one or all of the following objectives

Objectives of industry reform

 Efficient investment – ensuring that the right investments are in the right place at the right
Increase cost time to ensure value for money (e.g. longest long term capital costs)
efficiencies
 Efficient operations – ensuring the lowest operational costs to the industry, e.g. reserve
share trading
 Efficient consumption – demand side management / participation , energy efficiency

Reduce  Increase private participation / private external investment

Government  Less requirement for Government to be involved in day to day operations
exposure  Free up Government capital / credit

 Competition / contestability in both supply and demand side – consumer choice

Increase
competition
 Technology neutrality – third party access and open regulatory arrangements to allow new
technologies equal access
- Embedded generation (e.g., back-up generators, Co-gen)
- Innovative generation

In most, if not all, cases reliability

of supply is a very high priority
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The initiative on NEDA started in 2013 upon completion of a
study conducted …

• Conducted study, workshop and syndication

• Recommendations submitted
• Drafting of NEDA Rules
2012 - 2013 • Syndication with industry participants to obtain feedback on NEDA arrangements

• ST set up NEDA implementation Project team: ST, SB, SO and TNB

• Team improve and refine NEDA Rules
• Prepare for NEDA Trial Run
2014 • Implement Trial Run

• Review outcome of Trial Run and refinement of NEDA Rules

• Soft launch of NEDA Rules
• SB/TNB to prepare supplementary note for current PPA
2015 • Implement Phase 1 : for Gencos with PPA & SLA, Phase 2: all other generators/non-
PPAs

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 OBJECTIVES OF NEW ENHANCED DISPATCH ARRANGEMENT (NEDA)

1. Enhance cost efficiency through short-run competition in

generation dispatch.
2. Encourage more efficient operation of the IPP and TNB
plants.
3. Promote energy efficient technology such as co-
generation.
4. Provide opportunity for non-PPA generators, to maximise
the use of their existing facilities, to supply electricity for
generation dispatch.
This will benefit the country with cheaper generation cost.

CONFIDENTIAL
 NEW ENHANCED DESPATCH ARRANGEMENT (NEDA)
Current Dispatch New Enhanced Dispatch
Introduction of Price-based
Arrangement Arrangement
Bidding to complement current
PPA/SLA arrangements:
 Generators with PPA/SLA can Generators Generators Non-PPA
offer optional reduced heat rates with with Generators
& VOR PPAs/SLAs PPAs/SLAs
 If despatched, will be paid
at the offered heat rates &
VOR.

PPA/SLA rates
 Non-PPA generators bid to sell PPA/SLA rates or optional offer Price
energy to the Single Buyer. of reduced rates

 If despatched, will be paid

at Price as Bid.

Single Buyer Single Buyer

CONFIDENTIAL
 MAIN FEATURES OF NEDA

1. Generators with PPAs/SLAs can offer reduced heat rates and VOR vis-à-vis
the PPA/SLA rates.
2. Grid connected non-PPA generators e.g. co-generation, embedded
generation and plants with expired contract can participate in the market
by offering energy-price bids.
3. To ensure adequate reserve capacity for security of supply at all time,
Suruhanjaya Tenaga (ST) will continue with new capacity bidding to meet
security criteria
4. No major change to current generation scheduling and despatch
arrangements.
5. No violation to current PPA and GSA.
6. Comply with Malaysian Grid Code.

Enforce the Electricity Supply Act ( section 4(c)) on promotion of

competition in generation
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CONFIDENTIAL
NEDA Rules
No. Title No. Title

1 Introduction 11 Dispute Resolution

2 Objectives of NEDA 12 Commencement of Transitional
Arrangement
3 Principles of NEDA 13 Appendix A1:Submission of offer
4 Registration of Participants and 14 Appendix A2: Submission of offer
Submission of Information <10MW
5 Submission of Offers 15 Appendix A3: Submission of Offer for
Non PPA
6 Fuel Management 16 Appendix A4: Submission of Offer
Transition period
7 Purchase Price 17 Appendix B: Daily Availability
Declaration
8 Penalty and Compensation 18 Appendix C: Timeline of Day Ahead
Dispatch Schedule
9 Connection and Commercial 19 Appendix D: Registration of
Agreements Participants
10 Publication of Key Information 9
 SUMMARY OF BENEFITS OF ENHANCED DISPATCH ARRANGEMENT
NEDA
Values to MESI
Allow generators to offer optional heat rates and
VOR lower than PPA/SLA
Allow non-PPA generators (i.e. co-generation,
embedded generation, self generation, and
expiring/expired IPP and TNB plants) to bid for
availability and energy.
Continue the current practice of competitive
bidding for long-term new PPA capacity to meet
security standard.
CONFIDENTIAL
Benefits
 Maintain and improve benefits of current market
arrangements with savings in generation cost.
 Increase short-run competition in generation despatch
among generators with PPA/SLA.
 Allow more efficient generating plants to run more and
improve overall cost efficiency in generation.
 Promote energy efficiency, particularly efficient technology
such as co-generation by enabling to sell energy
generated.
 Allow expiring/expired IPP and TNB plants to continue
operation for the benefit of MESI.
Ensure adequacy of reserve capacity
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STAKEHOLDERS ENGAGEMENT BY ST, SB AND SO: WITH PLAYERS
TO ENHANCE THE RULES

Stakeholders syndicated Highlights/Issues raised

NEDA is a good avenue for expiring
“Expired PPA/SLA plants will be
IPP/SLA generators, but need to
treated as Merchant Generators
consider fixed costs, and not just the
i.e. offer via energy price, but
VOR, thus may not be able to offer
concern is the offer may not be
good rates
competitive”

View that this is positive

“Perceived other risk issues e.g.
availability and reliability of the
power plant in meeting
obligations (penalties imposed)”
TNB Gen
IPPs
“It would be difficult to secure
gas supply from Petronas
CoGens
without a PPA”
to provide avenue for
genco in coming years.
To date, there are no excess
capacity from Co-generators
because most are self-sufficient,
NEDA drives future investment

“Participants do not know where they

“We need to consider details stand with the offers made Cannot gauge
of submission” the market signal was not informed of the
market clearing price”
Moving Forward in 2015, implementation will start with
Generators with PPA / SLA

• Conducted study, workshop and syndication

• Recommendations submitted
• Drafting of NEDA Rules
2012 - 2013 • Syndication with industry participants to obtain feedback on NEDA arrangements

• ST set up NEDA implementation Project team: ST, SB, SO and TNB

• Team improve and refine NEDA Rules
• Prepare for NEDA Trial Run
2014 • Implement Trial Run

• Review outcome of Trial Run and refinement of NEDA Rules

• Soft launch of NEDA Rules
• TNB agreed to the implementation of NEDA Phase 1
• SB/TNB to prepare supplementary agreement /Term sheet for current PPA &
2015 SLA
• Launch and Implement Phase 1 : 1 October 2015 for Gencos with PPA and SLA.
Periodic review and prepare Phase 2: schedule Q1 2016

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FAQs

• What is NEDA • The industry consistently explore

approaches to improve efficiency.
Through better and improved
efficiency, there will be lower use of
resources and cost of supply.
• NEDA allows and enables:
– Generators with PPA to submit lower
heat rate and/or Variable Operating
Rates other than the PPA rates. This will
improve cost and dispatchability, It does
not impact the capacity payment
– Generators without PPA will have
opportunity to participate in the industry
by offering energy

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FAQs

• What are the • NEDA is to promote efficiency and

impacts of NEDA its impact will be positive to
to the industry players because efficient plants
players? will be higher on the merit order.
Generally,
– TNB (as offtaker) will benefits from
lower cost of energy
– more efficient generators will
benefits from higher generation
– avenue to promote competitiveness
among generators

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FAQs

• How do consumers • NEDA allows generators to re-declare

benefit from heat rates at the various load level and
NEDA? the VOR. As such, if plants are more
efficient, this will translate into savings in
fuel cost. Additionally, lower VOR will
reflect in lower variable cost when
dispatch.
• Both this components will promote
lower generation cost leading to lower
tariff
• However, to manage the transition
process, ST and SB have agreed to start
with declaration of VOR first before
moving on to the next variable.

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Terima Kasih

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