Sarawak has plenty of potential to serve as a regional power supplier

Given Sarawak’s budding power generation potential and the appeal of the cost competitiveness and sustainability of hydropower, the state government is in the midst of securing power exchange agreements with neighbouring territories. It is also looking to emulate the example of Norway, which has positioned itself as Scandinavia’s leading hydropower generator and utilises its production base to accrue fiscal revenues from selling electricity to nearby Sweden, Denmark, Finland and the Netherlands.

An off-take agreement to supply the Indonesian province of West Kalimantan, which Sarawak shares a border with to the south, was signed in 2012. State authorities are also in talks with Sabah and Brunei Darussalam to assess the extent to which it could be in a position to export surplus power to them in the future. Sarawak Energy is also in dialogue with Malaysia’s national utility, Tenaga Nasional (TNB), on the feasibility of a 700-km undersea cable to distribute power to the mainland. Should such a project eventually go ahead and prove commercially viable, there also exists the possibility, albeit a distant and ambitious one, of a constructing a pan-ASEAN undersea power grid for which Sarawak would become a key supplier.

INDONESIA: Starting in early 2016, Sarawak Energy will be exporting power to West Kalimantan, having reached a deal to provide the Indonesian province with between 50 MW and 230 MW depending on the supply and demand of both parties. Perusahaan Listrik Negara (PLN), Indonesia’s state-owned power company, is undertaking the construction of a 145-km line linking its provincial customers with hydroelectric facilities in Sarawak. The integrated grid, which includes high-voltage lines and a power substation, will, according to the Asian Development Bank (ADB), exchange an estimated 230 MWh per hour. Once the grid is up and running PLN, which is heavily reliant on diesel for fuelling the province’s power stations, should be able to generate savings of $100m a year, not to mention the environmental benefits. The ADB helped to fund the project and forecasts that by 2020 8000 homes in West Kalimantan will be served by hydroelectric power from Sarawak, with carbon emissions reduced by 400,000 tonnes a year. “This is a win-win-win situation,” Sohail Hasnie, energy specialist at ADB, told the in August 2013. “West Kalimantan gets renewable energy and will have the ability to exchange power; Sarawak starts its first export of hydropower; and the region moves one step closer to establishing a regional power transmission link that crosses Brunei Darussalam, Indonesia and Malaysia.”

BORNEO: Brunei Darussalam and the state of Sabah, Sarawak’s two neighbours on the island of Borneo, have diversified and robust energy mixes of their own. And while each has in principle agreed to power exchange agreements, there is less urgency to finalise deals. In turn, deliberations over how to finance the construction of the transmission systems and the fleshing out of contractual commitments are ongoing. According to Sarawak Energy, a deal with Sabah is likely to take effect some time between 2017 and 2020. “In principle, it will happen, but the dynamics are changing and so too are the details”, Syed Mohamad Fauzi Shahab, director of electricity supply at Sarawak’s Ministry of Public Utilities, told OBG.

UNDER THE SEA: The Malaysian government is aiming to have renewables account for 5% of its generation mix by 2020, up from the 1% that is currently in use. If there were a way for Sarawak’s hydroelectric output to feed into power facilities on the mainland, this would go a long way to fulfilling the 2020 ambition. There is nearly 1000 km of sea separating Sarawak from Peninsular Malaysia, and building the pipeline to transmit power would be a costly initiative that involves serious and deliberate planning. On the part of Sarawak Energy, another factor to consider is that for the time being TNB does not purchase its power at open market prices, and the state utility would need an assurance that it can fetch fair market value before making any long-term commitments. Leo Moggie, the chairman of TNB, told local press in December 2014 that he sees Sarawak as playing a much more significant role as a power provider to the peninsula, stating that TNB is “in discussions with Sarawak Energy on technical issues, but [a connection] is not going to be realised soon, probably in five years to come.”

REGIONAL INTEGRATION: Considering the range of issues that make an undersea pipeline connecting two landmasses within the same governed country a distant ambition, the likelihood of a pan-ASEAN power grid seems an even loftier proposition that could be decades away from materialising. A more realistic and logistically viable alternative would be for the trading bloc’s prospective grid to be split into two, with a western system that includes Laos, Vietnam, Myanmar, Cambodia, Thailand, Peninsular Malaysia, Singapore, and Sumatra and Batam in Indonesia. While an eastern system would cover Sarawak, Brunei Darussalam, Sabah, Indonesia’s province of West Kalimantan and the Philippines.

As the federal government in Kuala Lumpur grapples with preparations for the ASEAN Economic Community being fully implemented by the end of 2015, Sarawak is for the most part concerning itself with a less formalised sub-regional cooperative initiative, the East ASEAN Growth Area, the members of which closely match those that could join up to create an eastern ASEAN grid. Were such a grid to come to fruition, Sarawak would be in an advantageous position as a key energy provider, as among eastern ASEAN members it possesses the most hydropower potential and could avoid competing as a supplier with the Greater Mekong Subregion, where Myanmar and Laos are undertaking ambitious hydropower projects of their own. Most studies, however, conclude that an all-encompassing eastern ASEAN grid is not economically viable as sub-sea connections are significantly more costly to install than their overhead line equivalents. Yet, this does not preclude Sarawak and the Philippines from pursuing a project on their own in the interim.

LOOKING AHEAD: It also appears that demand growth from local households and industry, as well as an influx of new demand from fresh industrial investments, should ensure Sarawak Energy has an ample domestic customer base for the immediate future. Considering the abundance and cost competitiveness of Sarawak’s hydro potential, if and when technology improves to drive down the costs of installing sub-sea cables, and regional trading blocks resolve some of the political impasses that delay full open-market economic integration, Sarawak could eventually emerge as a sizeable supplier of power for the eastern parts of ASEAN. “There is, of course, scope and potential for further extension of linkages to Brunei Darussalam, Sabah and Kalimantan within the island of Borneo, as well as other regions in the greater area, including Sumatra, Peninsular Malaysia and the Philippines,” said Torstein Dale Sjotveit, Sarawak Energy CEO. “I am confident that greater connectivity will be possible in the region in the near future.”