Declining gas production will drive up power prices, says Rafizi

Former Malaysian economy minister Rafizi Ramli has warned that declining gas production will drive up power prices over the next five years. He explained that Malaysia's power generation system, designed decades ago, is now struggling to meet demand as the country runs short of domestic gas while phasing out coal-fired power plants.

Rafizi highlighted the issue as a pressing energy-security challenge, emphasizing that it extends beyond Tenaga Nasional Bhd (TNB) and affects the nation at large. The country's reliance on liquefied natural gas (LNG) imports, following disruptions around the Strait of Hormuz, has already led to a sharp increase in gas prices, with Tier 2 gas surging from about RM46 per million British thermal units (MMBtu) to between RM70 and RM80 per MMBtu.

Rafizi stressed that Malaysia cannot continue relying on coal as a long-term solution, as the country has committed to net zero emissions by 2050. While solar power could help replace coal, it cannot be scaled up quickly enough due to land, battery storage, financing, and the slow rollout of rooftop solar systems. Rafizi further warned that Malaysia's dependence on imported LNG would lead to higher cash outflows and weaken the country's energy sovereignty, citing Europe's experience with reliance on cheap Russian gas before the Ukraine-Russia war.

He concluded by stating that the government cannot indefinitely subsidize electricity costs, and the AFA mechanism should be understood as a temporary solution, with electricity tariffs likely remaining under pressure until Malaysia accelerates renewable energy deployment and addresses its long-term gas balance.