Malaysia is improving its electricity supply industry to become more transparent,
productive and competitive with the introduction of the single buyer market model.
However, since the electricity demand is lower than the reserved capacity, the
implementation of this market model does not provide transparent competition as
Tenaga Nasional Berhad (TNB) has suffered massive profit erosion because of
monthly capacity payment that should be paid to Independent Power Producers (IPP)
regardless of electricity usage. Since 2005, the Malaysia Electricity Supply Industry
(MESI) has planned to change to the pool market model as it is recognized as a
model which could overcome the shortcomings of the single buyer market model.
However, there are a few issues on introducing the pool model such as price
fluctuation and market power exercises which could influence the welfare of
generators as well as the consumers. Some researchers have developed pool-based
market models with the aim to overcome the aforementioned issues, but the
efficiency and the energy price offered from the generators are not considered.
Therefore, this research developed a model introducing the minimum generation
capacity payment involving the efficiency of the generators and base load sharing
approaches. The proposed model was tested using the 2, 16 and 24 generator test
systems involving IPPs and Tenaga Nasional Berhad Generation (TNBG) around
Peninsular Malaysia for an economic analysis to highlight the merits of the proposed
model in terms of generation revenue and demand payment. The results have shown
that the proposed market model ensures the intermediate value of total generation
revenue which decreased from 1.99% to 4.67% and 3% to 9.62% during the weekday
and weekend, respectively. The demand payment decreased as it is proportional to
the generation revenue. However, this proposed model did not consider market
uncertainties. This findings can be applied for MESI and globally, in assisting and
creating a new policy to achieve a better electricity market model
