Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

A Single Buyer Model of Imbalance Cost Pass-Through Pricing Forecasting under Malaysia Electricity Supply Industry

Version 1 : Received: 2 April 2024 / Approved: 2 April 2024 / Online: 2 April 2024 (12:34:22 CEST)

A peer-reviewed article of this Preprint also exists.

Khairuddin, F.K.; Zaini, F.A.; Sulaima, M.F.; Shamsudin, N.H.; Abu Hanifah, M.S. A Single-Buyer Model of Imbalance Cost Pass-Through Pricing Forecasting in the Malaysian Electricity Supply Industry. Electricity 2024, 5, 295-312. Khairuddin, F.K.; Zaini, F.A.; Sulaima, M.F.; Shamsudin, N.H.; Abu Hanifah, M.S. A Single-Buyer Model of Imbalance Cost Pass-Through Pricing Forecasting in the Malaysian Electricity Supply Industry. Electricity 2024, 5, 295-312.

Abstract

The Imbalance Cost Pass-Through (ICPT) is a flexible component of the Incentive Regulation (IBR) that empowers power producers to adjust tariffs in response to variable fuel prices, thereby enhancing the economic resilience of electricity generation. However, the cost of electricity generation is significantly influenced by the volatility of commodity prices, including coal, gas and LNG. In Malaysia, the Energy Commission has conducted biannual reviews of fuel and other generation costs. Any cost savings or increases identified during these reviews will be passed on to customers in the form of rebates or surcharges. Due to that reason, this study proposes ICPT price forecasting for the electricity market in Peninsular Malaysia. The study aims to construct an ICPT-related baseline model for the peninsular generation data by employing three forecasting methods. The forecasting performance is analysed by a Mean Absolute Percentage Error (MAPE). In findings, the ARIMA method is one of the most accurate forecasting methods for fuel prices compared to the Moving Average (MA) and LSSVM methods. The observed price differences between the ARIMA and LSSVM models for ICPT are minimal. The ICPT price for July-December 2022 and January-June 2023 is MYR 0.21/ kWh for ARIMA and MYR 0.18/kWh for LSSVM, which are close to the actual TNB’s ICPT tariff. As for the forecasting, the ICPT price is expected to drop for the next announcement. The findings of this study may contribute to a positive impact on the sustainability of the energy sector in Malaysia.

Keywords

Electricity price; Incentive Based Regulation; Electricity Market; Forecasting; Time Series; Machine Learning

Subject

Engineering, Electrical and Electronic Engineering

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