Impact of New Enhanced Dispatch Arrangement (NEDA) Mechanism on the Cost Efficiency of Generation of Malaysian Representative System

Transforming from a vertically integrated environment to a liberalized electricity market is not an easy task, and the rationale behind is the pressure to reduce electricity prices by relying on the enhanced efficiency of power plants and stiff competition in the generation sector. The New Enhanced Dispatch Arrangement (NEDA) is an initiative by EC (Energy Commission) to enhance efficiency in the short run electricity generation competition and drive down electricity prices. NEDA serves as a pre-cursor to the creation of an electricity market in Peninsular Malaysia. This paper analyses the impact of NEDA mechanism on the cost efficiency of a Malaysian Representative System. The PLEXOS simulation is done for two network constraints, which are the Southern and Northern constraint, using four types of load profiles to study the cost impact. To obtain the generation cost for each scenario, the methodology implemented will be Security Constrained Economic Dispatch (SCED). The objective function of SCED is to minimize the total system costs within various technical constraints and limitations. For Southern constraint, the results obtained showed an average of 1.3% cost savings per day, when 1000 MW of NEDA generation is injected into the grid. The annual cost savings is RM 226 million, translating to a 471% savings in generation prices. Expensive generators in the system are now being replaced by the generation from NEDA players which are paid at the System Marginal Price (SMP). On the other hand, for Northern constraint, the annual cost savings is approximately RM 191 million, which is equivalent to 366% cost savings. This will benefit the electricity industry by reducing generation cost, and consumers will be able to enjoy lower and cheaper electricity tariff.