I Read Sarawak Energy’s 142 page ESG Statement So that You Don’t Have to — Here’s the 5 Key Takeaways
Sarawak Energy (SE) is not a publicly listed company but it still publishes its Environmental, Social, and Governance (ESG) statement with the latest year being 2021. Even though 2021 isn’t the latest one, it still provides a lot of information about what SE is trying to do in the coming years.
After doing Tenaga Nasional Berhad’s ESG, I do feel like SE has more similarities to TNB but that is an article for another day. Let’s look at the 5 key takeaways from SE’s ESG statement!
SE is Aiming to Increase Renewable and Clean Energy Generation
Yes, SE being a utility company, means that it has the ultimate aim of cutting coal from its energy mix and increasing the share of its renewable energy. Currently, fossil fuel or non-renewable energy encompasses 23% of its total energy generation mix, where that proportion was about 90% in 2011. Out of that 23% of the fossil fuel energy mix, 11% is from natural gas and 12% is from coal.
It is worth noting that SE depends on hydropower mainly to generate electricity, and would like to maintain about 60% for hydropower mix in the long-term. In 2011, SE actually embarked on a plan to increase hydropower mix from 10% to about 60–70% by 2020. And it actually came true. If anything, it exceeded expectations at about 77% currently. Hydropower generation increased by 242% in 10 years, much more than coal (130%) and gas (24%). Meanwhile, diesel actually declined by 44%. Furthermore, SE is also aiming to increase solar energy generation to 4% by 2030.
SE is Working Towards Reducing Emissions in line with the Paris Agreement
Specifically, SE is aiming to limit the global temperature rise to below 2 Celsius above pre-industrial levels. To do this, SE is focusing on reducing its CO2 emissions and it has been pretty successful in this regard. CO2 emission intensity (tCO2eq / MWH) declined from 0.72 in 2010 to 0.20 in 2021 — a full 72% decline. SE needs to reduce this number to about 0.15 in order for a target 1.5 Celsius rise in global temperature.
How does this compare to international standards then? SE’s overall emissions intensity is considered one of the lowest among other international utility companies. It managed to do this as most of its power generation is from hydropower, not coal or diesel.
A Smart Grid Will Be Key for SE to Achieve its Climate and Environmental Goals
Key to its climate and environmental goals, SE would need to invest heavily in its electrical grid system to be more efficient and cost-effective. Eliminating wastage and transmission losses will be the most important result of a smart grid. At the current stage, hydropower power availability has declined to 95.1% in 2021 from 96.3% in 2011, while transmission losses proportion increasedby 52% to 2.5% in 2022. However, to be objective about SE, its total transmission length has also increased by 357% so it makes sense that transmission losses would also increase.
SE has about 7 key strategies to achieve higher smart grid penetration, but two, in particular, stand out. The installation of advanced and smart metering could enable the detection of outages, tampering, and energy theft and also improve the customer’s experience (customers can track their energy usage also). SE will aim to provide 70% of customers in Kuching with smart meters by 2026, and subsequently Miri, Sibu, Bintulu, Sri Aman, Betong, Sarikei, Mukah, Kapit, and Limbang by 2029. Secondly, the distribution remote monitoring system will have sensors for substations to track transmission losses.
The Amount of Economic Value Created for Sarawakians Increased in 2021
I think this concept is sort of hard to get our heads around. What does SE mean exactly for economic value created for Sarawakians? Here’s how they define it. They create value for Sarawakians by paying for operating costs, employee salaries, debt interest, and taxes paid to the government. Economic value increased from RM2.2 billion in 2020 to RM2.4 billion in 2021 but remains below the pandemic level of RM2.7 billion in 2019.
Operating costs make up the majority of this economic value, followed by interests paid, employee salaries, and taxes paid to the government. What is positive is that employee salaries have been on a continued increase in 2021.
Most Contracts and Works Are Still Awarded to Sarawakians
The total value of tenders by SE has rebounded in 2021 to RM2.4 billion from RM1.4 billion in 2020. It exceeded the pre-pandemic level of RM1.9 billion in 2019. Sarawakian firms won about 59% of the contracts in 2021, followed by international companies at 23% and non-Sarawakian companies at 18%. This is still in line with the Sarawak state government’s objective of supporting Sarawakian local businesses and suppliers.
Sarawak Energy’s ESG objectives are focused on increasing the share of renewable energies by reducing emissions intensity. SE would probably need to focus on its Smart Grid initiatives to complement its efforts in increasing renewable energy generation through hydropower and solar. Finally, SE still generates a significant amount of economic value for Sarawakians while retaining the majority of contracts for Sarawakian local companies.