S’pore to revise electricity market structure to deal with future volatility

[The_King]

SINGAPORE - The Energy Market Authority (EMA) will look into protecting more buyers from volatile prices by restricting the wholesale electricity price market to those that can withstand its fluctuations.

Currently, large electricity consumers such as coffee shops and malls with average monthly electricity consumption of at least 4MWh (megawatt-hour), or 10 times that of a four-room HDB flat, that cannot secure a fixed-price plan have to buy from the wholesale market, where prices fluctuate every half hour, instead of SP Group’s regulated tariff.

Several of such large buyers found themselves in this dilemma late in 2021 when the global energy crunch sparked the departure of some retailers, which affected about 140,000 households and 11,000 business accounts – equivalent to 9 per cent of consumers in Singapore – because they could not find fixed-price plans.

Tighter eligibility criteria for purchasing from the wholesale market are among plans to overhaul Singapore’s electricity market to cope with continued volatility expected in a global energy market rocked by crises since late 2021, said Minister for Trade and Industry Gan Kim Yong at the opening of Singapore International Energy Week on Tuesday.

Singapore’s electricity market was “severely tested” during the recent global energy crisis, with the exit of six electricity retailers in 2021, which suggests that several had not been sufficiently prepared against market volatilities and had taken large unhedged positions, Mr Gan said.

Going forward, stiffer regulatory requirements for retailers will be introduced such that “only credible industry participants with sufficient financial strength and sustainable business propositions will be allowed to retail electricity to consumers”, he added.

 

 

Separately, the Ministry of Trade and Industry said it plans to impose higher capital and hedging requirements on retailers to ensure that they can cope with market volatility, and additional protections for consumers if retailers prematurely terminate contracts.

Mr Gan said: “We are mindful that these adjustments will reduce the flexibility of some market participants... However, these measures will bring about a stronger and more secure power system.”

As at Tuesday, household consumers can buy from nine electricity retailers, while business consumers can purchase from 15.

These enhancements to strengthen the energy market structure will facilitate Singapore’s transition to cleaner energy sources as it commits to achieving net-zero emissions by 2050, said Mr Gan.

 

This year, Singapore is facing “a perfect storm” of soaring energy prices induced by shortages in fossil fuel production, triggered by underinvestment in energy projects and exacerbated by the Ukraine war, as well as severe disruptions in renewable power around the world, he noted.

“Global oil prices spiked significantly and reached more than US$130 per barrel at its peak, about 10 times higher than the trough in April 2020,” said Mr Gan.

As an island-state that imports almost all of its energy, Singapore is inevitably affected by global turbulence, he added.

The response of the energy market as fuel prices rose sharply in 2021 exposed three issues, including the inability of the wholesale market to function rationally under extreme price volatility.

 

Said Mr Gan: “When prices in the wholesale market surged, instead of inducing more electricity supply, some generation companies decided to withhold supply for fear that should there be an unexpected disruption in their supplies, they would have to buy at even higher prices from the wholesale market to meet their commitments.

“This caused prices in the wholesale market to surge even further, adversely impacting some consumers who purchased electricity directly from the wholesale market.”

EMA stepped in then to bridge the gap with the temporary electricity contracting support scheme, among measures to stabilise the market, said Mr Gan.

Singapore’s energy market structure needs to be strengthened to navigate volatility, which is expected to continue due to the likelihood of future energy crunches and the global clean energy transition, Mr Gan said, highlighting three areas that the Government will restructure.

Minister for Trade and Industry Gan Kim Yong delivering his opening address at Singapore International Energy Week 2022. ST PHOTO: GIN TAY

To ensure sufficient power generation capacity, the Government will also facilitate the building of generation capacity when required within the next five years, he said.

A competitive tender called by the Government will replace the current system where generation capacity is decided by private generation companies.

Said Mr Gan: “Today, planning decisions are made by private generation companies which may be based on various factors such as their own business plans, or their outlook for electricity demand.

“While each of them will make rational decisions individually, there is no assurance that this will translate into sufficient generation capacity for our needs.”

 

Should there be inadequate interest from private investments, EMA will build the required new capacity, he said.

To enhance the security of Singapore’s gas supply, the Government will also make permanent several temporary crisis management measures introduced when the global energy crunch hit Singapore in October 2021.

This includes requiring generation companies to maintain sufficient fuel for power generation and establishing a standby fuel facility to guard against the risk of gas supply disruptions, said Mr Gan.

The present direction to generation companies requires them to contract sufficient fuel for around 60 per cent of their installed capacity, an EMA spokesman told The Straits Times.

Enhancements to the energy market will be progressively implemented from 2023 after the industry and the public are consulted over the next few months, she said.

More details will be made available during these consultations, including the proposed threshold for consumers to be able to purchase electricity at wholesale prices, she added.

The EMA spokesman said: “Generation companies may not be able to plan new capacity as they wish, but this will reduce the possibility of oversupply of capacity.

“Consumers may have fewer retailers to choose from, but the retailers will be of higher quality.”

Dr David Broadstock, a senior research fellow at the National University of Singapore’s Energy Studies Institute, said the safeguards are designed to address the new enduring and deep uncertainties of global energy markets, which have become so risky as to prove unattractive for private businesses to operate within as a result of unique events such as the removal of Russian oil and gas from international energy markets.

He said: “A culmination of quite unprecedented conditions have eroded ‘normal’ market conditions, and what remains now is something very uncommon – a sustained period of extreme volatility.”

The proposed measures help create more robust boundaries around which fair competition can occur, while adding safeguards for when external market conditions are unattractive, he added.

[Satki]

another admission of failure

 

 

how many times then they need to bow and commit harakiri

 

damn the samurai chap must have cabut back to Penang

 

 

[socrates469bc]

limpeh's pigu alrdy foresee smlj electricity liberalization of 2018 will result in oligopoly of at most 5 gencos and possibly higher prices if energy markets experience supply shocks.

 

song bo, pappy serfs???????

 

limpeh's pigu smarter than smlj president's scholars.

 

wahahahahahahahahaha

Edited October 26, 2022 by socrates469bc