SINGAPORE — While most consumers in Singapore will not see an immediate increase in electricity prices, they may see a hike next year as energy prices increase globally, said Second Minister for Trade and Industry Tan See Leng in Parliament on Monday (1 November).
"Our market is now being tested by an unprecedented storm in the global energy market," said Dr Tan, who stressed that the city-state's electricity supply is one of the most reliable and competitively priced among major cities.
"Our commitment to this House is this: We will secure our energy supply. We will help vulnerable consumers weather the storm. And we will continue to make our energy sector even better."
Dr Tan was responding to a series of parliamentary questions about the impact on Singapore of the rising cost of energy worldwide, as well as the exit of several electricity retailers from the Open Energy Market (OEM).
'Shocks' in the global energy market
The 56-year-old alluded to a series of "shocks" in the global energy market, starting with an unexpected surge in demand as economies begin to recover following the easing of COVID-19 restrictions. Unusual weather events have also impacted the generation of wind and solar power in Europe, alongside lower than expected coal production, notably in China.
This has been compounded by a series of gas production outages around the world. The shocks have been most intensely felt in the market for natural gas, which is a fallback fuel for electricity generation in many countries. As a result, spot gas prices have risen by around five times since March.
The minister told the House, "Many major economies across Europe and Asia have low inventory levels and are moving quickly to secure sufficient fuel supplies for the winter. These have compounded the impact on prices of fuel and electricity around the world."
As Singapore relies on imported natural gas for almost all of its electricity production, it is highly exposed to global supply and demand shocks. However, most consumers in Singapore have been "somewhat cushioned" so far.
About 99 per cent of household consumers are on standard price plans with retailers or the regulated tariff rate, and about 96 per cent of businesses are on fixed price or discount-of-tariff plans. These have risen by far less than the price of gas or wholesale electricity, noted Dr Tan.
Exit of electricity retailers, thousands affected
Over the last three weeks, five electricity retailers – iSwitch, Ohm Energy, Best Electricity, UGS, SilverCloud Energy – have announced their plans to leave the market. These retailers supply about 9 per cent of all electricity consumers.
As of end October, about 140,000 households and 11,000 business accounts will either be transferred to another retailer, or back to SP Group.
"The unusually high number of exits reflects the severity of the global energy shock. We have observed the same phenomenon in other countries, such as the UK and Spain," said Dr Tan. This was down to factors such as several retailers being under-hedged when the global energy shocks and disruptions to Singapore's piped natural gas (PNG) supply caused wholesale electricity prices to spike.
"These retailers now find themselves having to buy the unhedged portion of electricity at the high wholesale electricity prices and sell them at much lower contracted rates to consumers."
Sufficient supply, 'extraordinary measures'
But Dr Tan stressed that Singapore's fuel supplies and generation capacity remains sufficient, citing measures over the years such as long-term contracts for PNG supply from Malaysia and Indonesia that were signed in 1999. The supply of PNG since has been "relatively stable", despite a 3 per cent drop in overall gas supply from West Natuna due to repair works at an upstream gas production facility.
In 2013, a Liquified Natural Gas (LNG) terminal was built to tap gas sources further afield, while two new term LNG importers were imported by the Energy Market Authority (EMA) this year. Power generation companies or gencos are required to stockpile at least 60 days of fuel reserves, in the event of disruptions to Singapore's natural gas supply. "The stockpile remains intact," said Dr Tan.
In addition, EMA mandates that, taking into account planned and unplanned outages, retailers must maintain spare generation capacity or reserve margin of at least 27 per cent above peak electricity demand. The reserve margin currently stands at 52 per cent.
Nevertheless, given the "unprecedented scale" of the energy crunch, EMA has been working closely with industry stakeholders on pre-emptive measures to further secure Singapore’s fuel and electricity supply and ensure energy. For example, it has established standby fuel facilities which gencos can draw upon if needed to generate electricity.
These measures will be reviewed by 31 March.
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