Singapore’s regulator steps in as energy crisis hits
Singapore | Singapore’s energy regulator will bolster gas reserves and could intervene in wholesale electricity markets as repercussions from spiking energy prices continue to reverberate across Asia.
The Energy Market Authority of Singapore will also restrict sales of excess gas by power generation companies (gencos) as it seeks to increase energy security in the city state where 95 per cent of electricity is generated from imported natural gas.
Singapore’ demand for electricity has increased - and so has the cost of producing power. AFR
The measures come as iSwitch, Singapore’s biggest independent electricity retailer and a potential foundation customer for Australia’s Sun Cable project, prepares to shut up shop next month, a victim of increased volatility in electricity wholesale prices.
According to EMA, this volatility is due to record prices for liquified natural gas (LNG), higher than usual demand for electricity, and problems affecting the natural gas supplies piped in from Indonesia.
“Upstream production issues in Indonesia’s West Natuna gas field have resulted in reduced output, which is likely to last until end-2021. Gas pressure from South Sumatra has decreased due to higher demand from gas users both upstream and in Singapore,” the EMA noted.
“The global energy crunch has made it significantly more expensive for the power generation companies (gencos) to secure additional spot liquefied natural gas (LNG) to make up for the drop in piped natural gas supplies,” it said.
Many consumers who are on fixed price plans have not felt much of an impact from the increased cost of electricity production but retailers buying on the spot market have. There has been some speculation gencos have been pushing up prices by more than necessary.
The EMA said it was monitoring the wholesale market closely and will intervene if necessary. However, it also stated that “electricity retailers who have under-hedged their positions” may find it challenging to sustain their operations and may therefore choose to exit the market.
“This is a consequence of their business decisions and can be expected in open and liberalised electricity markets, where participants may enter and exit the market, and market consolidation may occur.”
Spot prices for LNG have reached a record level of more than $US56 per million British thermal units and still remain above $US30/MMBTU, about 15 times higher their low point in the June quarter last year.
Analysts have warned the high prices could last for weeks or months if the northern hemisphere winter is particularly harsh.
The EMA will establish standby fuel facilities which gencos can draw upon. It has also directed gencos with excess natural gas supply to provide other gencos and EMA with the first right of refusal.
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