Singapore’s energy market has undergone significant transformations in recent years, driven by deregulation, the promotion of renewable energy, and the introduction of competitive markets. Let’s delve into the details of Singapore’s energy landscape and the various factors that shape it.
A Brief History, Deregulation and the Open Electricity Market
1960s-1980s: Building a Strong Foundation
During this period, Singapore focused on building a reliable and secure energy supply to support its economic growth. The country heavily relied on imported crude oil and petroleum products for its energy needs, in turn the oil and gas industry played a crucial role in Singapore’s economy, with the establishment of oil refineries and storage facilities.
1980s-1990s: Diversification and Power Generation
In the 1980s, Singapore started diversifying its energy sources to reduce its dependence on imported oil. The government encouraged the development of natural gas infrastructure and power generation facilities. Natural gas then became an important component of Singapore’s energy mix, offering a cleaner and more efficient alternative to oil.
1995-2000: Restructuring and Liberalization
In 1995, the energy market in Singapore underwent significant restructuring with the establishment of the Energy Market Authority (EMA). The EMA was tasked with regulating the electricity and gas sectors, promoting competition, and ensuring a reliable energy supply.
The restructuring also led to the separation of power generation and transmission activities. Singapore Power, a government-owned corporation, took over the role of owning and operating the electricity transmission and distribution network and power generation was opened up to competition, allowing independent power producers to enter the market.
2001-2017: Market Liberalization and Renewable Energy Focus
Singapore continued its efforts to liberalise the energy market and introduce competition. In 2001, the wholesale electricity market was launched, enabling wholesale trading of electricity and promoting market efficiency.
The government also prioritised sustainable development and the adoption of renewable energy sources. In 2008, the Sustainable Singapore Blueprint was launched, setting targets for energy efficiency and renewable energy deployment. Singapore began exploring solar energy through pilot projects and the installation of solar panels on public buildings.
2018-Present: Open Electricity Market and Energy Transition
One of the significant milestones in recent years was the introduction of the Open Electricity Market (OEM) in 2018. The OEM allows consumers to choose their electricity retailers and pricing plans, increasing competition and providing greater flexibility for consumers.
Singapore has also intensified its focus on renewable energy. The country aims to increase solar capacity to at least 2 GWp by 2030 and is exploring other clean energy sources such as offshore wind and biomass. The government has set ambitious targets to reduce carbon emissions and improve energy efficiency.
As of 2021, Singapore’s energy market had a substantial size of around US$55.771 million. The country has established itself as a significant player in global oil trading and refining, securing a position in the top five globally. Additionally, Singapore has emerged as a pivotal shipping hub in the Asian region.
The energy sector in Singapore encompasses diverse sub-sectors, each contributing to the overall energy landscape. Notably, natural gas plays a dominant role, accounting for more than 93 percent of the country’s electricity generation. This reliance on natural gas reflects Singapore’s commitment to cleaner and more sustainable energy sources.
With its robust energy market and strategic initiatives, Singapore continues to solidify its position as a key player in the global energy landscape, making significant contributions to the oil and gas industry while simultaneously embracing cleaner and more environmentally friendly energy options.
Furthermore, Singapore is actively exploring the use of nuclear energy from 2040 onwards as part of its long-term energy planning strategy.
How does the Wholesale Energy Market (WEM) work?
In the wholesale electricity market, power generation companies engage in a bidding process to sell electricity, which occurs every half-hour. The price of electricity in this market is determined by the interaction between demand and supply dynamics, leading to price fluctuations within each half-hour interval.
On the other hand, electricity retailers participate in the market by purchasing electricity in bulk from the wholesale electricity market. These retailers then engage in competition among themselves to sell electricity directly to consumers. By offering various pricing plans, services, and value-added features, retailers aim to attract customers and cater to their diverse energy needs.
Interaction between the Wholesale Market, Electricity Retailers, and SMEs
Retailers play a pivotal role in Singapore’s energy market by procuring electricity from the wholesale market and selling it to end consumers, including small and medium enterprises (SMEs) and households.
The liberalization of the electricity market has introduced competition among retailers, driving them to offer competitive pricing plans and value-added services to attract customers.
SMEs have benefitted from the deregulated market as they can negotiate energy contracts that align with their specific needs and preferences.
Retailers and energy service companies (ESCOs) also offer advisory services to help SMEs optimize their energy usage, identify energy-saving measures, and implement sustainable practices.
Singapore Energy Sourcing and Importation
Singapore, as a small city-state with limited natural resources, relies heavily on energy sourcing and importation to meet its energy needs.
The country adopts a multi-faceted approach to ensure a reliable and diversified energy supply. Let’s explore Singapore’s energy sourcing and importation strategies:
- Natural Gas: Natural gas plays a significant role in Singapore’s energy mix. The country imports liquefied natural gas (LNG) from various countries, including Australia, Malaysia, and Qatar. These imports are facilitated through the Singapore LNG Terminal, which serves as a crucial hub for receiving, storing, and regasifying LNG before distribution to power plants and other consumers.
- Renewable Energy: Singapore is actively promoting the adoption of renewable energy sources to reduce carbon emissions and enhance sustainability. Solar energy is a key focus area, with installations on rooftops, floating solar farms, and vacant land. The government aims to increase its solar capacity to at least 2 gigawatt-peak (GWp) by 2030.
- Electricity Imports: Singapore imports electricity from neighboring countries through interconnectors and regional power grids. These interconnections allow for the import and export of electricity, ensuring a more resilient and secure energy supply. For example, the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP) aims to enhance energy connectivity within Southeast Asia, facilitating the import and export of electricity between participating countries.
- Nuclear Energy Considerations: Looking toward the future, Singapore is considering the use of nuclear energy from 2040 onwards as part of its long-term energy planning strategy. This decision aligns with the country’s commitment to reducing carbon emissions and exploring clean energy alternatives.
- Energy Storage: To enhance grid stability and address intermittent renewable energy sources, Singapore is investing in energy storage technologies. Energy storage systems help to store excess energy generated during periods of low demand and release it during peak demand periods, ensuring a reliable and balanced electricity supply.
Stakeholders and the Future of Singapore’s Energy Market
The key players in Singapore’s electricity market encompass the following:
Energy Market Authority (EMA): The Energy Market Authority is the regulatory body responsible for overseeing Singapore’s electricity and gas sectors. EMA’s primary objectives are to ensure a dependable and secure energy supply, foster effective competition within the energy market, and cultivate a dynamic energy sector in Singapore.
Power Generation Companies: Power generation companies actively participate in the wholesale electricity market, engaging in competitive bidding to produce and sell electricity in half-hourly intervals.
Energy Market Company (EMC): The Energy Market Company operates and manages the wholesale electricity market, facilitating the trading and settlement of electricity transactions among market participants.
Electricity Retailers: Electricity retailers procure electricity in large quantities from the wholesale electricity market. These retailers then engage in competition to sell electricity to end-consumers, offering various pricing plans, value-added services, and customer-centric solutions.
SP Services (SPS): As the Market Support Services Licensee (MSSL), SP Services, a subsidiary of SP Group, provides crucial services such as electricity meter reading, meter data management, and facilitates access to the wholesale electricity market.
SP PowerAssets (SPPA) and SP PowerGrid (SPPG): SP PowerAssets, as the Transmission Licensee, owns and operates the power grid infrastructure responsible for the island-wide distribution of electricity. SP PowerGrid, acting as the appointed agent of SP PowerAssets, undertakes the construction and maintenance of the power grid. Both SPPA and SPPG are entities within the SP Group.
These stakeholders, including EMA, power generation companies, EMC, electricity retailers, SP Services, SP PowerAssets, and SP PowerGrid, collaborate and play distinct roles in ensuring the efficient and reliable functioning of Singapore’s electricity market. Through their collective efforts, they contribute to the stability, competitiveness, and accessibility of the electricity sector, meeting the energy demands of businesses and households across the nation.
How is the energy market regulated in Singapore?
As mentioned above, the energy market in Singapore is regulated by the Energy Market Authority (EMA), a statutory board under the Ministry of Trade and Industry.
EMA’s primary role is to ensure the reliable supply of electricity and gas, promote effective competition, and develop a dynamic energy sector in Singapore.
Here’s an overview of how the energy market is regulated in Singapore:
- Licensing Framework: The EMA issues licenses to market participants, including power generation companies, electricity retailers, and gas shippers. These licenses outline the rights, responsibilities, and obligations of the licensed entities, ensuring compliance with regulations and maintaining market integrity.
- Market Rules and Codes: The EMA establishes and enforces market rules and codes that govern the operation and conduct of market participants. These rules cover areas such as wholesale electricity trading, electricity retailing, gas supply, and metering standards. Market participants are required to adhere to these rules, promoting fair competition and transparency.
- Price Regulation: The EMA oversees the regulation of electricity and gas tariffs in Singapore. Tariffs for the transmission and distribution of electricity are set by the EMA based on a cost-of-service approach. The EMA also regulates the tariff methodologies for gas supply to protect the interests of consumers.
- Market Surveillance and Enforcement: EMA actively monitors the energy market to ensure compliance with regulations and detect any market misconduct. It has the authority to investigate, enforce, and impose penalties on market participants who breach market rules or engage in anti-competitive behavior.
- Market Development and Liberalization: The EMA is responsible for driving market development initiatives and facilitating the liberalization of the electricity retail market. It oversees the transition from a regulated market to an open electricity market, enabling consumers to choose their electricity retailers and encouraging competition in the retail sector.
- Strategic Planning and Policy Formulation: The EMA develops long-term strategic plans and policies to guide the energy sector’s growth and transformation. This includes initiatives to promote renewable energy adoption, energy efficiency, and the exploration of new technologies and energy sources.