EMA cites high demand, gas supply curbs for sharp spikes in Singapore's spot electricity prices
THE staggering spikes in Singapore's spot electricity prices in recent months are due to a confluence of factors including gas curtailment from Indonesia's West Natuna and "low landing pressure" of the gas supplied from South Sumatra, said the Energy Market Authority (EMA).
In a response to queries by The Business Times (BT), the industry regulator also cited "higher than usual electricity demand" and outage in several generation units as factors that have driven prices higher.
"Under standard operating procedures, generation companies (gencos) will switch from Piped Natural Gas to alternative fuel sources such as Liquefied Natural Gas (LNG) or diesel should gas pressure drop below certain levels. This ensures that power supply remains stable and reliable during such low-pressure situations," said EMA.
The regulator added that it is working with the industry, including the gencos, to ensure sufficient generation capacity and gas supply in the system.
A key executive from a leading genco told BT that the regulator has informed gencos to use less gas given the "gas supply constraints from upstream suppliers", which explains the "low" gas pressure situation.
Singapore's spot electricity prices have seen extraordinary surges since July this year. On the back of such volatile market conditions, BT earlier reported that iSwitch Energy, the fourth largest electricity retailer in the city state, has decided to call it a day on its retail operations.
At least 3 other independent retailers (IRs) for residential consumers - Best Electric, Ohm Energy and Diamond Electric - are also contemplating an exit.
According to a newswire report, Singapore LNG Corp was exploring options to increase LNG inventory at its terminal in the city-state amid tight global LNG supply. The owner, developer and operator of Singapore's LNG terminal has also made enquiries to buy LNG cargoes from the spot market, the report added.
This is taking place amid a global energy crunch as stockpiles shrink on the back of surging demand owing to a rebound in global economic activity and ahead of the peak demand winter season in the northern hemisphere. No surprise then that Asian spot LNG prices have hit record highs.
In Singapore's wholesale electricity market, which is almost entirely (96 per cent last year) powered by natural gas, most of which is imported, spot electricity prices have shot through roof on several occasions since July - even before the current global crunch played out.
For that reason, rattled market players suspect there may be other factors at play and have alleged "unusual bidding behaviour" and withholding of capacity by some gencos for the price surges.
But a statement issued by the EMA later on Friday (Oct 15) appears to have quashed that notion. It said a key agency in Singapore's electricity market, which surveils and investigates the conduct of market players to ensure fair play, has concluded that no rules were breached in late July when wholesale electricity prices saw wild fluctuations.
The EMA said this following its investigation into the sustained high Uniform Singapore Energy Price (USEP) over a four-day period three months ago.
The conclusion was made by the independent Market Surveillance and Compliance Panel, an independent body established under Singapore's electricity market rules, which monitors and investigates the conduct of market players in the wholesale market. This includes looking out for rule breaches and elements that are inconsistent with the efficient and fair operation of a competitive market.
Between Jul 26 and 29, there was an unplanned curtailment of piped natural gas (PNG) supply imported from Indonesia's West Natuna due to an incident at an upstream production facility, which also coincided with a planned curtailment for maintenance. Those curbs accounted for up to 16-20 per cent of Singapore's total gas supply, said the regulator.
During that period, the USEP averaged at S$418 per megawatt-hour (MWh) - nearly three times higher than the level over the preceding five weekdays.
"While EMA worked with the West Natuna PNG importer (SembCorp Gas) to flow additional regasified LNG to all the affected gas users, which included several electricity generation companies (gencos), the gas supply remained tight.
"The ability of the non-affected gencos to generate more electricity was also constrained by their contracted daily gas supply quantities and the operating limits to maintain stable and adequate gas delivery pressure in the gas supply system," EMA explained.
The regulator said it will continue to closely monitor the USEP for any unusual movements, as well as the reliability of generation units, and work with the industry to ensure that there is sufficient generation capacity and gas supply in the system.
July's incident is not isolated, and the USEP has hit multi-year highs in the ensuing months to as recent as this week. On Tuesday, the USEP hit the highest daily level not seen since the start of the National Electricity Market of Singapore (NEMS) in 2003. Thursday was no different with prices surging even higher to S$3,811 per MWh in the late morning's half-hourly session.
The hardest hit seem to Singapore's independent electricity retailers. Cripplingly high wholesale prices aside, these retailers' woes are compounded as they have been unable to adequately hedge against such volatility in the Singapore Exchange's electricity futures market as liquidity has dried up.
Under Singapore's Open Electricity Market, retailers are required by the regulator to hedge at least 50 per cent of contracted consumer volumes. SGX's EFM is the primary exchange for retailers to do so.
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