Market Dynamics of the Singapore Power Sector

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• Market characteristics:

  • Even though the power sector is de-regulated, government continues to play important role for shaping the energy mix, investment and fuel procurement in Singapore. ​

  • Energy mix is dominated by gas capacity with similar efficiency since 2013. 

  • Gas procurement strategy and gas market dynamics have material impact on spark spread of CCGT plants in Singapore. 

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• Investment Opportunities:

  • Imports: Power import is one of the key strategies that Singapore government has adopted to meet its CO2 emission target in the long term.  It is looking to import 3.5-4.0 GW of base-load green power from other countries by 2035.

  • Local investment: The government is actively seeking to get investors to plant local CCGT, solar and battery energy storage capacity. 

  • New technologies: The government is mulling to provide special incentives for pilot hydrogen (H2) facilities before rolling out big scale hydrogen infrastructure. 

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• Key Themes to Watch in the near-term:

  • How will the gas procurement policy evolve/change given all the uncertainties in the coming years?

  • How much will the spot wholesale market prices and the retail prices fall from the unsustainable high level seen in 2022-2023. 

    • New local capacity is going to be commissioned in 2025-2027, including OCGT capacity invested by EMA and three new H-class CCGT units invested by Sembcorp, Keppel and PowerSeraya. ​

    • Some import capacity may start to flow to Singapore in 2024-2026, including the planned import from Peninsular Malaysia and Bulan Island in Indonesia. 

    • Singapore government has also introduced secondary price cap; and it is procuring vested contracts for the non-contestable customers, which can increase the contracted volume of the Gencos and reduce their incentives to bid aggressively to push up prices. 

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Key Lessons from Singapore Electricity Market Liberalization are:

 

• Market reform can take a long time to reach the end-state desirable design and a phase-wise approach (like Singapore) has many benefits.

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• Even though the first round of reform in Singapore is imperfect, it still provides useful and necessary learning lessons for the market stakeholders and the government.

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• Robust reform on the market structure is critical to create an efficient and effective competitive electricity market that provide confidence to the investors that a level-playing field is created for everyone.  It can also reduce the scope and need for conduct regulation.​

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• Commercial arrangement, such as vesting contracts, can be created to successfully mitigate the potential unduly exercise of market power of some of the Gencos in Singapore.

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• Retail competition can be rolled out in phases.

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• Flexibility has material values in a small market like Singapore.