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Impact of COVID-19 on the Singapore Power Sector and Future Investment Opportunities and Risk

  • Status of COVID-19 in Singapore: With the outbreak of COVID-19 cases in the dormitories for the migrant workers, it remains highly uncertain how the situation will evolve after restriction measures are gradually eased from 1 June onwards.

  • Impact on GDP: COVID-19 has material negative impact on the near-term economic outlook [GDP could be down by 4 percent in 2020], and increases the uncertainty of economic growth in the medium-term.

  • Impact on demand and spot price:

    • Power demand shock due to circuit breaker is 8-12% in Singapore Wholesale Electricity Market (SWEM), and spark spread remains negative/close to zero

    • The daily load curves are “flattened” due to load reduction in the commercial sector; normal price pattern over the day has also changed

    • Demand will likely rebound gradually in H2 2020 but spark spread will remain low/negative due to rigid constraints on take-or-pay (ToP ) gas.

  • Future market evolution:

    • In 2021-2022/23, even if ToP gas is no longer in excess, the marginal fuel is the less expensive gas (i.e. PNG) in most hours, leading to low spark spread

    • After 2022/23, existing gas contracts will expire.  Nonetheless, Singapore still has homogeneous technology and likely similar gas cost, resulting in a very flat merit order curve.  Thus, Gencos’ profitability will be highly uncertain as it depends on their ability to exercise market power to drive up prices if SWEM remains as energy-only market

    • By 2026, new investment is likely required to replace old capacity and meet demand growth arising from addition of data centres

    • Singapore government has been doing a study to introduce a Forward Capacity Market since early 2019; as the market will become two-parts (capacity payment + energy margin), Gencos may be able to have higher revenue certainty.

  • Investment Opportunities:

    • Build new capacity [in Singapore or in Malaysia and export to Singapore] to meet demand growth and replace old capacity

    • Merger and acquisition opportunities exist as some players would like to exit the market.

  • Key Themes to Watch in the near-term:

    • How severe will be another waves of COVID-19 infection as restrictive measures are eased?

    • What will the detailed parameters of the forward capacity market be like?


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.

  • 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.

  • 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.

  • 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.

  • Retail competition can be rolled out in phases.

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

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