What Is In Store For Singapore Power Market In 2020?
Singapore’s power market is still in a transition phase, even on attaining a high level of maturity. A transition from nonrenewable sources of electricity to renewable sources is the latest trend set to shape the sector for years to come. Likewise, the Electricity Market Authority unveiling the Open Electricity Market Initiative appears to have created vast opportunities for independent power providers IPP.
The country’s electricity market is divided into three. The first segment is made up of Industry power generating companies, the second segment, electricity retailers, and finally, households or consumers. Consumers in Singapore buy electricity from the SP Group regulated by the EMA or from IPPs.
Singapore Power Market Current Status
The Open Electricity Market Initiative has not only enhanced competition in the country’s power industry but also fuelled levels of innovation not seen before. Unlike in the past, when consumers in the island nation got their power from Singapore Powers, now, there are more than 12 electricity retailers licensed to distribute power to households around the country.
Competition has since turned out to be the order of the day to the benefit of consumers, given the price wars at play. Households in Singapore are eligible to choose their preferred electricity providers. Some of the notable names shaking the industry include Best Electricity Supply Pte, Diamond Energy Merchants, Union Power Pte Ltd Sunseap Energy Pte Limited, among others.
The 12 Electricity retailers offer two options through which consumers can have their electricity consumption billed.
The Fixed price plans require electricity retailers to charge a fixed rate for whatever the amount of power that a household consumes for a given period. Thanks to the emergence of more players into the distribution business, the fixed price plans have turned out to be a real savior, as they tend to be much cheaper, compared to the regulated tariff. Currently, the lowest fixed price plans go for under $0.18kWh.
The downside of sticking with a fixed price plan is that one does not get to benefit whenever the electricity tariffs drop. However, some argue that the stability that comes with fixed pricing is worth every dollar.
Discounted off the regulated tariff plans, on the other hand, require the electricity retailers to peg their prices to the regulated tariff. Likewise, the retailer must ensure that the price charged is lower than the regulated tariff by a percentage, which makes them competitive in the industry.
The presence of more players in the distribution business has also resulted in varying levels of innovation in the race for consumer’s dollars. Some players have opted to charge varying rates for peak and off-peak hours. In this case, consumers are charged differently during off-peak and peak hours.
Electricity Charges Set to Rise
Singaporeans will have to contend with higher electricity bills for the first three months of the year. The SP Group has confirmed electricity tariff will increase by an average of 3.5% from January to March.
The increase will see consumers paying 24.24 cents for each KW/h consumed up from 23.43 cents. Similarly, households living in four-room HDB flats will have to contend with a $2.76 increase in their monthly bill. The latest tariff is the highest since October of 2014.
The increase, according to the SP Group, is necessitated by the higher cost of energy. The regulator expects the increased cost of imported gas to have an impact on the fuel cost component of electricity bills.
About 95% of the total electricity consumed in the island nation is generated from natural gas. A spike in natural gas prices on the global scene, most of the time, increases higher cost electricity generation, a cost that is many at times passed down to consumers.
Singapore Power Market Outlook
Amidst the expected increase in electricity tariffs to five-year highs, opportunities in the Singaporean power market continue to crop up by the day. A move by the government to support a transition to renewables is a welcome to an industry that is growing at an impressive rate. Likewise, upgrades on the grid should also go a long way in benefiting electricity retailers and consumers at large.
The government is pushing forward with plans to add about 2-gigawatts-peak solar power to the national greed by 2030. In addition, there should be a 200MW of energy solutions by 2025. The upgrades should diversify the country’s sources of energy away from natural gas consequently make generation facilities efficient
Proposed grid upgrades include a switch from AC powered grid to a digital grid operating on direct current. The upgrade should increase the capacity of solar PV and go a long way in supporting digitization and electric vehicle charging.
Singapore Power Market Opportunities
A transition to renewable sources of energy as well as upgrades to the national grid should result in expansion opportunities for Independent power providers, according to Abhise Dangra, a senior director at S&P Global Ratings
Rooftop solar, battery, and energy storage solutions, as well as the need for electric vehicle charging stations, should result in opportunities that IPPs can tap into going forward. The race to reduce emissions is one of the catalysts behind the race for solar power and electric vehicles, expected to offer vast opportunities for growth for IPPs.
The IPPs also look set to take advantage of the growing demand for large-scale storage solutions. The solutions are highly needed to store surplus energy when generation is at a peak, and demand is low. However, it is important to note that because the feasibility of large-scale storage solutions is still unknown, only larger groups with the financial muscle will be able to take advantage of this opportunity.
Singapore Power Market Challenges
While the emergence of more electricity retailers is welcome for households, the same has presented a wave of challenges to some retailers. The retailers have had to offer big discounts to be able to attract customers. While some have succeeded, some have had to pay the ultimate price and closed shop.
Red Dot was one of the first OEMs to go online but later on exited the market on experiencing financial challenges. The financial challenges could as well have stemmed from pricing pressure. The company could not compete against other retailers like Geneco that got their power, for retailing, from parent companies that are power generators.