Singapore is one of the few countries in Asia to fully open up its retail electricity market. Since the introduction of market competition and the full liberalization of the retail market in Singapore, the market vitality has been stimulated, and electricity prices have been greatly reduced.
However, due to the rise in global energy prices, Singapore, which is highly dependent on external energy, has also experienced large fluctuations in electricity prices, and some retailers are withdrawing from the market.
In order to achieve net zero emissions by 2050, Singapore will actively develop its own solar energy industry in addition to importing more clean energy through the regional grid.
01Investment environment
(1) Country Profile
Singapore is located at the southern tip of the Malay Peninsula, at the entrance and exit of the Strait of Malacca, adjacent to Malaysia across the Strait of Johor in the north, and facing Indonesia across the Strait of Singapore in the south. It consists of Singapore Island and 63 nearby islands. increased to 728 square kilometers. As of June 2020, Singapore's total population was 5.6858 million. Singapore is a city-state with no divisions between provinces and cities.
Singapore is one of the richest countries in the world, known for its stable political situation and clean and efficient government. Singapore is one of the most important financial, service and shipping centers in Asia and the fifth largest financial center in the world after New York, London, Shanghai and Hong Kong.
As one of the founders of ASEAN, Singapore plays an important role in regional relations. Singapore pursues a "balance of great powers" and advocates the establishment of a strategic balance between the United States, China, Japan and India in the Asia-Pacific; it has signed bilateral free trade agreements with many countries, and joined the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership Agreement" (RCEP).
(2) Energy resources
02Investment environment
(1) Energy and power structure
Since the beginning of the 21st century, Singapore has gradually switched from oil power generation to more environmentally friendly natural gas power generation. Currently, 95% of electricity comes from imported natural gas.
In the past 10 years, Singapore has vigorously developed solar energy, and its solar energy capacity has increased by a hundredfold from 3.8 megawatt peak in 2010 to about 400 megawatt peak in mid-2020. More than half of the top floors of HDB flats (public housing) currently have or are being equipped with solar panels, and by 2030 this proportion will increase to 70%. To overcome land constraints, Singapore is also planning to install floating solar systems on the cistern.
(2) Power operation mechanism
Power-related regulatory agencies in Singapore mainly include the Ministry of Trade and Industry (MTI), the Energy Market Authority (EMA) and the Power System Operator (PSO). EMA is a statutory body under the Ministry of Trade and Industry of Singapore and plays three key roles: power system operator, development strategy maker and industry regulator.
SP Power Assets Ltd owns and manages Singapore's electricity transmission system. Singapore Power Grid Corporation (SP Power Grid), as its agent, is authorized by EMA to be responsible for the construction and maintenance of Singapore's transmission and distribution network. EMA sets stringent performance standards for Singapore Energy Assets.
Since 2018, Singapore has gradually liberalized the electricity retail market. Power generators bid for the Internet in the Singapore wholesale electricity market, and the spot market is cleared every half an hour. The price is determined by the supply and demand relationship at that time, and retailers pay according to the uniform price (Uniform Singapore Energy Price, USEP) formed by the bidding; in the retail market, retailers Electricity consumers are supplied with different Standard Price Plans.
Most electricity consumers (households and businesses with an average monthly consumption of less than 4,000 kWh) have the option to sign up for Standard Price Plans with retailers or use Singapore Energy Group’s Regulated Tariff; large On the basis of two options, electricity consumers (with an average monthly consumption of at least 4,000 kWh) can also enter the wholesale market to purchase electricity.
In order to expand their competitiveness, retailers not only provide electricity price discounts, but also provide value-added services jointly with banks, telecommunications, insurance and other industries.
(3) Analysis of electricity price
In recent years, the Uniform Price (USEP) on the wholesale electricity market in Singapore has generally been lower than the full cost of electricity generation. This is the result of intense competition among generators, who tend to overinvest. Retailers can buy low-cost electricity on the wholesale market and pay retail electricity prices below the cost of generating electricity.
About 95% of Singapore's electricity supply depends on imported natural gas, which means Singapore's electricity prices are vulnerable to global energy prices. From 2021 to 2022, due to the tight global energy supply and the sharp rise in energy prices, the price of electricity in the wholesale electricity market in Singapore often fluctuates greatly every half-hour.
Most consumers are not affected by price fluctuations in the wholesale electricity market, but consumers will feel the increase in electricity prices when they renew or sign a new standard electricity price plan.
Generally speaking, the standard electricity tariff plan is for a period of 6, 12 or 24 months. If the user signs an automatic renewal of contract (Automatic Renewal of Contract), the electricity price provided by the retailer at the time of renewal must be lower than the regulated price at that time. .
On December 30, 2021, the Singapore Energy Group announced that the regulated electricity price in the first quarter of 2022 will be increased from 22.21 cents/kWh in the first quarter of 2021 to 27.22 cents/kWh (tax included), an increase of 23%.
In addition, many retailers quit the market or stopped accepting new users. As a result, some large electricity consumers have turned to buying electricity from Singapore Energy Group at wholesale prices.
(4) National Electric Power Development Plan
In March 2022, the EMA released a report that Singapore will achieve net zero emissions by 2050, import more clean energy through regional grids, develop hydrogen-fueled infrastructure, maximize the use of photovoltaics, and strengthen emerging low-carbon technologies such as Research on nuclear technology and carbon capture, etc.
Singapore plans to achieve a solar energy target of at least 2 gigawatts (GWp) by 2030 and a storage target of at least 200 MW by 2025.
Singapore also plans to import 4 GW of low-carbon electricity by 2035, which will account for around 30% of Singapore's electricity supply, which will be done through a competitive Request for Proposal (RFP).
To this end, EMA has been conducting power import trials with partners, evaluating and refining the import power technology and regulatory framework, including importing 100 MW of electricity from Malaysia and 100 MW of solar power from Indonesia. Singapore is also a member of the Laos-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP), which facilitates cross-border electricity trade.
03Investment opportunities and risk analysis of Singapore's electricity market
(1) Investment opportunities
After more than 20 years of electricity market reform, Singapore's electricity market infrastructure is now complete, the market structure is diverse, and the supervision and electricity pricing mechanisms are relatively mature. Except for some relatively small islands, the national grid coverage has been basically achieved, and the power supply quality is at the leading level in the world.
In terms of power generation, there are certain opportunities for large-scale floating photovoltaic power generation projects. The Sembcorp Tengger Floating Body Solar Power Plant, which was contracted and constructed by China Energy Construction Group Shanxi Electric Power Survey and Design Institute Co., Ltd., is the first large-scale floating photovoltaic power generation project in Singapore.
(2) Investment risk
The probability of large-scale replacement of power infrastructure in Singapore is extremely low, which means that it is unlikely to introduce large-scale power infrastructure investment in the next few years.