The electricity market in Singapore has certainly evolved a lot since it was first introduced. Over the years, technological improvements, and a vast program of rural electrification, combined with market reforms, new building projects, and organizational changes, have changed the energy landscape almost beyond recognition.
The energy source for the electricity generated in Singapore has been the fundamental driver of change over the years. In the past oil was a major contributor to energy in Singapore, but this is no longer the case. Lack of fuel security and fluctuations in the price of oil have steered electricity producers away from this particular commodity. As recently as 2010 oil accounted for about a quarter of electricity generation in Singapore, but this number has been reduced to virtually zero over the past decade.
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Instead, generating companies have fully embraced natural gas. Not only is there more security with this resource (as it is more widely distributed over the globe), but it is generally cheaper and is less harmful to the environment. Although it is a fossil fuel and still produces CO2 when burned, it is generally cleaner and free of some of the more noxious, harmful substances that are found in the oil.
This core staple is reflected in the current electricity tariff in place in Singapore. The energy market is regulated by the EMA, the Energy Market Authority. They make sure generators are keeping their commitments, the network infrastructure is maintained, and they balance the natural supply and demand in the country to ensure there is a stable and secure supply of electricity.
The regulator is a branch of the government which oversees a lot of the other private companies that operate in the market. It tries to encourage as much competition as possible, but it can intervene in the interest of the citizens if it feels the need.
The trend in the electricity market in Singapore, as in many other modern countries, is towards greater market liberalization. There are really two electricity markets at play in Singapore, and it is the interplay of these two markets which will dictate the final tariff that customers pay. The wholesale generation market is where generation companies compete to be able to generate and sell their electricity in half-hour slots. The bids accepted will be the generators who can afford to generate electricity for the lowest price.
The other half of the equation is the retail electricity market. In this market, companies buy from the wholesale market and then have the ability to sell this directly to commercial and residential customers. This half of the market has existed since 2001 and was created to try and encourage competition and reduce the price for end-users by allowing small, enterprising retailers to compete with huge generating companies. Prior to this most companies bought their power directly from large generation companies.
In the most recent market shake-up, customers have even more choice. They can now choose whether to buy their electricity from a third-party retailer, or they can buy through a state-regulated company called SP Group. Furthermore, if they decide to buy from SP Group, they can either choose to buy at the wholesale electricity rate (which changes every half hour), or at a predefined tariff which is set every few years. This tariff takes account of a number of factors such as fuel costs, network costs, and generation costs to try and predict a fair and accurate wholesale price.
Although the market has changed considerably over the years in Singapore, there are still many familiar faces on the block. Many companies have made a successful transition from being purely generating companies to also being customer-facing retailers of electricity.
For example, Senoko is one of the largest power stations in Singapore and has been in operation since the 1970s. However, as well as being a generating giant, it now also sells the electricity it produces directly in the retail market. Of course, it continues to perform in the wholesale market as well, meaning that it has crafted a well-rounded, multi-faceted business with great potential for growth in the coming years. This is just one example of how technical and economic changes have prompted innovation and ingenuity from existing businesses in the electricity market.