SINGAPORE - Electricity prices are likely to increase as Singapore's electricity overcapacity situation normalises and fuel prices rise, said Second Minister for Trade and Industry Tan See Leng on Thursday (March 4).
However, he noted that price surges and volatilities will be managed.
"Even when prices do go up, we will do our best to ensure that this gradient is gradual, and the Government will act where necessary to minimise excessive surges," said Dr Tan.
Addressing questions on electricity prices from Mr Saktiandi Supaat (Bishan-Toa Payoh GRC) and Mr Liang Eng Hwa (Bukit Panjang), Dr Tan said that wholesale electricity market prices are indeed well-depressed currently.
Generation companies (gencos) had built excess capacity to cater to projected bullish demand around a decade ago. But this did not materialise, and intense competition between the gencos have led to electricity prices falling below the full cost of production, he explained.
But the overcapacity situation will likely be alleviated in the near future and it is thus inevitable that prices will rise, he said.
"Over the medium to long run, electricity prices normalising is inevitable... No company that is commercially run will sell electricity below cost perpetually," Dr Tan told Parliament during a debate on the Government's sustainability plans.
The minister also outlined that rising demand for electricity, due to factors such as the growth of data centres and the electrification of vehicles, will also lead to wholesale electricity prices to rise and normalise.
"The low electricity prices today are currently also disincentivising the generation companies from investing in new plants," he said.
Singapore will still need to rely on energy imports going forward, and will also be subject to global prices, he said.
Dr Tan pointed out that fuel prices had dipped to their lowest levels in the last 20 years due to the Covid-19 pandemic last year, but are expected to rise going forward and will likely cause electricity prices to increase as well.
The Government will do its best to manage its energy trilemma of obtaining energy that is reliable, affordable and environmentally sustainable, by introducing more renewable energy in its energy mix, making power systems more efficient and minimising the impact on prices, Dr Tan stressed.
"However, 'right-pricing' the energy prices is critical to encouraging prudent use of electricity. We must adopt energy conservation as a way of life for all of us here in Singapore."
More details on the Energy Market Authority's (EMA) consultation with the industry on managing electricity price normalisation will be announced later in the year.
Greener energy sources
Dr Tan also elaborated on Singapore's efforts to decarbonise its energy sources, such as through the development of its solar capabilities and capacity, and regional grids. The country is continuing to explore ways to deploy solar, such as at existing canals and roads, he said.
Energy storage systems will also have to match the increase of solar deployment, he noted.
A consortium led by a local small and medium-sized enterprise, Eigen Energy, has been awarded a grant to pilot Singapore's first smart and clean-energy powered service stations which will have a smart energy management system to integrate solar, energy storage and electric vehicle chargers. These stations will provide one of the fastest public EV charging when ready in the first quarter of 2022, Dr Tan said.
The three stations, located in Tampines, Pasir Ris and Lakeview, are part of Shell’s network of EV charging points in Singapore.
The consortium is also developing an enhanced fire-rated battery container with improved fire resistance to store the energy storage system, as part of the project.
He also highlighted that the EMA will be issuing a request for proposal for a two-year trial of 100MW of electricity imports from Malaysia in March 2021, and is initiating cross-border power trade of up to 100MW under the Lao-PDR-Thailand-Malaysia-Singapore Power Integration Project.
"This will also allow us to tap on the abundance of hydropower and other renewable energies that some of our South-east Asian neighbours have."
On Tuesday, Singapore-based solar firm Sunseap and Malaysia's largest electricity utility Tenaga Nasional Bhd announced a joint venture to participate in the trial.
Addressing Nominated MP Koh Lian Pin's question on the carbon footprint of electricity imports, Dr Tan said that the EMA will put in place steps to verify the cleanliness of energy inputs, including requiring proof of carbon output. Cleaner proposals will be scored favourably, he added.