SINGAPORE — In a bid to weather"potentially more turbulent times ahead" amid a global energy crunch, the Government will soon require energy retailers to have sufficient capital and a good business plan to withstand market volatility before they are allowed to enter the market.
"To navigate the dual challenges of the energy transition and energy security, we need to strengthen our energy market structure," he said. Nevertheless, MTI said while the new measures will improve the stability and security of Singapore’s power sector in the long term, the ministry also acknowledged that these moves will reduce choice for both market participants and consumers"to some degree".
But while such a “competitive market structure” has served Singapore well over the past two decades, MTI said some gaps have emerged. “Indeed, when gas prices are high, gencos are less inclined to contract for gas for fear that they would be left stranded when gas prices moderate,” it said. But as it takes four to five years to build a new generator, companies may not be able to respond in time during a volatile market when electricity prices are high.Finally, MTI said there is also the risk of market failures as industry participants are not sufficiently equipped to deal with volatile market conditions.
These include imposing stricter qualifying criteria for retailers such that only industry participants with “sufficient financial strength and sustainable business propositions to withstand some degree of market volatility” can enter the market, said MTI. He added that all consumers can still enter into retail contracts, while consumers who qualify for the regulated tariffs can still continue to do so.Late last year, EMA implemented a slew of temporary measures to tackle the global energy crunch, which included requiring gencos to contract sufficient fuel to operate.
The facility was first introduced last year to allow gencos to draw upon for electricity generation in the event of gas supply disruptions. Moving forward, Mr Gan said EMA will work with the industry to explore ways to aggregate gas procurement and obtain contracts that are both longer and more secure.To ensure sufficient generation capacity to meet system demand, EMA will introduce a structured process to facilitate private investments in new power generation.