SINGAPORE Law and Practice Contributed by: Adam Moncrieff, Karthik Kumar, Lynette Lim and Kelly Choo, Orrick, Herrington & Sutcliffe LLP
1.7 Announcements Regarding New Policies There have been several recent policy and initiative announcements that may materially affect Singapore’s power industry over the medium to long term. Policy attention is increasingly focused on diversifying Sin- gapore’s energy mix through cross-border electricity imports, centralised gas procurement, energy storage and other low-carbon alternatives. A key policy direction is the scaling up of low-carbon electricity imports. Singapore aims to import around 6 GW of low-carbon electricity by 2035, equivalent to approximately one-third of its energy needs. The EMA has issued Conditional Approvals to 11 low-carbon electricity import projects from Australia, Cambodia, Indonesia, Sarawak (Malaysia) and Vietnam, with six projects having progressed to conditional licences. These developments indicate that cross-border inter- connectors, regional power trading and related grid infrastructure will become increasingly important to Singapore’s power sector. Singapore has also announced and implemented initiatives to strengthen fuel security and support decarbonisation. Singapore GasCo has been estab- lished to centralise procurement and supply of natural gas to the power sector, with prescribed generation entities generally required to procure gas from the holder of a central import gas licence unless the EMA permits otherwise. In parallel, Singapore is pursuing further decarbonisation-related initiatives, including minimum energy efficiency standards for prescribed energy-consuming systems, a proposed Emissions Standards Code for new and repowered fossil fuel- fired generation units, and carbon-market initiatives covering voluntary carbon credit guidance, a poten- tial buyers’ coalition and financial-sector support for carbon-market capabilities. 1.8 Unique Aspects of the Power Industry Singapore’s electricity sector is one of two fully liberal- ised and open markets in the Association of Southeast Asian Nations (ASEAN) region. Its foreign investment and business-friendly commercial environment, politi- cally stable landscape, business-friendly and clear laws and transparent, absence of corruption and effective justice system make it an attractive jurisdic- tion for power sector participants.
A distinctive feature of Singapore’s power market is the combination of competitive wholesale and retail markets with a single national grid. Generation com- panies bid to sell electricity into the wholesale market every half-hour, while electricity retailers buy electric- ity in bulk from that market and compete to sell to con- sumers. At the retail level, the open electricity market allows consumers to buy electricity from SP Group at the regulated tariff, from a retailer under a price plan, or from the wholesale electricity market through SP Group, while physical supply remains unchanged because SP Group continues to operate the national grid. Another noteworthy feature is that Singapore is pursu- ing an energy transition from a position of structural resource constraint. Singapore continues to rely on natural gas for around 95% of power generation, while solar is its most viable domestic renewable source but is expected to meet only up to 10% of projected electricity demand in 2050, mainly due to land con- straints. As a result, Singapore’s transition strategy is unusually outward-facing: it aims to import around 6 GW of low-carbon electricity by 2035, equivalent to around one-third of its energy needs. This makes cross-border electricity imports, regional interconnec- tors, centralised gas procurement through GasCo, and emerging technologies such as energy storage and low-carbon alternatives particularly important to Singapore’s power industry. 2. Market Structure, Supply and Pricing 2.1 The Wholesale Electricity Market The EMC operates and administers the wholesale electricity market. Power generation companies bid to sell electricity in the wholesale electricity market every half-hour. Depending on electricity demand and supply, the price of electricity in the wholesale electricity market changes every half-hour. Electricity retailers buy elec- tricity in bulk from the wholesale electricity market and compete to sell electricity to consumers. Real-time and historical half-hourly trading data, including the Uniform Singapore Energy Price (USEP), nodal energy
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