SINGAPORE: The Energy Market Authority (EMA) announced on Monday (31 July) that it will be implementing an enhanced regulatory framework for electricity retailers, designed to reinforce the competitive market structure and prepare Singapore for the energy transition.
The decision comes after a period of high volatility in the electricity market, partly triggered by the global energy crunch in the last quarter of 2021.
During the global energy crisis, there was significant price volatility in the Singapore Wholesale Electricity Market (SWEM), spilling over and affecting the electricity retail market. In 4Q2021, six electricity retailers exited the market as they were not sufficiently prepared for the market volatilities, and in some cases, consumer contracts had to be prematurely terminated.
These recent market conditions highlighted some retailers’ vulnerabilities who lacked the resilience to navigate market volatility.
In response to this, EMA has proposed a series of measures intended to fortify the current market structure, increase consumer protection, and enhance the resilience of electricity retailers against future market volatility.
These new regulations were finalized after a public consultation exercise from February to March 2023 and received general support from the electricity retailers.
The enhanced measures include requiring retailers to maintain a Tangible Net Worth of at least SGD$1 million at the time of license application or renewal, and to obtain EMA’s approval to appoint key appointment holders.
Moreover, retailers must hedge at least 80% of their retail contract position and provide a performance bond for any unhedged position, thus further safeguarding against market volatility. Steps will also be taken to protect consumers against premature termination of retail contracts. These enhancements are set to be progressively implemented from August 2023.
EMA also addressed the future electricity demand of Singapore and stated that the country has sufficient generation capacity. New generation capacity is expected to enter the market over the next few years due to economic growth and new investments in energy-intensive industries.
Keppel Energy and Sembcorp Cogen Pte Ltd are set to build Combined Cycle Gas Turbines, and Meranti Power is constructing two 340MW Open Cycle Gas Turbines, which are expected to be commissioned by 2025.
To further ensure sufficient generation capacity, EMA plans to introduce a Centralised Process for coordinating the development of new generation capacity by the private sector.
A Request for Proposals for new generation capacity required in five years’ time was launched in July 2023. If private sector interest proves insufficient, EMA has stated that they will build the necessary capacity.