A spike in Singapore’s wholesale electricity price to the highest level in a decade highlights the nation’s vulnerability to the global energy crisis, putting further strain on beleaguered power retailers.
The cost of one megawatt-hour soared to $4,499.93 for about 30 minutes on Monday night, more than 13 times the daily average. That’s just below the price cap of $4,500, which was last reached in 2012, according to Energy Market Co., the market operator.
“Periodic price spikes can occur when there are tight supply conditions,” said Henry Gan, senior vice president of EMC. He didn’t specify the exact cause of Monday’s incident, but said, “What is important is that the prices normalize after the supply returns to normal, which is usually the case.”
While most Singapore consumers are protected from jumps in wholesale prices, the spike represents the latest reverberation from the global squeeze on energy supply. Countries around the world are wrestling with soaring fuel prices and power shortages, with the turmoil exacerbated by Russia’s invasion of Ukraine.
Elevated prices in Singapore and around the globe “will remain until the macro-economic picture comes under control,” said James Whistler, managing director of Vanir Global Markets Pte. “Volatility in global gas and coal prices will continue to wreak havoc on markets dependent on these fuels” until the Russian supply chain stabilises.
The volatility presents further challenges for a shrinking group of independent companies that supply power to households and businesses in Singapore. They buy power from the wholesale market, but sell to customers at a fixed rate, so any sudden swing in prices could result in enormous losses.
That’s what happened last year, when surges in electricity prices forced several providers to cease operations, upending the country’s efforts to open its market for more competition. At the time, Singapore promised safeguards, including offering retailers help in hedging.
Singapore’s Energy Market Authority is considering tightening licensing requirements for electricity retailers to minimize failures in the sector, the Business Times reported in May, citing an EMA’s director of market development and surveillance.
Currently, there are nine companies offering power plans to residential consumers in Singapore, according to the Open Electricity Market, which was launched by the government in 2018. That compares with 12 in May of last year.
Retailers contacted by Bloomberg either declined to comment on the recent price jump or didn’t immediately respond.
The resource-poor island nation generates almost all its electricity from power plants running on natural gas, which is imported via pipelines or tankers. That leaves the country exposed to skyrocketing prices for the fuel.
Singapore’s small size also limits how much renewable power can be added to its energy mix, necessitating imports of clean power from other countries. Last month, it began receiving hydropower from Laos, while plans have been proposed for an undersea cable to bring in solar electricity from Australia.
The government last month announced a $1.5 billion package to shield lower-income households from surging costs of living, including utilities rebates.