SINGAPORE, April 10 (The Straits Times/ANN): Singapore will be seeking bids to increase its electricity generation capacity by 2028 to meet the growing energy demand as the Government moves towards a centralised process to coordinate such investments by the private sector.
The Energy Market Authority (EMA) will launch a request for proposals in the second half of 2023 – the first time in two decades that the Government is directly calling for such bids.
By 2028, Singapore’s peak electricity demand is projected to grow at a compounded annual growth rate of 4 to 6 per cent to reach between 10.1 gigawatts (GW) and 11.7GW.
Singapore’s generation capacity in 2022 was 11.8GW, with a peak demand of 7.8GW. A buffer is typically needed to ensure there is sufficient electricity supply to meet demand and to avoid the risk of blackouts.
Investments in new power generation technology and capacity are currently market driven.
Power generation companies (gencos) determine how much electricity to produce based on commercial considerations such as their own business plans, the outlook of electricity demand and price signals in the Singapore Wholesale Electricity Market.
The proposed centralised process framework, which EMA is getting public and industry feedback on, seeks to ensure Singapore has sufficient generation capacity on the whole, to reduce the risks of volatile electricity prices and blackouts here.
EMA noted that high electricity prices typically signal to companies that capacity is tight and new plants are needed, but such signals are “generally too late”, as it could take four to five years to build a new plant.
On the other hand, sustained high wholesale energy prices could lead to a rash of new plants being built, which later results in oversupply.
Such prolonged cycles of over- and under-supply make it challenging for private gencos to make long-term investment decisions in generation capacity, it added.
The agency also noted that as Singapore’s energy sector transitions towards being net-zero by 2050, gencos may avoid investing in new thermal plants that burn natural gas, due to rising carbon taxes and higher financing costs, as well as concerns about asset stranding.
Asset stranding could be prevalent in the oil and gas industry when countries shift to more renewable sources of energy, so much of its infrastructure is no longer used and becomes a liability before the end of the lifespan.
However, such plants “will still be needed to meet growing electricity demand and maintain a secure and reliable power system in the near and medium term”, EMA said.
Under the proposed centralised process, EMA will monitor Singapore’s generation capacity and forecast electricity demand to determine the amount of generation capacity needed to meet the nation’s needs five years ahead.
“Should the projections show that there is insufficient generation capacity to meet system needs, EMA will conduct a request-for-proposal for the private sector to build, own and operate the required new generation capacity,” it added.
EMA will step in to build the required new generation capacity if there is no private sector interest to do so or the proposals submitted are assessed to be unsuitable.
All gencos will also be required to give a notice period of at least five years to retire any licensed generating units.
Feedback on the proposed centralised process can be given at go.gov.sg/reach-centralised-process. - The Straits Times/ANN
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