After faltering amid the global downturn, Singapore’s electricity demand is again on the rise, driving innovative investment in LNG facilities, market liberalization, energy efficiency measures and smart grid technology.
A hint of dismay could be sensed when, in June last year, Singapore’s Energy Market Authority (EMA) signalled a prospective slide in annual demand: “This is the first time electricity demand is expected to fall in Singapore. Over the past four decades, Singapore’s electricity demand has been growing at an average rate of 6 per cent per year. Even in past recessions, we experienced only a slowdown in the growth rate of electricity demand, but not a decrease.” In the event, the fall in demand reversed early in the year, enabling 2009’s annual consumption of 37 974.2 GWh to nudge ahead of the previous year’s 37 940.3 GWh.
Demand’s inexorable rise
By the first quarter of this year – with demand up 14 per cent on the previous year – Singapore’s electricity market was firmly back on its familiar path. Average daily demand climbed to 4863 MW over the quarter, while sultry weather triggered a record spike of 6261 MW.
The rise spotlighted a serious but more welcome challenge for the business-friendly city state: meeting the energy needs of sustained growth. Between 2009 and 2018 the EMA forecasts that electricity demand will climb by between 2.5 per cent and 3 per cent a year.
Population growth braked sharply this year, when the total crept past five million, but the number of residents is likely to resume its historic rise in coming years. Domestic consumption also reflects burgeoning living standards and a proliferation in energy-intensive appliances. For instance, in 1988 only 19 per cent of households had air-conditioning but by 2003 the figure had hit 72 per cent. Reflecting this, domestic demand has shot up from 1565.3 GWh in 1986 to 7084.9 GWh last year. However, the non-domestic market provides the lion’s share of Singapore’s electricity demand – 82 per cent in the first quarter of 2010 – and also drove this year’s market recovery.
“Singapore has a small [electricity] system, so a large number of industries locating here or the start-up of a new refining complex can have a significant impact on demand,” Dave Carlson, CEO of the Energy Market Company (EMC), which runs Singapore’s wholesale market, told the Business Times of Singapore at the end of the first quarter. The opening of two massive ‘integrated resorts’ is believed to have helped fuel the surge in demand along with Shell’s new $3 billion petrochemical facility.
The push for energy conservation
Mitigating the looming threat to its energy security, Singapore sliced its energy intensity by 28 per cent from 1990 to 2007, according to its National Environment Agency – which is planning for a 20 per cent drop from 2005 levels by 2020 and 35 per cent by 2030.
An Energy Conservation Act to be introduced in 2013 will set minimum energy management standards for large industrial users. A migration to service industries is also set to curb growth in demand. The service sector’s demand finally overtook that of manufacturing in 2008. While manufacturing consumed 13 628 GWh last year, the figure for non-industrial firms was 17 261 GWh.
Seeking shelter from price hikes
Progressive liberalization is credited with cushioning consumers from a rise in fuel prices. Yet Singapore’s reliance on imported gas leaves it heavily exposed to market fluctuations. The pegging of gas to the oil price prompted a sharp upswing in the Uniform Singapore Energy Price (USEP) – which in the first quarter doubled year-on-year to S$191.45 ($146.56) per MWh.
Fuel costs make up 60 per cent of the tariff charged to consumers, which means that tariff hikes must eventually reach the island’s electorate. The EMC has warned that volatile markets and burgeoning demand could see the USEP continue to climb, despite at least 2000 MW of extra capacity coming on line by 2013. As demand raced ahead in the first half of the year, the USEP’s rise also reflected a switch to less efficient generation facilities as combined-cycle turbines underwent maintenance.
LNG diversifies supply
As well as pressing demand – for which the minimum reserve margin is set at 30 per cent above peak demand – Singapore is edgy about its overwhelming reliance on gas piped in from its neighbours. EMA requires all gas fired power stations to be able to switch to other fuels if the gas supply is disrupted.
After the market was deregulated in 2001, gas rapidly ousted oil – which provided 70 per cent of electricity a decade ago – to generate 80.3 per cent of the country’s electricity in 2008.
The government’s determination to lighten the state’s reliance on piped gas was clear in its intervention in July 2009 to salvage a $1bn liquefied natural gas (LNG) terminal project after GDF Suez and PowerGas (a Singapore Power subsidiary) were deterred by the global credit crunch. The Jurong Island terminal, now in the hands of government agency Singapore LNG Corporation, is due to come online in 2013, providing an alternative to piped gas from Malaysia and Indonesia.
The terminal will incorporate two 180 000 m3 storage tanks. Imports are initially expected to total 1 million tonnes per annum (tpa), although government controls will hold back pipeline imports to drive this figure up to 3 million tpa by 2018. A planned second phase of development would double capacity to 6 million tpa – the amount now piped in from Malaysia and Indonesia.
Gencos tussle for market share
In a marked contrast to its enthusiasm for regulating areas of life such as the use of chewing gum, Singapore is an intrepid pioneer of liberalization in energy. By putting its three big power utilities in the hands of international investors, the government has triggered competition, which has propelled the development of new capacity and the transition from oil to gas.
Temasek, the government’s investment company, sold off Tuas Power to a subsidiary of China’s Huaneng Group in March 2008. A consortium led by Japan’s Marubeni bought Senoko Power in September of the same year. The last of the big three generation companies – PowerSeraya – became a subsidiary of Malaysia’s YTL Power International in March last year.
PowerSeraya edged into pole position in the generation market last year, its 27.2 per cent share pipping Senoko Power’s 26.4 per cent, with Tuas Power taking 24.3 per cent, Sembcorp Cogen 10.5 per cent, Keppel Merlimau Cogen 9.1 per cent and incineration plants 2.5 per cent.
Laying the ground for a smart grid
In Singapore’s liberalized energy market heavier purchasers – known as ‘contestable consumers’ – can already choose their supplier. Since December 2003, a monthly consumption of 10 000 kWh earns the right to buy in one of three ways: from a chosen retail supplier; directly from the National Electricity Market of Singapore (NEMS), which is a real-time wholesale market run by the Energy Market Company under EMA regulation; and indirectly from NEMS through SP Services, the market support services licensee. Extending such freedom to Singapore’s other 1 million customers – who make up 25 per cent of the market – is already being planned, although no timescale has been announced.
June saw the conclusion of an Electricity Vending System (EVS) pilot project that allowed households to choose their retailer and offered smart metering along with e-payment. The EMA reports promising results – with households cutting usage or switching their consumption off-peak – and has embarked on a larger-scale pilot for an Intelligent Energy System (IES).
In what its chief executive Lawrence Wong characterizes as “a healthy pipeline of gas generation capacity going forward”, the EMA anticipates about 3000 MW of new gas generation capacity in the next three to five years.
“All five of our existing power companies in Singapore have announced plans for new plants. A new company, Island Power, has announced that it will be investing in Singapore and entering the Singapore power market,” says Wong.
Projects under way include Tuas Power’s Tembusu Multi-Utilities Complex, which should start coming online in 2012 with an initial output of 100 MW. Keppel Merlimau Cogen plans two new generation plants, each 450 MW, with commissioning dates of 2013 and 2014. Sembcorp is adding 400 MW to its capacity. Island Power is to start constructing a 800 MW plant in the first quarter of next year, with completion due in 2013.
|Singapore’s power generation and consumption in GWh, 2005–2009 Source: EMA, SP Services, SP PowerAssets|
In the cramped confines of Singapore, repowering projects are key to bolstering capacity. Senoko Power’s ongoing repowering is due to replace 750 MW in oil fired capacity with two combined-cycle 430 MW gas turbines by 2012. PowerSeraya has recently added 1500 MW of cogen capacity. Tuas Power is currently considering whether to follow its lead with a repowering project to build 400 MW combined-cycle capacity.
New technologies and power links
In the immediate future, Singapore is unlikely to witness a transformational adoption of new energy sources. Yet in setting ‘Energy Resilience for Sustainable Growth’ as first priority for a S$16.1 billion five-year research grant in September, the government showed enthusiasm for innovative solutions.
Five incineration plants now generate a total of 184 MW from waste, although solar power has yet to gain more than a toehold, with 31 grid-connected photovoltaic installations contributing only 422 KW, while wind has been held back by cost. On the 10 km2 island of Pulau Ubin, however, EMA is now investigating clean energies, with an intelligent microgrid as a test-bed.
New international links could hold greater promise. Two long-established 230 kV submarine cables between Senoko Power and Malaysia have helped utilities at both ends to tackle outages through a transmission capacity of 200 MW. Over the next few years these may be joined by several interconnections such as a 700 MW link to Peninsula Malaysia, a 600 MW connection to Sumatra, and a link with Batam.
On 24 August, Indonesia’s energy minister Purnomo Yusgiantoro announced that Indonesia, Malaysia and Singapore had agreed to build three interconnected power transmission networks with up to $1 billion in investment. The networks, linking Singapore with Batam and Bintan in Indonesia, would help his country tackle shortages in Sumatra and Kalimantan, he added.
The progress of the ASEAN power grid according to official declarations is by no means certain. But the enthusiasm that vast, resource-rich Indonesia shows for linking up to its tiny neighbour reflects the success of the city state’s drive for energy security. Through aggressive liberalization and consistent investment, Singapore’s celebrated attitude of ‘kiasu’ – the fear of failure – is once again triumphing over heavy odds.
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