SEFE Marketing & Trading Insight: Challenges and Opportunities in the Singapore Energy Market

singapore energy market

Amid a move from oil to natural gas, how is Singapore transforming its energy mix? We'll explore its changing energy market in more detail below...

Singapore’s energy sector has undergone quite an evolution since its early days. Over the last 50 years, the country has moved from oil to natural gas, generating cleaner power in the process. This is shown in the power generation chart below.

Source: Energy Market Authority, Singapore

Solar power on rooftops and in reservoirs has played a larger role in the energy mix, while an improved energy system and more affordable costs are encouraging.

As the region’s industrial growth has effectively sped up its consumption of energy, here we’ll take a closer look at the challenges and opportunities that face Singapore’s energy market in more detail.

Source: Energy Market Authority, Singapore

The chart above shows that, with an increase in GDP, Singapore’s power demand is also on the rise. However, with the challenges brought about by climate change, Singapore intends to leverage greener energy sources. In doing so, the country has set long-term action plans to decarbonise its energy mix.

As a result, the country is aiming to achieve the energy “trilemma” – producing energy that is:

• Secure and reliable

• Affordable

• Environmentally sustainable

The chart below shows that Singapore has managed to achieve a degree of price stability since 2017:

Source: Energy Market Authority, Singapore

Singapore’s 4 Switches

Part of Singapore’s long-term plans to ensure a clean, affordable, and reliable energy future include an approach known as “4 Switches”. Outlined by the Ministry of Energy, the “4 Switches” will comprise:

1st Switch: Natural Gas

Right now, around 95% of Singapore’s electricity is generated using natural gas – the cleanest fossil fuel today. Natural gas will continue to dominate the country’s energy mix as Singapore scales up its other switches. The government will also aid suppliers in improving the efficiency of their power plants.

Singapore’s energy market authority has taken steps too. For instance, the launch of Genco Energy efficiency grants has helped power generation companies to deploy more efficient technology.

As seen in the installed capacity chart below, the use of Liquefied Natural Gas (LNG) has also been gaining traction in Asia amid a global push to reduce carbon emissions, with Singapore’s first ship-to-ship bunkering of an LNG-fuelled oil tanker completed earlier this year. Singapore expects annual LNG bunkering to hit one million tonnes by 2021.

2nd Switch: Solar

Singapore’s most promising renewable energy source. Having already achieved its target of 350 megawatt-peak by 2020, the government is working towards a solar target of at least 2 gigawatt-peak (GWp) by 2030, and an energy storage deployment target of 200MW beyond 2025. The chart from Bloomberg below shows that solar has grown and is projected to grow at an exponential pace.

Source: Energy Market Authority, Singapore

As a result, the country is trying to identify as many opportunities to install panels on as many suitable solar deployment places as possible. This means more solar panels on rooftops and open spaces like reservoirs, as well as untapped spaces like existing land, canals, and roads.

Likewise, the SolarNova project has also played a large role in driving solar panel installations, with four tenders done between 2015 and 2019, adding a further 236MW. And although it wasn’t officially reported, there have been rumours that the winning bid for a third tender was close to $0. Is this an indication of the confidence that investors have in recovering costs through the sale of excess generation?

There have also been some direct sales. For example, Apple agreed to power 100% of its Singapore operations using solar, while Sunseap signed a multi-year virtual power purchase agreement with Facebook for solar energy from Singapore’s offshore floating farm.

3rd Switch: Regional Power Grids

Singapore will also explore ways to tap into regional power grids in order to access energy that is cost-competitive, either through bilateral cooperation or regional initiatives.

This will allow them to access other renewable sources of energy, like hydropower, from other countries. A two-year trial with Malaysia will see Singapore import 100MW of electricity through renewable sources.

4th Switch: Emerging Low-Carbon Alternatives

The final switch will investigate emerging low-carbon solutions that have the potential to reduce Singapore’s carbon footprint. This includes carbon capture, hydrogen and other high utilisation and storage technologies.

Singapore does not produce oil domestically, and neither does it use oil for power generation. However, it is still a global oil trading hub and a major refining and petrochemical centre. It refines 1.5 million barrels a day, equivalent to 1.5% of the global refining volume, and produces 25 MT of petrochemicals per annum, which is 1.2% of the global capacity.

So, while there are plenty of challenges that an independent small city-state faces, Singapore’s plans show that it has treated the challenges as real opportunities to innovate and improve its energy mix.

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Content for this article was contributed by Serguei Edrenkine, Country Chair, SEFE Marketing & Trading Singapore and the SEFE Marketing & Trading Singapore team.

The views, opinions and positions expressed within this article are those of our third-party content providers alone and do not represent those of SEFE Marketing & Trading. The accuracy, completeness and validity of any statements made within this article are not guaranteed. SEFE Marketing & Trading accepts no liability for any errors, omissions or representations.