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Centralised Process to Ensure Sufficient Generation Capacity
A total of 10 companies responded to the consultation paper. Feedback received had indicated that the industry was generally supportive of the Centralised Process and recognised the need for a centralised planning process to avoid under/over-capacity in the system. However, there were requests for greater clarity on EMA’s supply and demand projection methodologies, operating parameters of generating unit built by EMA, provision of revenue support for new generation planting and the proposed Request For Proposal (“RFP”) timeline. These are addressed in the attached Final Determination Paper. The framework for the Centralised Process and the RFP for new generation capacity are also set out in this Final Determination Paper.
EMA will continue to review the design framework of the Centralised Process and the RFP for new generation capacity to safeguard the continued security and reliability of the Singapore power system.
Please refer to the attached the addendum issued for the consultation.
Over the past two decades, investments in new power generation technology and capacity have been driven by the commercial considerations of power generation companies (“Gencos”). These considerations include Gencos’ own business plans and their outlook for electricity demand. While this approach has generally served us well by increasing innovation and efficiencies in operations, it does not provide sufficient assurance that there will be sufficient generation capacity at the system level.
While high electricity prices typically signal to companies that capacity is tight and new plantings are needed, these signals are generally too late as it takes around four to five years to build a combined cycle gas turbine (“CCGT”) generating unit on a green field site. This may result in periods of insufficient generation capacity, which increases the risks of volatile electricity prices and blackouts. On the other hand, periods of sustained high prices on the Singapore Wholesale Electricity Market (“SWEM”), increases the risk of uncoordinated multiple plantings, leading to excess capacity. Such prolonged cycles of over and under-supply make it challenging for private generation companies to make long-term investment decisions in generation capacity.
This is further exacerbated by the energy transition, where rising carbon taxes, higher financing costs and concerns about asset stranding may discourage investments in new thermal generation units which will still be needed to meet growing electricity demand and maintain a secure and reliable power system in the near and medium-term.
In Oct 2022, the Ministry of Trade and Industry (MTI) announced that the Energy Market Authority (EMA) would be introducing guardrails to strengthen the existing competitive market structure and ensure that Singapore is well-positioned to navigate the energy transition. In particular, to ensure that we have sufficient generation capacity in time to come, MTI announced that EMA would be planning and coordinating capacity building at the system level via a Centralised Process. This consultation paper sets out the details of this Centralised Process.
Please submit all written comments via email to Ong_Guang_Yong@ema.gov.sg and Kwok_Sher_Wei@ema.gov.sg by 5pm on 8 May 2023 in the format shown in the Appendix of the consultation document. You are requested to submit a soft copy of your submission in both PDF and Microsoft Word format.