Singapore's Energy Markets Authority (EMA) will impose a temporary wholesale power price cap from 1 July, according to a document published on its websiteon 19 June.
This comes in a bid to cushion electricity retailers — and by extension, businesses and households — from high and volatile LNG prices.
The price cap will be set based on a formula that takes reference from natural gas and generation costs, but EMA did not disclose any further information.
This comes after LNG spot prices surged in the fourth quarter of 2021, which left power generation companies unwilling to secure term LNG, in turn raising the risks of an actual gas shortfall and increasing wholesale electricity price volatility. Spot LNG prices have been on a downtrend since late 2022, and wholesale electricity prices have cooled somewhat, but some volatility in electricity prices remained.
High fuel prices have also discouraged investment in thermal generation units, which also increases the risk of an electricity shortfall.
The front half-month of the ANEA, the Argus assessment for spot LNG deliveries to northeast Asia, was last assessed at $10.50/mn Btu on 19 June, about 67pc lower than a year ago.
As many as six electricity retailers in Singapore were forced to shut down in late 2021, when high LNG prices made it impossible for them to continue operating. One of the largest retailers, iSwitch Energy ceased operations on 11 November 2021.
Around the same time, Singapore LNG emerged in the spot market to seek two spot LNG cargoes for the first time ever, with the cargoes for delivery in November 2021 to the 11mn t/yr Jurong terminal on a bilateral basis. This was an unprecedented move for the city-state — 95pc of the country's electricity is produced from natural gas, but it mostly sources its LNG on term basis.
