Average power prices fell last year despite oil hikes

AVERAGE Singapore electricity prices dipped in 2007 after climbing for two consecutive years, a just released market report by the Energy Market Company showed. This is despite sharply higher oil prices and record high electricity demand here last year.

This was attributed to efficiency gains and increased competition among the generating companies (gencos), spurred by the entry of new player Keppel Merlimau Cogen.

This led to the average Uniform Singapore Electricity Price dipping by 6 per cent to S$124.57/MW hour last year, after climbing from $82.35 in 2004 to $109.90 in 2005 and $132.42 in 2006.

The fall in average electricity price came despite the oil benchmark for the electricity industry here - 180 centistoke high sulphur fuel oil - rising by 18.7 per cent from 2006.

In tandem with higher GDP growth, electricity demand here also rose, the EMC report said, with peak demand rising to 5,782 MW in 2007 from 5,452 MW in 2006.

EMC chairman Tan Soo Kiang noted that overall, the electricity market performed well in 2007 showing 'continuous growth, ongoing changes and increased competition'. This 'helped keep electricity prices competitive as efficiency gains and competition among the generating companies cushioned the impact of high oil prices on electricity prices', he added.

The market attracted new investment in generation capacity with total installed capacity up 19 per cent since 2003. In fact, the entry of new genco Keppel Merlimau Cogen (with 498 MW capacity) last year was one of the factors that led to the fall in the average electricity price here, he said.

Keppel Merlimau's entry boosted availability of electricity offered - to above 4,900 MW - from more efficient combined cycle gas turbines here. This contributed to lower electricity tariffs. On the other hand, steam turbine offer availability shrank a further 1.4 per cent last year.

The EMC report also noted that new investment and market players will be entering Singapore following Temasek Holdings' divestment of the three biggest gencos here.

This has already started with China's largest power producer, the China Huaneng Group, buying over Tuas Power for $4.2 billion last month. The 2,670 MW genco recently told BT that it was planning to 'repower' its steam turbines with investments in either more cost-efficient combined cycle gas turbines or coal-firing units.

Next will be the sale of the largest genco here - Senoko Power (3,300 MW) and PowerSeraya (3,100 MW). Intra-industry, the entry of newcomer Keppel Merlimau, which captured a market share of 6.4 per cent last year, reduced the incumbents' share.

While Senoko (29.7 per cent) continued to claim the highest market share, this was down 2.49 per cent from 2006. Tuas Power (24.5 per cent) and Semb- Corp Cogen (9.4 per cent) were similarly affected with reductions of 1.6 per cent and 1.4 per cent respectively. The impact on PowerSeraya (27.7 per cent market share) was more moderate, the EMC said, with a 0.62 per cent decline in generation market share.

In total, $5.26 billion of electricity was traded in Singapore's wholesale market, or 1.43 per cent, marginally less than in 2006.