Singapore Bold Energy Pivot: To fortify its energy sector and mitigate the erratic fluctuations in electricity prices triggered by energy shortages, Singapore’s government is establishing an entity tasked with centralizing gas procurement and supply for the power industry.
This entity will pool gas demand from power generation companies (gencos), which currently make individual decisions about the volume and duration of gas procurement based on their commercial considerations. Minister for Trade and Industry, Gan Kim Yong, introduced this centralized gas procurement framework at the Singapore International Energy Week (SIEW), emphasizing the crucial role of a stable and secure power system in the transition to net-zero emissions.
Minister Gan highlighted the potential risks to decarbonization efforts, particularly during times of global energy crises, as observed in certain countries resorting to restarting coal plants to stabilize electricity prices. He underscored the need for a reimagined approach to gas procurement as the world navigates an energy transition marked by increased volatility.
Natural gas is pivotal to Singapore’s energy landscape, accounting for 95% of its electricity generation. To address the challenges posed by market uncertainties and increased volatility in the gas sector, the Energy Market Authority (EMA) is working to establish a new entity, tentatively called Gasco, by 2024.
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The initiative stems from the global energy crisis of the past year, driven by factors like fossil fuel shortages, disruptions in renewable power, and price spikes in oil and spot gas markets. This framework aims to rectify the shortcomings of the existing gas procurement system that led to suboptimal outcomes during the crisis.
Under this new approach, Gasco will become the sole procurer of upstream gas for the power sector, affording it a stronger position for negotiating favorable contract terms and optimizing system needs. It will also have the capacity to enter long-term gas contracts, enhancing price stability and supply.
As a pivotal component in Singapore’s ongoing energy transition, this centralized gas procurement framework is poised to create a more robust and reliable power system, ultimately benefiting consumers and power generation companies. It serves as a critical foundation for advancing the nation’s energy transition toward a cleaner and more sustainable future.
This development represents a significant shift in gas procurement methodology and underscores the government’s commitment to building a resilient and secure energy landscape, setting the stage for a sustainable and forward-thinking energy future.