This article was written in collaboration with the Energy Market Authority (EMA). All views expressed in this article are the opinion of DollarsAndSense.sg based on our research. DollarsAndSense.sg is not liable for any financial losses that may arise from any transactions and readers are encouraged to do their own due diligence. You can view our full editorial policy here.
Since the start of the year, we have seen a rapid increase in inflation in Singapore. For 2022, the Ministry of Trade and Industry (MTI) and Monetary Authority of Singapore (MAS) have forecast that the CPI-All Items inflation will be between 4.5 and 5.5%, while MAS Core Inflation will be 2.5 to 3.5%.
One essential area that Singapore households would have experienced inflation is electricity bills. As of 3Q 2022 (July 2022), the electricity tariff in Singapore is 32.28 cents per kWh (inclusive of GST). For those of us who have signed up for a plan with an Open Electricity Market (OEM) retailer, we will likely encounter higher prices as well when we recontract or switch to another plan.
But what exactly are the factors that have led to this increase in electricity prices?
Singapore Imports Almost All Its Energy Needs
As a country with limited natural resources, the first thing we need to understand is that Singapore imports almost all our energy needs. This means, similar to many other goods that our country imports, the prices that we pay for electricity are largely determined by external factors outside of our control.
In Singapore, about 95% of electricity is generated from imported natural gas. In the Ministerial Statement by Second Minister for Trade and Industry Dr Tan See Leng on 4 April 2022, he shared that “we cannot fully insulate ourselves from the volatilities in the global energy market”.
Global Supply & Demand Shock Since 2H 2021
Unfortunately, a confluence of factors has caused the prices of oil and natural gas to spike since the second half of 2021. These include an increase in demand for oil and natural gas consumption as major economies around the world recover from the pandemic, seasonally-high energy consumption during the winter months in the Northern Hemisphere, and a series of unexpected gas production outages that led to a supply-demand mismatch in global energy markets.
The current conflict in Ukraine has also further exacerbated the tightening of oil and natural gas supply.
When we take a look at electricity futures that are traded on SGX – SGX USEP Quarterly Base Load Electricity Futures, we can see a similar increase in electricity prices for future contracts.
From about $113.85 on 5 July 2021, prices for electricity future contracts with contract month of September 2022 have gone up to $317.50 as of 4 July 2022.
Generating Electricity From Renewable Sources Of Energy
To be clear, natural gas is not the only way to generate electricity. There are other options like coal and oil to generate heat, which is subsequently used to produce steam to generate electricity. However, such fuels would be extremely pollutive.
The use of renewable sources of energy is another method to generate electricity in a relatively more non-pollutive way. However, whether that is a viable method varies for different countries.
As explained by EMA on the use of renewable energy in Singapore, “there are no hydro resources, our wind speeds and mean tidal range are low”. As such, “solar energy remains the most viable renewable energy option for Singapore when it becomes commercially viable”.
However, solar energy also comes with its own limitations. Due to the small land size of Singapore and high population density, we need to set up our solar power infrastructure in creative ways to maximise solar energy and make every space count. Besides setting up solar photovoltaic (PV) systems on the rooftops of HDB blocks and industrial buildings, possible alternative sites include offshore spaces, reservoirs, walkways and even temporary vacant land. In considering these spaces, we also need to be mindful of competing uses, such as for recreational purposes, as well as the need for biodiversity preservation.
You can take a look at some of the most interesting places in Singapore where solar panels have been installed, including over water bodies such as Tengeh Reservoir, on top of the Supertrees at Gardens by the Bay or even above an ATM kiosk.
Even then, our limited land size makes it difficult for us to only use solar power to meet our energy demand. Currently, a national solar energy target that Singapore has set is to deploy at least 2GWp of solar capacity by 2030. This would be enough to meet the annual power needs of around 350,000 households.
How Can We Conserve Energy Today?
Even as we invest in renewable energy for our future, there are things we can do today to help reduce our usage of energy.
For homeowners, one of the easiest things we can do is to use energy-efficient appliances at home. This allows us to power the same appliances with less energy. When purchasing electrical appliances, check out the energy efficiency rating for everyday appliances such as our refrigerators, air conditioners, washing machines and dryers. Since these are appliances that are used frequently, an energy-inefficient appliance will result in higher long-term usage cost over time.
Besides our appliances, we can change our consumption habits. For example, if you are used to switching on the air conditioner everyday while working from home, you could consider switching to a fan to help with natural ventilation. Another way would be to dry our clothes naturally instead of using a dryer. Changing our daily consumption habits, even if it’s in small ways, can amount to significant electricity cost savings in the long term.
To support Singapore households in coping with the near-term spike in electricity prices, the government has doubled the GST Voucher U-Save Rebates for FY2022. For instance, an eligible HDB household who owns and lives in a 4-room flat will receive a total of $600 in U-Save rebates for FY2022. The amount of U-Save rebates increase for households living in smaller HDB flat types.
In addition, the government has also announced a $100 utilities credit for every Singaporean household to help defray the cost of utilities in 2022.
If we compare the average utility bill for HDB households living in 4-room flats, the $600 in U-Save rebates and $100 utilities credit will cover about 5.3 months of utility bill based on the national average household consumption for utility bills for the month of May ($131.84). For households who are living in 3-room HDB flats, the U-Save rebates that they receive ($680) is enough to cover about 6 months of utility bill based on May’s average utility bill of $113.01.
As we gain a better understanding of Singapore’s energy landscape, the factors that have led to both a global supply shock and an increase in demand for electricity and more importantly, the reasons behind rising electricity prices in Singapore, it becomes easier for us to appreciate the importance of conserving electricity, and the ways we can do so.
It’s also worth noting that despite the increase in electricity prices over the last couple of months, most families who live in HDB flats are able to enjoy more rebates off their utility bills in FY2022 thanks to the additional U-Save vouchers and utilities credits.
Read Also: Here’s Why Buying An Energy Efficient Household Appliance Will Definitely Be Cheaper In The Long Run
The post Factors That Impact Electricity Prices In Singapore, And What Can We Do About It? appeared first on DollarsAndSense.sg.
0 Mga Komento