TL;DR – Electricity prices in Singapore are set to rise yet again, as a major supply pipeline in Europe has been taken off service last week.
Major supply pipeline taken off service
Nord Stream 1, a major supply pipeline, was originally scheduled to complete its annual maintenance on 21 July 2022. But this maintenance is set to be extended indefinitely as a political move by Russia due to the Russia’s invasion of Ukraine.
European nations are highly reliant on Russian gas. With Europe’s current sanctions on Russia, it is foreseeable that Russia would “strike back” by withholding supply of liquified natural gas (LNG), which would effectively impede Europeans’ preparations for the coming winter.
LNG prices are spiking
The benchmark price for LNG was US$25 per British thermal unit (MMBtu) on 13 June 2022 and spiked to US$48 MMBtu on 11 July 2022.
Global experts have pointed out that European gas prices are closely related to Asian gas prices — when one rises, the other rises along.
Managing the spike
The surge in LNG prices has caused countries to adapt in their own ways. India, for example, has switched to coal as a fuel supplement for power generation. Pakistan limited the operating hours of commercial establishments to curb electricity demand and imposed a five-day work week to cope with fuel shortages.
What can Singapore do? Singapore relies heavily on natural gas for power generation requirements. The reliance on natural gas stands at 95%. Natural gas is transported through pipes from Malaysia and Indonesia. Gas is also liquified to be transported from Qatar and Australia.
Brace for increased costs
Since electricity generation in Singapore is so reliant on natural gas, we should expect a further increase in electricity costs in time to come. In the long term, Singapore will need to explore renewable strategies while it waits for the energy market to stabilize.
In June 2022, Singapore grid operator SP Group has already raised the electricity tariff from July 1 to September 30 by about 8 per cent due to higher fuel costs. If the trend continues, we can expect prices to continue increasing after 30 September 2022.