Market Update for July and August 2023
Overview of USEP and supply cushion – Jan to Aug 2023
The daily average Uniform Singapore Energy Price (USEP) ranged between $108.31/MWh and $380.63/MWh in July, and between $101.58/MWh and $572.01/MWh in August. The monthly average USEP plummeted 45.1 percent to $167.49/MWh in July. This was the first time that the monthly USEP fell below $200.00/MWh since October 2021. In August, the downward trend continued, the USEP declined another 5.2 percent to $158.82/MWh.
In July, demand decreased 1.4 percent to 6,365MW while supply fell 0.4 percent to 7,282MW. This led to an expansion in supply cushion by 0.9 percentage point to 12.6 percent. Despite a 10.0 percent increase in fuel oil price, the drop in July’s USEP can be attributed to the decreased in the number of days when the daily USEP rose above $300.00/MWh – there were three days in July which registered a daily USEP of more than $300.00/MWh, compared to 11 days in June.
In August, demand increased by 0.2 percent to 6,377MW while supply fell 1.5 percent to 7,176MW. As a result, the supply cushion contracted by 1.5 percentage points to 11.1 percent. In August, there was one day with the USEP clearing above $300/MWh. This was a drop of two days when compared to July. This resulted in the drop in the USEP for August despite a 16.2 percent increase in fuel oil price.
The new vesting regime framework took effect on 1 July. This will hedge the non-contestable consumers (NCCs) load for the next five-year period, from 1 July 2023 to 30 June 2028, following the expiry of the existing vesting contracts (VCs) on 30 June.
In addition, as part of a suite of initiatives to strengthen Singapore's energy market, the Energy Market Authority (EMA) introduced the Temporary Price Cap (TPC) mechanism from 1 July. The TPC aims to mitigate extreme price volatility in the Singapore Wholesale Electricity Market (SWEM).
