Energy Market Authority consults on penalty framework for electricity imports

30 March 2022

From 25 February to 18 March 2022, the Energy Market Authority (“EMA”) conducted a consultation on “Penalty Framework for Electricity Imports”, and issued a consultation paper on its website www.ema.gov.sg for this purpose.

EMA requested views from the industry on, inter alia, the proposed electricity imports penalty framework, list of penalties and penalty quantum and also invited any other suggestions and feedback on the Electricity Imports Penalty Framework.

Background

EMA intends to allow up to 4GW of total low-carbon electricity imports by 2035, which is expected to make up around 30% for Singapore’s total supply by 2035. EMA issued the first Request for Proposal on 12 November 2021, for the import of up to 1.2 GW of low-carbon electricity.

To ensure that electricity imports meet its availability, delivery, reliability and sustainability needs, EMA is developing a penalty framework that will apply to electricity importers.

Developing penalty framework for electricity imports

Methodology to calibrate penalty framework for electricity imports

EMA has designed the penalty framework for electricity imports using the following methodology:

• Determine the list of penalisable contraventions, based on the key performance characteristics that are sought from importers as stated in the Request for Proposal requirements to appoint Licensed Electricity Importers (ema.gov.sg/electricity-imports.aspx); and
• Calibrate the penalties for each penalisable contravention based on severity level.

Supply before commercial operations

• Delay in imports project completion: To ensure the timely delivery of imports, EMA intends to impose a penalty for each month of delay, or part thereof.
• Failure to meet quarterly load factor of 75% after five years of commercial operation: To ensure a consistent supply of imported low-carbon electricity, EMA intends to impose penalties for failure to achieve a quarterly load factor of 75%. EMA also notes that during initial years, the cost of generation and storage technology may make it too costly for project from low-carbon sources to produce electricity on a constant basis. Hence, EMA will require projects to achieve the quarterly 75% load factor five years after commencement of commercial operations. Maximum penalties will apply when the quarterly load factor is at 50% or less.
• Supply outages attributable to import and restoration of supply: As supply outages and prolonged restoration time have a significant impact to the supply of low-carbon electricity to Singapore, EMA intends to impose penalties for supply outages, and for failure to restore supply within reasonable time.
• Failure to meet required annual carbon mission target: As low-carbon electricity imports is a key mitigation measure that contributes to Singapore’s climate ambition and goals, EMA intends to set a penalty for failure to achieve the required emission, based on the prevailing carbon tax level in Singapore, multiplied by the difference between the actual emissions factor of the offending importer and the acceptable zone of 0.15tCO2e/MWh, and the required load factor.

Mitigating factors

EMA may decide to impose a “lower than 100%” quantum for the penalties, depending on the adequacy and completeness of preventive measures that are put in place by importers to mitigate the impact, and whether there had been lack of due diligence by importers.