Why Are Electricity Prices Rising?
In recent weeks, electricity prices have soared to their highest levels in decades. Consequentially, these price increases have resulted in a sharp upward pressure on household energy bills. We explore the factors that are driving these price increases and what homeowners can do to avoid succumbing to them.
Rising Gas and Coal Prices
The early onset of the Covid-19 crisis in 2020 had led to the historic plunge in global energy consumption – this drove the prices of fuels to their lowest levels in years. Since then, the prices of fuels have rebounded strongly, as a result of a rapid global economic recovery and a weaker-than-expected increase in supply.
In the case of natural gas prices, the strong increases have prompted substantial switching to the use of coal instead to generate electricity. With this increased use of coal, carbon emissions have also been driven up from global electricity generation. This has in turn, led to rising carbon prices – combined with the higher gas and coal prices, the price of electricity has subsequently been swept along in this surge.
In the case of Singapore, around 95% of our electricity is generated using imported natural gas. Therefore, price movements in the global energy market will greatly affect our electricity prices.
The Supply and Demand Crunch
This surge in coal and gas prices was not a result of a single “shock event” on the demand or supply side. Rather, it stems from a combination of supply and demand factors that gradually tightened markets over the course of several months.
Since September 2021, the world has been facing an energy crunch arising from unexpected strong demand for energy and a number of supply disruptions. Due to commodity price collapses, investments in natural gas have declined in recent years. This has introduced more vulnerability to the energy supply chain. At the same time, there has not been substantial initiatives to implement policies that scale up clean energy sources and technologies to fill the gap in energy supply. Against this backdrop, as the global economy began rebounding in the first half of 2021, the demand for coal and natural gas rose exponentially.
Homeowners And Rising Utility Bills
In the context of Singapore, electricity tariffs have risen to 27.94 cents per kilowatt-hour for the period of 1 April to 30 June 2022. This is a marked increase, especially when compared to prices during the period of July to September 2020 – 19.60 cents per kilowatt-hour.
Households living in a four-room flat – which typically consumes about 349 kilowatt-hour of electricity per month – can expect their average monthly electricity bill to go up by $8.73, almost double the increase in the previous quarter.
What can homeowners do then, to avoid succumbing to the rising costs of living in lieu of the rising electricity prices? There are two options – reducing energy consumption or switching to renewable energy sources to power their homes.
1. Reducing Energy Consumption
Being more conscious of the household’s energy consumption can help alleviate the rising costs of living because of the Carbon Pricing Act. Homeowners can opt for energy saving appliances, especially with regards to Air Conditioning and Lighting – which, on average, accounts for 70% of a building's energy consumption.
In Singapore, energy-saving and energy-efficient appliances have an Energy Label affixed onto the units, indicating the unit’s relative energy efficiency rating. These can further provide homeowners more clarity when opting for such appliances in their homes.
2. Switching To Renewable Energy Sources
Another alternative would be to generate one’s own electricity to meet their energy needs – this can be done via renewable energy sources such as residential solar. Through residential solar, the rooftop solar panel installations will convert sunlight into electricity to power the home. Click here for more details on how a rooftop solar panel system functions.
At SolarPVExchange, we offer homeowners attractive interest-free plans to help simplify the switch to solar. We will handle the installation process from start to finish and provide maintenance at no added cost. This allows homeowners the ability to readily adapt this technology at home. To get started, contact our team and you will be well on your way to achieving your energy-saving goals!