from the ground Up

by Jessica Cheam, The Straits Times, June 3 2009

MORE green shoots have emerged in the economy, this time in the form of energy demand last month, which increased from April’s level of use.
Last month’s demand for electricity reached 4,697 megawatts (MW), up 3.6 per cent from April – a reversal of demand decline since September last year, according to the Energy Market Company (EMC) yesterday.
Last month’s figures could indicate the beginning of a new uptrend in demand and, in turn, increased economic activity.
Yesterday’s Purchasing Managers Index (PMI) numbers also showed that manufacturing grew last month after eight straight months of slump.
Still, it is too early to say if the demand uptrend is sustainable as May is also a hot month when electricity usage typically climbs, said EMC chief executive Dave Carlson.
Electricity demand last month was down by 2.3 per cent compared with May last year.
CIMB-GK economist Song Seng Wun agreed, saying the spike in demand could be due to seasonal reasons.
However, he added the figures are indeed “supportive of improved sentiment on the ground”, and the return of some degree of confidence.
Last year was the first time monthly average demand registered negative year-on-year growth since 2003. The months of March, August, October, November and December all recorded lower usage than the same months in 2007, said Mr Carlson at a media briefing on EMC’s 2008 market report yesterday.
For the whole of last year, the rate of demand growth was 1 per cent, compared with an annual growth rate of over 3 per cent in the preceding five years, he added.
This was due to the economic fallout and subsequent drop in demand for energy, he added.
Last year, the Uniform Singapore Energy Price (USEP) averaged $162 per MWh – 30.2 per cent higher than in 2007, on the back of record prices of crude oil before the global crisis.
The USEP and other administrative charges make up the purchase price paid by electricity wholesalers.
Milestones were also achieved last year, most notably the sale of the three largest gencos – Tuas Power, Senoko Power and PowerSeraya – by Temasek Holdings for about $12 billion.
This reflects the confidence investors around the globe have for Singapore’s transparent and efficient market, said Mr Carlson.
Increased competition also saw more energy generators join the landscape, such as Schering-Plough, with its tri-generation embedded generator, and IUT Singapore generating energy from food waste.
Crude oil prices have recently climbed to touch US$68 per barrel.
If this continues, electricity prices would eventually rise along with it, said Mr Carlson, but he added that this was still hard to predict.
He said EMC has seen electricity demand “slowly increasing” this year and new investment is entering the market, such as the Keppel Merlimau cogen power plant, as more efficient generation takes hold.