NYJC 2023 H2 Economics 9570 P1

1 JC2 H2 Economics 9570/01 NANYANG JUNIOR COLLEGE 2023 JC2 Preliminary Examination H2 ECONOMICS Paper No: 9570 /01 30 th August 202 3 Time : 0800 – 1030 hrs Wednes day Duration : 2 hours 30 mins INSTRUCTIONS TO CANDIDATES Do not turn over this paper until you are told to do so. Write your name, class and the name of your E conomics tutor in the space provided on the answer booklet. You are required to answer ALL questions. The number of marks is given in the brackets at the end of each part question. Write your answers in the answer booklet provided. If you use more than one answer booklet, slot the additional booklets into the first booklet. Please start each case study on a fresh page. You are advised to spend several minutes reading through the questions and data before you begin writing your answers. There are 7 printed pages including this cover page.

2 JC2 H2 Economics 9570/01 Answer all questions Question 1: Singapore Electricity Market Extract 1: The Retail Electricity Market The Singapore electricity market consists of the wholesale electricity market and the retail electricity market. Power generation companies have to bid to sell electricity in the wholesale electricity market. Depending on electricity demand and supply, the price of electricity in the wholesale electricity market changes. Electricity retailers then buy electricity in bulk from the wholesale electricity market and compete to sell electricity to consumers. Since 2001, the Energy Market Authority (EMA) has pro gressively opened up the retail electricity market to competition. This is to allow consumers to enjoy more choices and flexibility when buying electricity. Consumers will also benefit from competitive pricing and innovative offers while enjoying the same electricity supply. The Open Electricity Market marks the final phase of market liberalization efforts. In November 2018, the Open Electricity Market was extended to all consumers in Singapore, giving them the option of buying electricity on a plan from any retailer that best meets their need. Source: Adapted from openelectricitymarket.sg, accessed on 18 August 2023 Table 1: Market share of Electricity Retailers in Singapore between 2014 and 2021 (Unit: Percent (%)) 2014 2015 2016 2017 2018 2019 2020 2021 SP Services Ltd 33.0 30.8 30.1 27.7 24.6 20.4 15.8 15.5 Tuas Power Supply Pte Ltd 12.7 12.6 13.4 13.6 13.7 15.1 17.8 15.4 Keppel Electric Pte Ltd 13.4 11.5 10.4 13.8 14.4 14.1 15.0 15.0 Seraya Energy Pte Ltd 14.2 14.3 12.9 12.2 11.9 14.5 14.7 14.1 Senoko Energy Supply Pte Ltd 14.6 12.7 13.0 11.6 11.8 13.1 12.5 13.3 SembCorp Power Pte Ltd 8.3 12.2 9.8 10.9 11.9 12.8 12.8 13.1 Source: Energy Market Authority Singapore, accessed on 18 August 2023 Extract 2: Exits by Singapore electricity suppliers sparked by price volatility amid global energy crisis The prospect of surging energy prices for the next few years amid volatile conditions are what spurred the departure of two retailers from Singapore's open electricity market (OEM), experts said. Of the 10 remaining retailers, at least two others are set for the exit door. Singapore's fourth-largest retailer iSwitch, as well as Ohm Energy, announced their departures from the market just days apart. Ohm Energy on Oct 15 informed customers it was e xiting the market effective the same day due to "a volatile electricity market" rendering its prices unsustainable. An e -mail to an existing Diamond Electric customer seen by The Straits Times cited "increasing costs of electricity" for the discontinuation of a similar plan.

3 JC2 H2 Economics 9570/01 Earlier this month, Trade and Industry Minister Gan Kim Yong cautioned that fuel prices have more than doubled over the past 18 months, and as an island state that imports almost all its energy, Singapore is inevitably affected by global turbulence. This year, Singapore is facing “a perfect storm” of soaring energy prices induced by shortages in fossil fuel production, triggered by under-investment in energy projects and exacerbated by the Ukraine war, as well as severe disruptions in renewable power around the world. Business lecturer Tan Tsiat Siong from the Singapore University of Social Sciences said, "Retailers offering fixed price plans ar e promising to sell electricity at a cheap price - and sometimes in large volume - without sufficiently ensuring that they would be able to purchase this electricity at low prices." However, observers said independent retailers also had to compete in a sat urated Singapore market - with 12 retailers for 1.4 million residential households - and for some of them, at the disadvantage of not having their own power generation assets. Continued competition, for one, would still bring about benefits such as improv ed service quality, greater choice of customized product offerings and overall lower prices. Mr Sharad Somani, KPMG Singapore partner and the head of infrastructure advisory, called on industry regulator Energy Market Authority to review the appropriate number of retailers for a competitive yet financially and commercially sustainable retail market space. As for retailers, he noted that in some other countries, they are known to go beyond electricity to provide anything from energy management solutions to broadband and heating. These additional offerings improve the stickiness of their customer base and increase revenue per customer. Said Mr Somani: "Retailers will need to reinvent their business model and offer more value - added and diverse services to stay relevant, competitive and profitable in the long term." Source: Adapted from The Straits Times, October 2021 Extract 3: Singapore boosts UN climate targets, confirms net zero by 2050 Singapore's power sector now produces about 40 per cent of the country's emissions, but the sector could realistically bring this down to net zero by 2050, said a new report published on Tuesday (March 22). The report comes after Singapore announced last month that it will aim for national emissions to reach net zero "by or around" that same mid-century timeline. About 45 per cent of national emissions comes from the industrial sector, while la nd transport here makes up about 14 per cent of the total emissions inventory. But the power sector is likely to contribute a larger percentage to Singapore's emissions in the years ahead, especially with the move towards digitalization and the electrification of vehicles here. The Energy 2050 Committee report, commissioned by industry regulator Energy Market Authority (EMA), said achieving this target can be done in ways that will neither compromise Singapore's energy security nor affordability. Importing more clean energy into Singapore through regional power grids, developing infrastructure suitable for clean -burning hydrogen to be used as a fuel and maximizing solar panel deployment are some of the strategies the report recommended, with inputs from energy experts. Most of Singapore's energy is generated by natural gas, a fossil fuel, which means burning it produces planet-warming emissions into the atmosphere. In response to questions, A National Climate Change Secretariat spok esman noted Singapore’s emissions were still growing but said: “Unlike other cities or countries that have abundant access to alternative energy sources like wind, nuclear and hydropower, Singapore’s geography and small land area hamper our ability to harness alternative energy.”

4 JC2 H2 Economics 9570/01 EMA chairman, Mr R