Singapores Electricity
Market after Market Reform
David Tan
Deputy Chief Executive
Energy Market Authority
Agenda
Timeline of Market Reform
Regulatory Principles and Tensions
Outcomes of Market Liberalisation
Before Liberalisation
Public Utilities Board (PUB) has been the sole
provider of electricity in Singapore up to 1995.
Infrastructure is built to meet forecasted demand.
Upward pressure on prices has led the Government
to ask whether the industry is as efficient as it is, as
the electricity system continues to grow.
Competition through industry reforms would
encourage companies to be cost-efficient.
Industry Reforms (1)
Electricity industry reforms started in 1995
electricity and gas undertakings of PUB corporatised
under Singapore Power. PUB remained the
regulatory body.
Singapore Power was a vertically integrated power
company, owning the generation, transmission and
retail segments of the industry
Electricity Industry Structure in 1995
ENV
Singapore Power Ltd
Senoko Power Ltd
PowerSeraya Ltd
PP GT
Senoko
Jurong
Tuas
Power Ltd
SembCorp
Cogen Pte
Ltd
IPPs
Seraya
PowerGrid Ltd
T&D
System
Operations
Power Supply Ltd
Franchised
Sector
Nonfranchised
Sector
Franchised
Consumers
Utilities
Support
Services
Pool
Operations
since Apr 98
Private Electricity
Suppliers
Utilities
Support
Services
Progressive
extension of
competition
Nonfranchised
Sector
Non-franchised
Consumers
Contestable Business
Non-contestable
Business
Industry Reforms (2)
New power companies were not forthcoming in
investing in new plants, since Singapore Power
owns grid and generation.
In 2000, Govt took further steps in industry reform:
separation of the natural monopolies (i.e. grid) from
the competitive domain (i.e. generation and retail)
Grid remained under Singapore Power, while each
power plant was set up as a separate company to
compete with one another
Industry Reforms (3)
EMA was formed in 2001 as the industry regulator
and power system operator.
Energy Market Company became the market
operator.
New generation companies came into operation:
SembCorp Cogen in 2001 and Keppel Merlimau
Cogen in 2007. Island Power Company is expected
to come into operation in 2010.
Electricity Industry Structure in April 2001
Senoko Power
Ltd
PowerSeraya
Ltd
ENV
(now NEA)
Tuas Power
Ltd
IPPs
Energy Market Authority
of Singapore
Industry
Regulator
PowerGrid Ltd
System
Operator
T&D
Singapore Power Ltd
Power Supply Ltd
(now SP Services Ltd)
Electricity
Retailers
Market
Operator
Energy Market
Company Pte Ltd
Franchised (Small)
Consumers
Market to be
fully opened
ultimately
Non-franchised (Large
Industrial & Commercial)
Consumers
Electricity Flow
Key Electricity Licensees
Electricity Generation (8)
Senoko Power Ltd
PowerSeraya Ltd
Tuas Power Ltd
SembCorp Cogen Pte Ltd
National Environment Agency
Island Power Company Pte Ltd
Keppel Merlimau Cogen Pte Ltd
Keppel Seghers Tuas Waste-ToEnergy Plant Pte Ltd
Electricity Transmission
SP PowerAssets Ltd
SP PowerGrid Ltd (as agent to
electricity transmission licensee)
Market Company
Energy Market Company Pte Ltd
Electricity Retail (6)
Keppel Electric Pte Ltd
SembCorp Power Pte Ltd
Tuas Power Supply Pte Ltd
Senoko Energy Supply Pte Ltd
Seraya Energy Pte Ltd
Island Power Supply Pte Ltd
Market Support Services
SP Services Ltd
Industry Reforms (4)
National Electricity Market of Singapore (NEMS)
commenced operation in Jan 2003.
Vesting Contracts was introduced in Jan 2004 to
curb vesting contracts.
Interruptible Load Supply was introduced in 2004
consumers can offer to have their electricity supply
interrupted in exchange for payment from the
reserve market.
Industry Reforms (5) Retail Contestability
Phase I
Phase II
Phase III
started
Jun 2003
started in
Dec 2003
Being studied
HT consumers
LT consumers
with average
monthly
consumption
exceeding
20,000 kWh
About 5,000
consumers
LT consumers
with average
monthly
consumption
exceeding
10,000 kWh
Another 5,000
contestable
consumers
Remaining one
million
consumers
Electricity
Vending System
Electricity Industry Structure in Jan 2003
PowerSenoko
Ltd
PowerSeraya
Ltd
ENV
Tuas Power
Ltd
IPPs
Energy Market Authority
of Singapore
Industry
Regulator
PowerGrid Ltd
System
Operator
T&D
Singapore Power Ltd
Electricity
Retailers
SP Services Ltd
Market
Operator
Energy Market
Company Pte Ltd
Franchised (Small)
Consumers (1 mil)
Market to be
fully opened
ultimately
Non-franchised (Large
Industrial & Commercial)
Consumers (10,000)
Electricity Flow
Generation Statistics (2007)
Max System Demand
5,946 MW
Licensed Generation
Capacity
12,330 MW
Energy Generated
41,138 GWh
System Gross
Efficiency
~ 44%
System Losses
~ 9%
Generation by Fuel Fix
Fuel Oil
18%
Natural Gas
79%
Others (Incineration,
etc.)
3%
Regulatory Principles (1)
A good regulatory regime is essential for the free
market to function efficiently.
Key regulatory objectives :
a) a level playing field
b) transparent rules and consistent application of
rules.
c) open access
d) low entry and exit barriers
The most expensive electricity is no electricity
Electricity price should be an outcome of a properly
functioning market.
Regulatory Principles (2)
Key market principles:
a) Champion competition, not companies and allow
market outcomes to be expressed.
b) Market to drive investments, allow entry or exit of
new competitors/products into the market
c) Market to incentivise most cost efficient behaviour
d) Market sets electricity price
e) No distortions from subsidies, causer-pays
principle
Price regulate monopolies (the Grid) in a way to
incentivise the companies to be cost efficient.
Regulatory Tensions (1)
One outcome of competition is to cause companies
to adopt the most cost efficient technology
Combined Cycle Gas Turbines (CCGTs).
The reliance on gas has thrown up some dilemmas.
Do we need a fuel mix for security? Should we
determine the fuel mix to be used or should we
leave it to the market to determine what mix of fuel
to be used?
Global fuel mix is much more diverse than Spore
Global Electricity Fuel Mix (2004)
Geotherm
al
Hydro 0.3%
Waste
0.4%
Singapore Electricity Fuel Mix
(2006)
Others
0.5%
Refuse
2.4%
16.5%
Coal
39.6%
Nuclear
15.6%
Biomass
0.9%
Natural
Gas
77.8%
Diesel
0.1%
Orimulsi
on
6.9%
SynGas
0.9%
Fuel Oil
11.9%
Gas
19.5%
Source: IEA, EMA
Oil
6.7%
Source: IEA, EMA
Coal
Hydro
Oil
Gas
Nuclear
Renewables
Singapore
Switzerland
Norway
France
New Zealand
Russia
Netherlands
Japan
Finland
Malaysia
Philippines
Ireland
UK
North Korea
South Korea
Indonesia
Denmark
Germany
USA
Taiwan
Hong Kong
Israel
Australia
South Africa
International Comparison
100%
80%
60%
40%
20%
0%
Regulatory Tensions (2)
We were dependent on oil for a long time. But the
well developed global markets for oil helped to
ensure that there is always a supplier to buy from
even during the oil embargo in the 1970s, we were
able to secure fuel.
Gas enables 2 levels of diversification gas turbines
can be fired by diesel which is stockpiled and the
LNG terminal which is being planned will enable
source diversification.
Regulatory Tensions (3)
Fuel diversification occurs in large countries and
usually in countries which have indigenous sources
of energy and is usually an outcome of economic
viability.
Without adequate economies of scale with each type
of fuel used and without the circumstances to render
the use of each type of fuel viable, fuel diversification
can be a very expensive option.
We are technology neutral and will be an enabler for
what the market decides.
Outcomes of Market Liberalisation (1)
Downward pressure of electricity prices
By 2007, about 10,000 accounts representing 75%
of electricity consumed in Singapore are
contestable.
EMA is exploring how to leverage on technology
(Electricity Vending System) to extend contestability
to the rest of about 1 million domestic consumers
Evident in the rise in electricity tariffs which is
significantly smaller than rise in fuel oil price
Electricity Tariff vs Fuel Oil Price
96.64
100
Fuel Oil Prices (S$) vs Low Tension Tariff
90
87.49 88.52
87.46
100
90
80.96 81.23
72.71
60
40
42.84
45.66
42.42
70
60
52.40
50.15
50
80
65.25
64.87
70
77.45
75.73
47.79
49.22
50
43.06 43.34 43.12 44.56 44.56
38.30 37.18 37.18
40
32.1332.13
30
19.87
20
10
17.21 17.21
15.0215.02 16.01 16.51 15.24
17.81 16.56
15.81 15.44 15.8 15.8 16.53 16.73 16.06
18.26
21.15 21.64 20.02
19.57 21.02 20.49
18.88
20.52 21.38
22.62 30
20
Pegged Fuel Price
LT Tariff
10
0
Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan01 01 01 02 02 02 02 03 03 03 03 04 04 04 04 05 05 05 05 06 06 06 06 07 07 07 07 08
Fuel oil price has increased by 152%
The electricity tariff for households has however increased by 14%
This is largely due to efficiencies gains in the industry, such as utilizing
more cost-efficient technologies for electricity production.
Tariff (/kWh)
Fuel Oil Prices (S$/bbl)
80
CO2 Generated in kg/MWh in Year 2000 and 2007
Source: CARMA
30% reduction in Carbon Dioxide Generated in kg/MWh
Outcomes of Market Liberalisation (2)
Companies are incentivised to:
a) reduce costs (sourcing for cheaper fuel);
b) lower costs of risks (hedge against volatility in fuel
oil price);
c) adopt the most cost competitive technology (switch
from steam plants to CCGTs),
d) develop market demand and improve efficiency
(adopting combined heat and power plants eg cogen and tri-gen).
On the whole, market reforms have increased
competition among industry players and benefited
consumers.
