singapore electricity market

8/10/2019 Singapore Electricity Market

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Singapores Electricity

Market after Market Reform

David Tan

Deputy Chief Executive

Energy Market Authority


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Timeline of Market Reform

Regulatory Principles and Tensions

Outcomes of Market Liberalisation

Agenda


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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.

Before Liberalisation


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Electricity Industry Structure in 1995

IPPsSembCorpCogen Pte

Ltd

ENV TuasPower LtdSingapore Power Ltd

Contestable Business

Non-contestableBusiness

FranchisedConsumers

Non-franchisedConsumers

Progressiveextension ofcompetition

Non-franchised

Sector

UtilitiesSupportServices

FranchisedSector

T&D PoolOperations

SystemOperations

PowerGrid Ltd

SerayaJurong

PowerSeraya LtdSenoko Power Ltd

PP GT Senoko

Private ElectricitySuppliers

Non-franchised

Sector

UtilitiesSupportServices

Power Supply Ltd

since Apr 98


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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 (2)


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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 MerlimauCogen in 2007. Island Power Company is expected

to come into operation in 2010.



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T&D

PowerGrid Ltd

IPPsENV(now NEA)

Tuas PowerLtd

Senoko PowerLtd

PowerSerayaLtd

Power Supply Ltd(now SP Services Ltd)

Franchised (Small)Consumers

Non-franchised (LargeIndustrial & Commercial)Consumers

Market to befully opened

ultimately

ElectricityRetailers

Energy Market Authorityof Singapore

Electricity Flow

Singapore Power Ltd

MarketOperator

IndustryRegulator

SystemOperator

Energy MarketCompany Pte Ltd

Electricity Industry Structure in April 2001


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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 supplyinterrupted in exchange for payment from the

reserve market.



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Industry Reforms (5) Retail Contestability

Phase II Phase III

started

Jun 2003

HT consumers

LT consumers

with average

monthly

consumption

exceeding

20,000 kWh

About 5,000

consumers

started in

Dec 2003

LT consumers

with average

monthlyconsumption

exceeding

10,000 kWh

Another 5,000contestable

consumers

Being studied

Remaining one

million

consumers Electricity

Vending System

Phase I


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T&D

PowerGrid Ltd

IPPsENV Tuas PowerLtd

PowerSenokoLtd

PowerSerayaLtd

SP Services Ltd

Franchised (Small)Consumers (1 mil)

Non-franchised (LargeIndustrial & Commercial)Consumers (10,000)

Market to befully opened

ultimately

ElectricityRetailers

Energy Market Authorityof Singapore

Electricity Flow

Singapore Power Ltd

MarketOperator

IndustryRegulator

SystemOperator

Energy MarketCompany Pte Ltd

Electricity Industry Structure in Jan 2003


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Generation Statistics (2007)

12,330 MWLicensed Generation

Capacity

~ 9%System Losses

~ 44%System GrossEfficiency

41,138 GWhEnergy Generated

5,946 MWMax System Demand

79%Natural Gas

3%Others (Incineration,etc.)

18%Fuel Oil

Generation by Fuel Fix


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A good regulatory regime is essential for the freemarket 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 electricityElectricity price should be an outcome of a properlyfunctioning market.

Regulatory Principles (1)


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Key market principles:

a) Champion competition, not companies and allowmarket 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 behaviourd) Market sets electricity price

e) No distortions from subsidies, causer-pays

principle

Price regulate monopolies (the Grid) in a way toincentivise the companies to be cost efficient.

Regulatory Principles (2)


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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 wedetermine the fuel mix to be used or should we

leave it to the market to determine what mix of fuel

to be used?

Regulatory Tensions (1)


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Global fuel mix is much more diverse than Spore

Coal

39.6%

Oil

6.7%

Biomass0.9%

Nuclear

15.6%

Others

0.5%Hydro

16.5%

Gas

19.5%

Geotherm

al0.3%

Waste

0.4%

Global Electricity Fuel Mix (2004)

NaturalGas

77.8%SynGas

0.9%

Orimulsi

on

6.9%

Fuel Oil

11.9%

Diesel

0.1%

Refuse2.4%

Singapore Electricity Fuel Mix(2006)

Source: IEA, EMA


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International Comparison

0%

20%

40%

60%

80%

100%

SouthAfrica

Australia

Isra

el

HongKong

Taiwan

US

A

German

y

Denmark

Indones

ia

SouthKorea

NorthKorea

U

K

Irelan

d

Philippines

Malays

ia

Finland

Japan

Netherland

s

Russ

ia

New

Zealan

d

France

Norway

Switzerlan

d

Singapo

re

Coal Hydro Oil Gas Nuclear Renewables

Source: IEA, EMA


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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.



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Fuel diversification occurs in large countries and

usually in countries which have indigenous sources

of energy and is usually an outcome of economicviability.

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.



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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

Outcomes of Market Liberalisation (1)

Downward pressure of electricity prices


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Electricity Tariff vs Fuel Oil Price

Fuel Oil Prices (S$) vs Low Tension Tariff

38.30 37.1837.18

32.1332.13

42.8445.66

42.42

50.15

43.06 43.3443.12 44.5644.5647.79

52.4049.22

64.87

72.71

80.96 81.23

87.49 88.52

75.73

65.25

77.45

87.46

96.64

19.8717.2117.21

15.0215.02 16.01 16.5115.2417.81 16.56 15.8115.4415.8 15.816.53 16.73 16.06

18.2619.5721.02 20.4921.15 21.64 20.02 18.88

20.52 21.3822.62

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Tariff(/kWh)

Pegged Fuel Price LT Tariff

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.


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CO2 Generated in kg/MWh in Year 2000 and 2007

30% reduction in Carbon Dioxide Generated in kg/MWhSource: CARMA


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Companies are incentivised to:

a) reduce costs (sourcing for cheaper fuel);

b) lower costs of risks (hedge against volatility in fueloil price);

c) adopt the most cost competitive technology (switchfrom steam plants to CCGTs),

d) develop market demand and improve efficiency(adopting combined heat and power plants eg co-gen and tri-gen).

On the whole, market reforms have increasedcompetition among industry players and benefitedconsumers.

Outcomes of Market Liberalisation (2)


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singapore electricity market

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