Singapore’s Electricity Market after Market Reform
David Tan
Deputy Chief Executive
Energy Market Authority
• Timeline of Market Reform
• Regulatory Principles and Tensions
• Outcomes of Market Liberalisation
Agenda
• 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
• 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
Industry Reforms (1)
Electricity Industry Structure in 1995
IPPsSembCorp
Cogen Pte
Ltd
ENV Tuas
Power LtdSingapore Power Ltd
Contestable Business
Non-contestable Business
Franchised Consumers
Non-franchised Consumers
Progressive extension of
competition
Non-franchised
Sector
Utilities Support Services
Franchised
Sector
T&D Pool
Operations
System
Operations
PowerGrid Ltd
SerayaJurong
PowerSeraya LtdSenoko Power Ltd
PP GT Senoko
Private Electricity Suppliers
Non-franchised
Sector
Utilities Support Services
Power Supply Ltd
since Apr 98
• 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)
• 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.
Industry Reforms (3)
T&D
PowerGrid Ltd
IPPsENV
(now NEA)
Tuas Power
LtdSenoko Power
Ltd
PowerSeraya
Ltd
Power Supply Ltd
(now SP Services Ltd)
Franchised (Small)
Consumers
Non-franchised (Large
Industrial & Commercial)
Consumers
Market to be
fully opened
ultimately
ElectricityRetailers
Energy Market Authorityof Singapore
Electricity Flow
Singapore Power Ltd
Market
Operator
Industry
Regulator
System
Operator
Energy Market Company Pte Ltd
Electricity Industry Structure in April 2001
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-To-
Energy Plant Pte Ltd
� Electricity Transmission� SP PowerAssets Ltd
� SP PowerGrid Ltd (as agent to
electricity transmission licensee)
� 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
� Market Company
� Energy Market Company Pte Ltd
• 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 (4)
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
monthly
consumption
exceeding
10,000 kWh
• Another 5,000
contestable
consumers
Being studied
• Remaining one
million
consumers
• Electricity
Vending System
Phase I
T&D
PowerGrid Ltd
IPPsENV Tuas Power
LtdPowerSenoko
Ltd
PowerSeraya
Ltd
SP Services Ltd
Franchised (Small)
Consumers (1 mil)
Non-franchised (Large
Industrial & Commercial)
Consumers (10,000)
Market to be
fully opened
ultimately
ElectricityRetailers
Energy Market Authorityof Singapore
Electricity Flow
Singapore Power Ltd
Market
Operator
Industry
Regulator
System
Operator
Energy Market Company Pte Ltd
Electricity Industry Structure in Jan 2003
Generation Statistics (2007)
12,330 MWLicensed Generation Capacity
~ 9%System Losses
~ 44%System Gross Efficiency
41,138 GWhEnergy Generated
5,946 MWMax System Demand
79%Natural Gas
3%Others (Incineration, etc.)
18%Fuel Oil
Generation by Fuel Fix
• 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 (1)
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 toincentivise the companies to be cost efficient.
Regulatory Principles (2)
• 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?
Regulatory Tensions (1)
Global fuel mix is much more diverse than S’pore
Coal
39.6%
Oil
6.7%
Biomass
0.9%
Nuclear
15.6%
Others
0.5%Hydro
16.5%
Gas
19.5%
Geotherm
al
0.3%
Waste
0.4%
Global Electricity Fuel Mix (2004)
Natural
Gas
77.8%SynGas
0.9%
Orimulsi
on
6.9%
Fuel Oil
11.9%
Diesel
0.1%
Refuse
2.4%
Singapore Electricity Fuel Mix (2006)
Source: IEA, EMA
International Comparison
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60%
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100%S
ou
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Coal Hydro Oil Gas Nuclear Renewables
Source: IEA, EMA
• 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 (2)
• 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.
Regulatory Tensions (3)
• 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
Electricity Tariff vs Fuel Oil Price
Fuel Oil Prices (S$) vs Low Tension Tariff
38.30 37.18 37.18
32.1332.13
42.8445.66
42.42
50.15
43.06 43.3443.12 44.56 44.5647.79
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
19.8717.21 17.21
15.0215.02 16.01 16.5115.2417.81 16.56 15.8115.44 15.8 15.8 16.53 16.73 16.06
18.2619.57 21.02 20.4921.15 21.64 20.02 18.8820.52 21.38 22.62
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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.
CO2 Generated in kg/MWh in Year 2000 and 2007
• 30% reduction in Carbon Dioxide Generated in kg/MWhSource: CARMA
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 co-
gen and tri-gen).
• On the whole, market reforms have increased
competition among industry players and benefited consumers.
Outcomes of Market Liberalisation (2)