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.