Channel NewsAsia: S’pore to consider setting up electricity futures market

SINGAPORE: Singapore is exploring ways to foster more competition in the electricity market.

One of the initiatives to consider is the setting up of an electricity futures market.

The government is also seeking feedback on the use of Demand Response — a system that allow consumers to respond to price signals and curtail demand if there is any spike in price.

An electricity futures trading market will allow electricity to be bought, sold and traded like a commodity.

This means that both power companies and heavy users of electricity like the petrochemical industry may be able to hedge their bills.

Minister in the Prime Minister’s Office and Second Minister for Trade and Industry, S Iswaran, said: “There are quite a range of industrial players who are interested in these sorts of initiatives and we want to make sure we hear the different perspectives before we go ahead to look how we can structure these arrangements.”

Currently, Singapore’s electricity supply comes from five power generating companies — Tuas Power, Senoko Power, Sembcorp, Keppel Energy and YTL PowerSeraya.

Electricity futures trading is already well-established in countries like the US, Australia and New Zealand.

Mr Tilak K Doshi, head of energy economics division at Energy Studies Institute at the National University of Singapore (NUS), said: “The key thing about the futures market is to have good infrastructure for those contracts and as many players as possible, then it will be very beneficial for the market and price discovery.”

Experts said such market may also attract more players, thus making energy pricing and supply more efficient.

Mr Ravi Krishnaswamy, vice-president for energy and power systems (Asia Pacific) at Frost and Sullivan, said: “The electricity futures market is probably a natural progression of the liberalisation that the government is embarking in the respective electricity sector.

“Once you have a wholesale market, it is quite obvious that you need to have a futures trading at some point of time, so that you get in more types of players.”

Apart from hedging their power bills, an electricity futures market also provides power companies and heavy users greater transparency.

With more information, heavy users can then consider their options for more efficient use of electricity.

Singapore Management University’s International Trading Centre academic director, Professor Annie Koh, added: “As they look at the pricing, they become more aware that they need to move towards a change of behaviour in terms of clean-tech, in terms of savings electricity at downtime, so that may be good because transparency may lead to a change of behaviour.”

The government has also launched a public consultation to look at how to allow consumers to make more informed decisions on energy use.

News story originally published on Channel NewsAsia

Image from fabio9petroni

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