A Look Inside Singapore's Electricity Market

Featured Stories 12 Aug 2024

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A great deal of work goes on behind the scenes to ensure that lights turn on with a flick of the switch.

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Flipping a switch and having the lights come on instantly is second nature to us. But have you ever wondered what it takes to keep the electricity flowing to our homes? We are not just talking about the physical grid infrastructure delivering the electrons.

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Beyond the physical power grid, an intricate network of players come together to bring about a well-functioning electricity market to provide reliable and cost-competitive electricity for consumers.

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Flipping a switch and having the lights come on instantly is second nature to us. But have you ever wondered what it takes to keep the electricity flowing to our homes? We are not just talking about the physical grid infrastructure delivering the electrons.

Beyond the physical power grid, an intricate network of players come together to bring about a well-functioning electricity market to provide reliable and cost-competitive electricity for consumers.

The "Stock Exchange" for Electricity Trading

At the heart of it all is the Singapore Wholesale Electricity Market (SWEM), operated by the Energy Market Company (EMC). "We are like a bridge between electricity producers and consumers", Vincent Wise, an economist at EMC's Market Administration department said.

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At the heart of it all is the Singapore Wholesale Electricity Market (SWEM), operated by the Energy Market Company (EMC). "We are like a bridge between electricity producers and consumers", Vincent Wise, an economist at EMC's Market Administration department said.

Vincent Wise, an economist with the Market Administration team at the Energy Market Company.

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To understand what goes on in the SWEM, think of it like a stock exchange. However, instead of stocks being traded, it is electricity, Vincent explained. "And the price of electricity is determined by demand and supply," he added.

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To understand what goes on in the SWEM, think of it like a stock exchange. However, instead of stocks being traded, it is electricity, Vincent explained. "And the price of electricity is determined by demand and supply," he added.

From the Selling of Electricity...

At the start of the trading chain are the power generation companies which generate electricity and sell it in the market at every 30 minutes. Here, EMC facilitates market clearing to determine the wholesale electricity price ("WEP"), decide which power generating assets are to run, and at what levels at different times. EMC also helps in settling all trades in the SWEM, making sure money is collected from the market's net debtors to pay its net creditors.

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"These functions run around the clock, so maintaining robust and reliable systems is crucial and a big part of what we manage," he said.

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At the start of the trading chain are the power generation companies which generate electricity and sell it in the market at every 30 minutes. Here, EMC facilitates market clearing to determine the wholesale electricity price ("WEP"), decide which power generating assets are to run, and at what levels at different times. EMC also helps in settling all trades in the SWEM, making sure money is collected from the market's net debtors to pay its net creditors.

"These functions run around the clock, so maintaining robust and reliable systems is crucial and a big part of what we manage," he said.

...To the Buying of Electricity

Once the electricity is sold in the SWEM, electricity retailers will buy electricity in bulk and offer it to consumers through various electricity price plans that are usually short-term in nature (e.g. two to three years for example).

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For consumers buying electricity through SP Group, this is done via vesting contracts that are longer-term in nature. This is how consumers buy electricity at the regulated tariff rate, set by SP Group and reviewed quarterly by the Energy Market Authority (EMA).

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Since 2018, the electricity market has been fully liberalised, providing consumers with choices and flexibility in their electricity purchase options.

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Once the electricity is sold in the SWEM, electricity retailers will buy electricity in bulk and offer it to consumers through various electricity price plans that are usually short-term in nature (e.g. two to three years for example).

For consumers buying electricity through SP Group, this is done via vesting contracts that are longer-term in nature. This is how consumers buy electricity at the regulated tariff rate, set by SP Group and reviewed quarterly by the Energy Market Authority (EMA).

Since 2018, the electricity market has been fully liberalised, providing consumers with choices and flexibility in their electricity purchase options.

Watch the video to learn more about the electricity tariff and what it comprises.

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Watch the video to learn more about the electricity tariff and what it comprises.

The Success Factors

With multiple players in the market, transparency and fair competition are essential. In this regard, EMC provides accurate real-time market information on its website while trading activities are governed by market rules which are regularly reviewed by the Rules Change Panel.

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There are enforcement and dispute resolution processes, similar to Singapore's police force and the courts. EMC's Market Assessment Unit assists various independent panels that monitor the efficiency and fairness of market operations, enforces the market rules and ensures that disputes are resolved fairly, efficiently and cost-effectively.

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Reflecting on the ingredients for success in operating an efficient and competitive wholesale electricity market, Vincent said it all boils down to building solid partnerships with the industry and having clear communication channels for engagement and gathering of feedback.

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This is why EMC regularly organises monthly industry forums and biannual Roundtables. "Such activities help to bring together the collective minds of different market players on best practices and recent market developments," Vincent said.

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With multiple players in the market, transparency and fair competition are essential. In this regard, EMC provides accurate real-time market information on its website while trading activities are governed by market rules which are regularly reviewed by the Rules Change Panel.

There are enforcement and dispute resolution processes, similar to Singapore's police force and the courts. EMC's Market Assessment Unit assists various independent panels that monitor the efficiency and fairness of market operations, enforces the market rules and ensures that disputes are resolved fairly, efficiently and cost-effectively.

Reflecting on the ingredients for success in operating an efficient and competitive wholesale electricity market, Vincent said it all boils down to building solid partnerships with the industry and having clear communication channels for engagement and gathering of feedback.

This is why EMC regularly organises monthly industry forums and biannual Roundtables. "Such activities help to bring together the collective minds of different market players on best practices and recent market developments," Vincent said.

At the recent National Electricity Market of Singapore (NEMS) charity event, staff from EMA, EMC and industry players brought children from non-profit organisation, Child at Street 11 Ltd to River Wonders for a fun-filled day.

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Looking Ahead

Singapore's electricity market is a testament to the power of collaboration and innovation. With EMC at the helm, supported by a network of dedicated industry players and robust regulatory measures, the market continues to thrive, providing reliable and affordable electricity to consumers.

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Separately, EMA is progressively introducing measures to strengthen the overall market structure and boost its resilience to price volatility. For instance, an entity will be established to centralise the procurement and supply of gas by aggregating gas demand from power generation companies. The Temporary Price Cap, which acts as a "circuit breaker" during periods of high and sustained volatility, was also introduced in 2023 to help mitigate extreme price volatility in the SWEM.

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The commitment to transparency, competition, and continuous improvement ensures that the market not only meets current demands but is well-prepared for future challenges.

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As Singapore moves forward, the combined efforts of all stakeholders will undoubtedly lead to a brighter and more sustainable energy future for everyone.

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Singapore's electricity market is a testament to the power of collaboration and innovation. With EMC at the helm, supported by a network of dedicated industry players and robust regulatory measures, the market continues to thrive, providing reliable and affordable electricity to consumers.

Separately, EMA is progressively introducing measures to strengthen the overall market structure and boost its resilience to price volatility. For instance, an entity will be established to centralise the procurement and supply of gas by aggregating gas demand from power generation companies. The Temporary Price Cap, which acts as a "circuit breaker" during periods of high and sustained volatility, was also introduced in 2023 to help mitigate extreme price volatility in the SWEM.

The commitment to transparency, competition, and continuous improvement ensures that the market not only meets current demands but is well-prepared for future challenges.

As Singapore moves forward, the combined efforts of all stakeholders will undoubtedly lead to a brighter and more sustainable energy future for everyone.

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