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03 May 2019
Energy Market Authority (EMA)
Suggestion View - 611
Electricity market

The Energy Market Authority made two major mistakes that will be costly to the economy over a long term. 

a)  They created a massive over supply of capacity in the electricity generation market causing the wholesale electricity price to crash to a disastrous level. Some power generators, such as Hyflux, was destroyed due to the massive losses.

The new power generators that entered the market recently were protected by vesting contracts and give an guaranteed price for their supply. This is not fair to the old generators.

b) They open up the retail energy market allow for many suppliers to compete for retail customers. This adds to the marketing and administration costs. Many consumers are confused with the different types of contracts and the reliability of the suppliers.

What is an alternative approach? Here are my ideas:

a) It is a good approach for the EMA to get power generators to compete to generate power to meet the demand. Contracts can be given out to generate a fixed volume of electricity daily at the contract price over a contract period. The power generators can calculate their price and submit their tender.

These contracts can be arranged to generate up to (say) 90% of the expected demand over the peak and non-peak periods of the day.

b) It should be technically possible to store some of the electricity into high capacity batteries during the day to even out the peak and non-peak demand.

If this is not technically possible or too expensive, the power generators can be asked to spread out their production to meet the fluctuating demand.

c) To cater for the exceptional demand, a separate contract can be given out to require the production of the additional demand. The power supplier will be compensated with a minimum price even for zero production and given at the price for the actual production but the quantity is not fixed. The power generator is required to provide up to a specified quantity each day by EMA but EMA has the option to ask for a lower quanitity.  

d) The EMA can appoint SP Services to provide the electricity to consumers at the average wholesale price of the electricity (which is the average of the power generating contracts) plus an acceptable margin (say 10%) to cover administration and services. There is no need to open up the market for unproductive and wasteful competition. The useful competition has already been carried out at the wholesale level by the use of power generating contracts.

I hope that the EMA will adopt this new approach to sort out the electricity market over the next fe years.

Tan Kin Lian

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