Issue 2 | APRIL 2012
Laying The Foundation For An Electricity Futures Market

The development of an electricity futures market complements the existing spot market and supports the liberalisation of the electricity industry. EMA is looking at the possibility of implementing an electricity futures market in Singapore and will draw lessons from countries like Australia, New Zealand and the United Kingdom.

An electricity futures market is a platform for industry players and financial intermediaries to use electricity and related financial instruments for risk management and investment activities. A futures market could potentially provide robust price discovery and risk transfer for investment decision making. By providing hedge cover (i.e. reducing the impact of adverse price movement) for new entrants, barriers to entry to the electricity industry are potentially lowered. In addition, an electricity futures market could spur greater competition in the electricity retail market, with reduction in information asymmetry, entry of independent retailers and potential increase in demand-side participation.

Within the region, electricity futures would be a new development that could enhance price competitiveness in the electricity sector. This development could tap on Singapore’s position as a financial centre with well-established capital markets and could create spin-offs in the trading of other energyrelated commodities like Liquefied Natural Gas (LNG).

To this end, EMA has initiated a study to identify key challenges and factors critical to the development of an electricity futures market. We look forward to engaging players from the power and financial industries as part of our consultation process, to get their inputs on how we could develop a successful electricity futures market in Singapore.

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