About / Singapore Case Study

The Electricity Market in Singapore

90% of electricity is generated by natural gas

Supplied by 3 pipeline connections and LNG imports

Growing penetration of rooftop and grid scale solar

Baseload cleared futures available for monthly and quarterly trading

The Problem

Insufficient price risk management tools are available to market participants to facilitate term hedging, load shape hedging, and dynamic rebalancing of hedges.

The Solution

A cash-settled, electricity forward marketplace

An open and transparent marketplace where participants with bi-lateral contracts in place can buy and sell electricity forward contracts for a specified future date. These are cash-settled instruments as the price of a purchased contract is compared to the load weighted average price in the spot market (reference price).

  • If the contract is more than the reference price, then the buyer pays the seller the difference between these prices.

  • If the contract is less than the reference price, then the seller pays the buyer the difference between these prices.

For the Singapore economy

Energize economic growth through increased generation capacity and commercial demand

  • A cash-settled electricity forward marketplace can help energize the economic growth of the Singapore market by supporting both investment in additional electricity generation capacity and facilitating demand growth in commercial and industrial sectors. Forward markets have historically helped reduce price volatility. As risk premium comes out of the market, prices generally trend down which will help all electricity consumers in the Singapore.

  • New and existing electricity suppliers can analyze the forward price for electricity to calculate if it would be profitable to build a new plant. If it is, they can sell cash-settled forward contracts that mimic the generation from the new plant to lock in their exposure to price. The supplier can use these contracts to secure financing to build the new facility.

  • Forward markets have historically helped reduce price volatility and prices in general due to the reduction of uncertainty. This reduces the operating costs of commercial and industrial businesses giving them more capital to invest in growth.

    Consumers can purchase cash-settled electricity forwards giving them the opportunity to create certainty in their price for electricity for months or years in advance. This allows these companies to more accurately forecast their electricity expenses which can free up capital for growth initiatives.

For Electricity Suppliers

Access capital to invest in generation and rebalance volumes based on changes in forecasted production

  • By participating in a cash-settled electricity forward marketplace, your organization can sell contracts for electricity months and years in advance that are based on the market’s expectation of the future price of electricity (the forward price curve).

    Your organization can sell contracts that mimic the additional capacity of a proposed new plant without having to go through the costly process of marketing preconstruction power. Preselling demonstrates that there is enough demand at a specific price. Hedging reduces uncertainty in your company’s revenue projections for the new plant which will give financial institutions more confidence in supplying capital to build the new plant.

  • Your company can better optimize the generation plant’s profitability by comparing the plant’s marginal cost with the forward price curve and hedge accordingly. The company can lock in its profits by selling forward if the market is higher than the plant’s marginal cost.

  • Your company can reduce the impact of scheduled maintenance. By using the forward price curve, your firm can make more informed decisions around the months that are more profitable to run versus conducting scheduled maintenance.

  • As a Renewable Energy Supplier, your firm produces electricity when the sun is up. Green Tiger Markets has designed “Solar Specific” forward contracts that only have price exposure to the middle of the day. You can hedge your forward price risk by locking in prices for months or years in advance to monetize existing generation or hedge future projects.

For Electricity Consumers

Reduce electricity price uncertainty so your firm can more accurately forecast costs

  • Better forecast your firm’s electricity costs: The cash-settled electricity forward marketplace is a tool to hedge the price fluctuations of the electricity spot market and better manage your company’s operational costs.

    In the spot market the price can fluctuate in unpredictable ways. By participating in the marketplace, your organization can buy contracts for electricity for months and years in advance, locking in the company’s electricity expenses for the future.

  • As a Retail Energy Supplier, your firm may take on additional risk by selling to smaller consumers at a fixed price. By participating in a cash-settled electricity forward marketplace, you can hedge your price risk by locking in prices for months and years in advance.

Contact us

Green Tiger Markets agents are available now to discuss your trading strategy.

Connect