Electricity market leads to reserve energy price crash
The Straits Times, Friday, 21 March, 2003
By: Tang Weng Fai
THE electricity market which started trading in January is showing the first signs of helping to reduce prices.
The market operator, the Energy Market Company (EMC), yesterday said that based on data from the first two months of operation, prices for reserve energy have been slashed by almost 87 per cent compared with last year.
Daily average prices for energy reserve were lowered to $160,000 for Jan-Feb compared with $1.2 million average last year.
The opening of the energy market has also heightened the already keen competition among power generators, a market which Allan Dawson, EMC chief executive, describes as "dog eat dog at the moment".
So-called reserve energy is the amount of power that electricity generators (gencos) have to make available on a standby basis in case of a surge in demand at any point in the day.
Under the old electricity pool, a static reserve of 600 megawatts (MW) was the standby requirement for daily energy use ranging from 3,300-4,500 MW. This makes it necessary for gencos to put generating capacity on standby, without making money from selling the power. This is because standby generators are burning fuel but not yet generating electricity.
With the new energy market operating since January, the one flat reserve requirement is split into three smaller chunks each separately priced. The primary reserve is used within 2-5 seconds of a surge in any energy demand. The secondary reserve within 30 seconds of surge and the contingency reserve within 10 minutes of surge.
Whereas in the past, the average cost of reserve energy was $83/MWh (megawatt hour), this has been reduced to $23.46/MWh (primary), $4.55MWh (secondary) and $0.31 (contingency).
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