In assessing the potential framework for electricity futures trading in Singapore Electricity Roundtable speaker Julie Heng, Head of Commodities at the Singapore Exchange (SGX), pointed to the increasing number of commodity trading companies that are basing their operations in the city-state and participating in Singapore trading markets.
SGX is perhaps the only exchange outside of China to offer futures for China's 50 largest companies and future contracts on India's largest companies.
She noted that in order to develop a vibrant electricity futures market, a strong collaboration between SGX, the Electricity Market Company (EMC), Energy Market Authority (EMA), and other local and overseas parties would be vital. Furthermore, Singapore could gain the needed knowledge for developing the futures market through learning from past international experiences.
Ms Heng believes generators, retailers and consumers will benefit from the establishment of an electricity futures market. She explained that during planned maintenance schedules and unplanned outages, generators are exposed to fluctuations in spot electricity prices as they are obliged to purchase electricity at high spot prices. With the development of a futures market, generators will be able to hedge against any high spot prices to protect profit. New generator and retailers will also enjoy greater certainty on their returns.
Ms Heng cited Nord Pool and New Zealand as markets from which Singapore could learn as it plans ahead.
By :Henry Wong, EMA