The Energy Market Authority (EMA) introduced the Singapore Wholesale Electricity Market (SWEM) in 2003 to facilitate competition among the generation companies (“gencos”). The SWEM is designed as an Energy-Only Market (EOM)with ancillary services. The gencos are remunerated primarily based on the prevailing half-hourly spot price for the energy that they generate, with no separate capacity payments. This was the best practice adopted in the early 2000s by other established competitive electricity markets such as in Australia, New Zealand (“NZ”), the United Kingdom (“UK”) and the United States (“US”).

The EOM, by design, seeks to provide short term price signals to guide longer-term investments in generation capacity. However, there is no guarantee that the EOM will achieve timely resource adequacy to ensure electricity supply reliability. The experience in many jurisdictions with EOMs is that spot energy prices that result from the prevailing demand and supply conditions may not be high enough, on average over the longer term, to attract adequate new investments in generation capacity to meet the target electricity supply reliability standard (“Reliability Target”).

EMA is therefore consulting the industry on developing a Forward Capacity Market (“FCM”), which together with the real-time wholesale energy market with ancillary services. We would like to invite written comments and views on each key FCM design element, as well as the transitional arrangement and indicative development and implementation timeline for the FCM. EMA will take the comments/views into consideration as we develop the detailed FCM design and rules in consultation with the industry.