The new electricity market of Singapore : competitiveness and market power

• Main Authors: Chng, Clarence Kai Hui, Ng, Yvonne Yalin, Ng, Yun Fang
• Other Authors: Chang Youngho
• Format: Final Year Project
• Language: English
• Published: 2015
• Subjects: DRNTU::Social sciences::Economic theory
• Online Access: http://hdl.handle.net/10356/62459
• Institution: Nanyang Technological University

This study examines the level of market power and competitiveness in the National Electricity Market of Singapore (NEMS). First, while the four-firm concentration ratio and the Herfindahl- Hirschman Index show that the NEMS is concentrated, the market shares of the largest energy generation firms are on a downward trend. Second, the Supply Margin Assessment and Residual Supply Index also indicate decreasing market power. Third, the Lerner Index indicates that the NEMS is fairly competitive with low price-cost mark-ups. These indexes indicate limited market power in the NEMS as well as a low potential for firms to exercise market power in the future. Fourth, a log-linear form is used to estimate the coefficient of price-quantity relationships in the electricity demand of contestable consumers. The elasticity of demand is derived through two-stage least squares regression. While results show that the elasticity of demand have decreased since 2004, this is rationalised with vesting contracts in the NEMS and the inflexible nature of contestable consumers’ energy demand.