This Assignment is Designed for Learners to Demonstrate their Understanding and Application of the Module Concepts which Include Demand & Supply: Microeconomics Report, SMU, Singapore

1.Assignment Outline

The assignment is designed for learners to demonstrate their understanding and application of the module concepts which include demand & supply, elasticities, production factors & costs, and market structures. It provides the learners a first-hand experience of applying the concepts to analyze and solve a real-economic problem.

2. Learning Outcomes

After the completion of this assignment, learners will be able to:

a. Explain the concepts of demand, supply, and elasticity concepts pertaining to a case based on local electricity retail

b. Apply the concepts of production factors and cost to evaluate the production issues for an electricity retailing

c.Analyze the market competition among the electricity retail players using the concepts of market

3.Requirements

a. This is an individual written report assignment. Please read the case in Appendix 1 and submit a report based on the requirements stated

b. You are to apply any relevant economic concepts and theories from the various topics in the module to explain the case Appropriate use of graphical analysis in the report is expected.

The assignment report should consist of the following parts:

Introduction

• a. Give an introduction of the case with clear description of the characteristics of the electricity retail market. The introduction should also include some analysis of the demand, supply and elasticity concepts of electricity retail market before the opening of the electricity market in the case indicated in Appendix

Main Discussion

b. Explain the market equilibrium using a diagram to illustrate the electricity market before and after the entry of new electricity retailers such as MyElectricity, Sun Electric and Sunseap Energy. Explain the impact on the industry price and quantity in terms of the services

c. Describe the various production factors and cost for Sunseap Energy and suggest how Sunseap Energy can organise its resources to operate in the market.

d. Suggest how Sunseap Energy can compete in the Singapore based on the market structure for the electricity retail

e. Analyze the impact on consumers and society after the liberalization of the electricity market in

Reflection

f. Provide a reflection of 200 words stating your opinion on the liberalization of the electricity retail market. Highlight your understanding of the issues and concepts learned in this module.

Case Study:

Singapore’s Open Electricity Market

Singapore’s steady and measured campaign to open up its electricity market since 2001, was in fact, one of the first in the world to deregulate the energy market but fell behind due to its cautious approach. Singapore Power (SP) was the only electricity provider prior to the liberalisation of the energy market. SP provides electricity and gas transmission and distribution services in Singapore. SP owns and operates the network that delivers power to consumers in Singapore. Singapore’s liberalisation effort has seen SP’s market share slip below 30 per cent for the first time in 2017.

Singapore is gearing up towards Full Retail Contestability (FRC) for its electricity market in the second half of 2018. This will enable residential consumers to select from a variety of electricity providers and pricing arrangements. In order to gain market share, the retailers will no doubt soon begin to try to get the attention of consumers through a plethora of branding, pricing strategies, and catch advertisements.

As of October 2017, there were 27 registered electricity service providers listed. These retailers must hence differentiate themselves and build trust with consumers via branding efforts that cater to particular groups of newly contestable consumers.

Newer retailers, such as electricity have already started to brand themselves as an electricity service provider (ESP) that focuses on ‘state-of-the-art” technology to provide electricity to household consumers. They plan to continuously upgrade their software solutions and leverage collaborative opportunities with other service providers to offer integrated billing solutions for consumers. Others are offering clean electricity. For example, Sun Electric and Sunseap Energy will focus exclusively on solar energy-related services. These strategies ensure some form of product differentiation, with differentiated groups of consumer loyalties emanating from the uniqueness of each supplier “brand.

One benefit arising from liberalizing the retail electricity market is pricing. Soft launch consumers in Jurong who switched from SP Power to an OEM (Open Electricity Market) retailer generally paid an electricity rate of about 20 percent lower than the regulated tariff. A spokesman from the EMA (Energy Market Authority) said: “The greatest benefit of liberalizing the retail electricity market is that it provides more choices to consumers. Greater choice also includes “innovative offers” such as packages where power is offered with other products or services.”