Electricity market to sizzle in 2018 with new elements

THE BUSINESS TIMES |
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Singapore

A FULLY liberalised electricity market, an upcoming carbon tax and new electricity products are set to drive a new wave of energy consciousness among consumers and businesses in the years ahead.

As generation companies and independent retailers gear up for battle in 2018, some of the options being bandied include bundling electricity contracts with telcos and credit cards, and even peer-to-peer electricity trading.

But first, raising consumer awareness will be key, said industry players, especially as the country looks to launch the open electricity market (OEM) pilot in Jurong in April 2018.

This means that households and businesses in the estate will be the first in Singapore to be able to choose their electricity retailers. The OEM, previously referred to as Full Retail Competition (FRC), is expected to be rolled out to the rest of Singapore in the second half of 2018.

SEE ALSO: Singapore beefs up muscle in solar and energy storage

The Energy Market Authority (EMA) is planning for an integrated communications campaign in the first quarter of 2018, starting with a letter and a booklet for residents and businesses in Jurong.

The campaign will focus on explaining the choices available to consumers and assuring them that the reliability of their electricity supply will not be affected by their choice of retailers, said a spokesman in response to a Business Times query.

Higher consumer awareness will be critical, with many players noting that businesses which can already choose to buy electricity are still ignorant of their power to choose, or fearful about maintaining reliable electricity supply when they switch retailers.

Singapore's electricity market has been gradually liberalised since 2001. Steadily more consumers have been given the freedom to switch from buying electricity at the regulated tariff from SP Services, to buying from electricity retailers which offer packages at different price plans.

At the start, the largest consumers - industrial users - were given this freedom to choose; they are also known as contestable consumers. Currently, businesses with an average monthly electricity consumption of at least 2 megawatt-hour (MWh) (equivalent to a monthly electricity bill of at least S$400) have this option.

Some 30 per cent of contestable consumers still have not switched out of SP, start-up Electrify estimates from its experience. Electrify offers a platform to compare products by retailers.

"There's still a very big gap (in information) between what's in the market and what they understand," said chief operating officer and co-founder Martin Lim. Consumers, for instance, did not understand how retailers could possibly be selling electricity at lower rates than SP.

On its part, Electrify is planning to conduct a joint marketing campaign this year with a few retailers. This will entail a combination of advertising on mass media online and offline as well as on trains and buses.

Still, others noted that the education and awareness process has been ongoing in the past two years.

The volatility of the oil market - with the oil price moving from the US$40 range to US$60 range - has meant that customers spent more time in 2017 thinking about the type of electricity products they should buy, said Andrew Koscharsky, iSwitch general manager for wholesale and trading.

This includes, for instance, whether their electricity price should be fixed or a floating rate pegged to the oil-linked SP tariff, he said.

Promotional efforts aside, retailers are also ramping up their back-end infrastructure to handle a much greater volume of customers.

Best Electricity Supply, part of the Prime Group which includes Prime Taxi, is investing heavily to build up an efficient and reliable IT system for sign-ups, billing, and payment collection. It is also building a mobile phone app.

The firm is now in talks with "strategic channel partners" on different collaborations for bundled products, its deputy general manager Terence Neo told BT.

Similarly, Senoko Energy, one of the largest power generation firms here, is now focused on preparing its retail team to ensure that the firm provides a high level of dedicated customer service.

Beyond a push into green electricity (see story above), industry players are also anticipating the sector to become more sophisticated.

"As the energy market transforms next year, we see plenty of opportunities," said Senoko Energy president and chief executive Bernard Esselinckx.

"We are likely to see further developments in digitalisation and demand-side management technologies such as smart metering, as we look to increase energy efficiencies and support consumers' increasingly sophisticated energy needs."

Diamond Energy, in October 2017, became the first retailer to successfully register for the demand response programme that EMA introduced in 2016.

Demand response allows contestable consumers to reduce their electricity consumption during peak consumption hours, in exchange for payment. These reductions could come from consumers with flexible production processes, chillers and pumps, or on-site back- up generation.

This year will likely see a rise in energy-efficiency innovations from the sector, such as electricity retail plans bundled with smart home technologies, said Diamond Energy chief executive Dallon Kay. "We will not only see the changes in the way electricity is retailed in Singapore, but also the way electricity is consumed."

The group, which has mainly been serving large electricity consumers such as industries and businesses previously, plans to offer new solutions for residential consumers during the OEM soft launch.

But despite the plethora of options for electricity consumers, the path ahead for generation companies and independent retailers alike will not be easy given the intense competition.

"The year will not be without challenges as the power generation sector continues to suffer from weak demand, massive overcapacity and an oversupplied gas market," said Senoko Energy's Mr Esselinckx.

Best Electricity's Mr Neo noted that new entrants in the electricity retail market have been very aggressive in their pricing, selling at cost or with negative margins in order to gain market share in the shortest time.

Echoing the thoughts of many in the sector, he said: "This may be good for the consumers for now, but it will not be sustainable for the whole industry in the long run."

READ MORE:

Green electricity catches on in Singapore

Infographics: BT Explains: Singapore's electricity market

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