Singapore’s liberalised electricity market: Cheat sheet from Europe.
Coming back from the Eurelectric Power Summit 2018, where Enrupt supported an innovation programme for European utilities, the stakes for Singapore's electricity market liberalisation appear much higher. Singapore will be an experimenting ground amid a global electricity sector transformation.
Mature electricity markets in Europe and the US are exposed more. If you think that my choice of vocabulary is an exaggeration, check out the latest developments in the German saga. Some of its largest power market players, EoN and Innogy, are painfully working their way through what it ACTUALLY means to be a decentralised utility and what are the options on the table when your customers start producing electricity themselves.
In its turn, Singapore will experience first-hand effects of liberalisation in this new area of clean, decentralised and digital energy. This is a cheat sheet of learnings from the European industry.
Utilities are discovering new strategic approach which anchors customers first, rather than generation, transmission and distribution assets. Retailers are busy developing services that indicate to the consumer how and where it should reduce its electricity consumption to become more efficient. But does it really work?
Let’s learn from a different industry - apps tracking calories intake to achieve user’s fitness goals. The user enters meals for few days, just to see that he or she is overeating again and drops off. On the other hand, community approaches are proving to work much better. The Whole Life Challenge makes a difference by creating a supportive community of individuals that help each other to achieve their fitness goals with peer to peer support.
European utilities realise in a similar fashion, they need to build a community and purpose around their service to connect with the consumer and his or her needs. For more insights on utility customers, check out the latest report by BNEF with 2 important conclusions about residential consumers:
- Economic factors are more likely to be the reason NOT to do something than a reason to do something.
- A successful customer strategy will engage consumers through their peer groups rather than directly.
Residential and commercial/industrial customers behave differently. For residential segment, the best way forward might be a standardised offering which is built around customer values: Desire to go green, create value for the whole family across several households and ease of tracking and comparing consumption with peers. For commercial and industrial customers, customisation helped more nimble players in Europe to succeed.
The landscape of electricity is changing. Potential competitors and allies are not necessarily in the utility business today. Eurelectric summit was buzzing with the names of Amazon, Google and the likes entering the utility business. Amazon and Google are possible candidates. One of the options is bundling FREE electricity with the rest of Amazon offering such as Prime membership. What will happen to electricity retailers when someone else will be offering electricity for free?
Two schools of thought were emerging from the discussions. One was the grid owners exploring how to enhance revenue generation from their assets and new technologies leveraging the available data. The other was a group of providers exploring feasibility of an energy company without any asset ownership.
Interestingly, traditional service and equipment suppliers (GE) were on par with newer players (GreenCom Networks) as an indication that utilities are progressively becoming more open to collaborations with new players. The Innovation programme included several startups addressing grid management issues for utilities. DC Brain and Envelio were both shortlisted for the Eurelectric Award, which went to a microgrid company Okra Solar.
4. Digitalisation and decentralisation
The 3Ds of energy sector transformation were present across all the discussions. Decarbonisation is a given, the question is how far it will go. Several countries in Europe are reaching 100% renewable energy mix (one of the few indicators where Norway is on par with Albania). On the other hand, the overall sentiment is that the learning curve of digitalisation combined with decentralisation has only started. The vision is based on a transition from reactive to responsive and autonomous systems. GE’s Steve Martin described the future as self-healing, self-provisioning and extensive autonomous operations with limited human intervention.
The debate on who will win the battle for new digital utility platform was not, so join us for our next Enrupt Innovation Talk in Singapore to learn more. Yet, interesting insights came out of a session on digital-energy nexus organised by the Directorate General for International Cooperation and Development the European Commission. While a vision of a digital platform sounds exciting, especially for larger players, the solution might emerge bottom up based on autonomous power systems that connect directly equipment, consumers and can grow and adapt. Young startups such as SolShare, Okra Solar and FlexGrid are building their solutions based on the principles of swarm electrification and are getting support. SolShare won the German Startup Energy Transition Award this year and FlexGrid received funding from the EU’s ElectriFI facility.
The challenges of power sector transformation are somewhat sweetened by the prospects of the overall electrification of the economy. At the Summit, Eurelectric released its report analysing deep decarbonisation of the European economy through electrification. We are talking about deep tech in Singapore. Eurelectric is talking about deep decarbonisation, which will mean:
· Up to 63% of total final consumption will be electric in Europe by 2050
· 45 to 63% in buildings could be electric driven by adoption of electric heat pumps
· Up to 50% electrification of industrial processes
What it means in practice is that, at least in Europe, we won’t be talking about electric vehicles anymore, only vehicles because they will be by default running on electricity.
6. Risk and Reward
Risk was the underlying issue everyone was talking about and no one discussing. Electricity companies were built on the notion that elimination of risks is paramount to their business, yet, today they need to embrace risk as a new value to pursue innovation. The question is: In this uncertain future of the electricity industry how can we handle the underlying risks related to innovation?
That’s why I left the Summit hopeful for the future of the work we are doing with Enrupt. We are building collaborative activities where startups and corporations can experiment together in low-risk environments. We are using the principles of open innovation to bring innovative solutions to the everyday business of electricity companies and ease go to market strategy for startups.
We are building a new type of electricity system that is good for the planet, closer to the consumer and anticipates, rather then reacts to the challenges. #wedisruptenergy
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