The Open Energy Market aims to bring more energy options and lowered costs to consumers. How successful has it been so far? Tong Suit Chee finds out
Since 2018, Singapore has been gradually liberalising its energy market by introducing the Open Electricity Market (OEM), a move that aims to spark competitive pricing and bring a wider range of electricity retailers to consumers.
The OEM was rolled out on a zonal basis over a period of six months from 1 November 2018. Pick-up from consumers has been encouraging — as of end-June 2019, about 34 per cent of household consumers have made the switch, said a spokesperson for the Energy Market Authority (EMA).
Surveys commissioned by the authority showed that 98 per cent of OEM consumers who have changed retailers found the switching process easy. Moreover, the switch rates for the soft launch in Jurong, Zone 1 and Zone 2 as of end-January 2019 were higher than the single-digit first-year switch rates seen in other countries that have also made similar moves to deregulate its energy market, such as Japan, the United Kingdom, Australia and New Zealand.
Flipping the switch on the market
There are currently 22 electricity retailers in Singapore, of which 13 are participating in the OEM’s nationwide initiative.
Competition among this wider selection of retailers is expected to not only bring about more energy plan options, but also lower the retail price of electricity and help consumers save on their electricity bills. Retailers face the challenge of designing clever energy plans that differentiate their offers in the retail market, while consumers gain from being able to choose plans that best fit their consumption needs. Government-owned SP Group, which as the default provider previously had monopoly of the market, now has to compete with the new retailers and also branch out to new ventures.
“Deregulation is targeted at long-term positive impact, even if there could be short-term inconveniences. End-users now are becoming gradually aware that they can save money, which was not an option previously,” said Dr K R Krishnanand, Dr Joimala Mrangthem and Associate Professor SK Panda, research fellows with the Electrical and Computer Engineering Department at the National University of Singapore.
This has certainly been true for NUSS member Nancy Cheong, who has made the switch to Senoko Energy. “The process (to change retailers) was easy,” she reported. “We were at a road show and selected a supplier we thought offered us the best rate. We probably saved money though I have to confess that we did not keep track of the amount saved!”
A wider selection of options has meant that retailers now need to differentiate themselves by providing better service. A housewife residing in Yishun who wanted to be known only as Ms Lin shared that she moved to PacificLight as it “provided excellent and professional customer service” at a road show she visited.
Battle for power
But there are signs the market is getting a little crowded as competing retailers jostle for market share. Earlier in January, Red Dot Power, which was one of the first independent retailers to obtain a licence from the EMA, pulled out of the market, citing financial challenges for its exit. The electricity accounts of its roughly 3,000 customers, including 120 households, have been transferred back to SP Group.
Ms Geraldine Tan, General Manager of Retail at PacificLight, agreed that the OEM is competitive, as the market is relatively small in size for the number of retailers in it.
Operating since 2013, PacificLight is a “gentailer”, as it both generates and sells power. Its power plant on Jurong Island generates close to 10 per cent of Singapore’s annual electricity needs. According to the company, it has a modest pool of industrial, commercial and residential customers.
“Deregulation is targeted at long-term positive impact, even if there could be short-term inconveniences. End-users now are becoming gradually aware that they can save money, which was not an option previously.”
“PacificLight’s high efficiency and cost competitiveness enable us to offer our customers competitive pricing that provides customers with significant cost savings below the prevailing SP Group’s tariff rate,” said Ms Tan.
But lower rates hasn’t necessarily meant more people are switching retailers. While businesses benefit from lowered energy costs just by signing a new contract, residential consumers face the challenge of having to now educate themselves on the different retailers so they can choose the best energy plan.
“Initially, some households were keen to switch retailers, but did not know how to go about doing so or were unsure of the plan that would work best for them,” said Ms Tan. “We had to provide customers ways to understand the market and the plans available, which included face-to-face engagements, informational videos and more.”
Putting the heat on the competition
With so many retailers in the competitive market, how do the companies differentiate themselves other than through pricing and yet have a sustainable business?
For Sunseap Energy, it is by offering consumers a greener option. “(With) our network of solar systems installed across more than 1,000 buildings, including public housing and commercial buildings, we are the only retailer to include solar energy in our plans, to encourage customers to go green while enjoying competitive electricity tariffs,” said the retailer’s director, Mr Laurence Kwan.
He acknowledged that many consumers still hold the misconceptions that solar energy is unreliable and more expensive than conventional energy. The company has had to educate them on the benefits of solar energy during events and road shows. Its efforts have thus far paid off, and the company has seen steady interest and sign-ups to its clean energy bundles for households, and have recently reported a higher uptake of energy plans with a higher component of solar energy. Such keen interest has led to Sunseap fast achieving 1 per cent of the entire market, serving commercial businesses, heavy industrial consumers and households.
Mr Kwan believes that most of his company’s customers choose Sunseap because they want to do good for the environment, and at the same time, its competitive price further compels them to make the switch. “In such a competitive electricity market, we are heartened to see our clean energy plans gain traction among consumers, as more people want to become more environmentally friendly,” he said.