When Singapore liberalised the retail electricity market in 2018, households were free to pick and choose their preferred retailer outside of SP Group. Under the Open Electricity Market, retailers lured them away from the national grid operator with attractive promotions and discounts.
Barely three years later, the volatile energy market proved too much to bear for some retailers, and a wave of exits began. Among them, iSwitch, then the fourth-largest retailer and the largest independent brand, ceased operations in October 2021.
Today, the Open Electricity Market’s official website carries a page titled “Retailer Exit”, offering information about what customers can do when their retailer goes bust. Among the nine retailers still sporting their logos on the site, Diamond Electric has suspended new residential plans.
Could the bloodbath have been avoided and was Covid-19 a contributing factor? The head of Singapore’s “No. 1 household electricity retailer” describes an unforgiving market environment owing to market volatility.
“As in any liberalised market, not just in Singapore, you will first see a big group of retailers entering,” says Lim Han Kwang, CEO of Geneco. “What we have observed, unfortunately, was some of these retailers bowing out. But we expected that to happen; I think it is quite common.”
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The players still standing today are “definitely stronger”, Lim adds, and “should be able to weather a similar kind of volatility” should it arise again. But the energy sector is not yet out of the woods. “I can’t say that the market is very stable at this point; there’s still a lot of uncertainty. But based on the business model of retailers, the key is the ability to hedge our position,” he adds.
Geneco is wholly owned by YTL PowerSeraya, which has power generation facilities on Jurong Island. According to its website, the company has a licensed generating capacity of 3,100 megawatts (MW). This strong backing is Geneco’s secret to success, powering 160,000 homes today.
“Within our own fleet, we have 1,867.7MW of gas-fired machines. We hedge our wholesale price risks directly with our power generation company, so that we can honour the fixed price that we offer to the customer,” says Lim, who is also group head of retail, regulation and renewables at the YTL PowerSeraya Group.
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In contrast, some of the new retailers that exited were but resellers. They buy wholesale from the generating companies at a mix of fixed or spot rates, then resell them to consumers — many of whom they attracted by offering low rates. When wholesale prices shot up above fixed retail prices, it left retailers in a bind.
To protect consumers, Singapore’s energy regulator will soon introduce guardrails for electricity retailers. Minister for Trade and Industry Gan Kim Yong announced last month a central competitive tender for power generation capacity, which will prevent oversupply while mandating standby facilities, and stricter eligibility criteria to come for electricity retailers and wholesale electricity consumers.
Lim says Geneco welcomes improvements to the market.
“We are looking forward to the Energy Market Authority’s upcoming consultation for the initiatives and will contribute our organisation’s views that will safeguard our customers’ interest, while balancing our business’ priorities.”
Adding value for retail customers
Now is the time for retailers here to decide how to “add value” for their customers, says Lim.
Geneco is betting on the sustainability megatrend by launching the Power Eco Add-On, which invites customers to purchase Renewable Energy Certificates (RECs) or carbon credits from $1 monthly.
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Launched in August 2021, the scheme is Singapore’s first and only customisable green add-on for retail electricity. From $1 to $4, new customers can choose to offset 25%, 50%, 75% or 100% of their electricity emissions, estimated against an average household consumption of 400 kilowatt-hour/month.
The add-on is then locked in for the duration of their contract. According to Lim, Geneco sources its RECs from US environmental tech provider APX’s Tradable Instrument for Global Renewables Registry, while its carbon credits are sourced from the Verified Carbon Standard Programme. These credits represent solar and hydroelectric projects in Malaysia, Vietnam and India, Lim adds.
Are Singaporeans keen on paying more for the Earth’s future? Says Lim: “I’ll be honest with you: the take-up rate is encouraging but definitely not that high… We believe that as soon as Singaporeans become more conscious of the impact of climate change, more people will look forward to purchasing these carbon offsets.”
Looking ahead, Geneco wants to expand the scheme to existing customers. “We are now improving our system [so that] at any point throughout your contract, if you feel that now it’s time to adopt greener power, you can then add on. It’s very similar to a telco. I think this is putting the choice into the hands of the consumer,” says Lim.
Corporate customers
Despite all the headlines from this industry, which were mostly on the retail market, Lim says the bulk of Geneco’s business comes from commercial and industrial clients. “Residential holds only about 10% of the volume we are selling.”
Geneco can also help its corporate customers source for RECs and carbon credits if required, says Lim. The recent Formula 1 Singapore Grand Prix even tapped Geneco’s expertise to offset power usage over the race weekend.
Electricity demand slumped during the pandemic years owing to reduced economic activity, but today, Lim says demand is back at pre-Covid-19 levels. While power companies here are “bound to serve” businesses from the manufacturing, chemical, semiconductor and data-centre industries, Lim does not want Geneco to be overweight on any particular sector.
“The economic cycle actually drives consumption. My strategy is always to take a more balanced view. I’ll have some residential, some SMEs and some data centres or manufacturing, so that when any of these industries are hit with a downturn, we are not badly affected,” he says.
Ready for hydrogen?
Last month, Deputy Prime Minister Lawrence Wong announced the National Hydrogen Strategy, outlining plans to develop the low-carbon fuel, which could supply half of Singapore’s power needs by 2050.
The current fleet of gas-fired combined cycle plants will not be able to switch to hydrogen immediately, says Lim. “We can only mix up to 10% of hydrogen.”
Two of the company’s generators will reach 25 years of life by 2027, and such machines have a typical lifespan of up to 30 years. “Most of the new [machines] are already capable of partial hydrogen. Those will be the kind of tech we will look at.”
While Geneco is keen on staying abreast with hydrogen power, the infrastructure is still some years away, says Lim. There is also the issue of cost. He says: “There’s still no visibility on where we’re going to get competitively priced hydrogen. How will it reach Singapore and how will it be distributed to generators?”
Competitiveness is key to survival in Singapore, says Lim. “If the cost of using hydrogen outweighs what you can produce using natural gas, there’s no way any of us generation companies will adopt it.”
The same was said for solar panels, however, which has become much cheaper with wider adoption in recent years, says Lim. “Every technology will follow the same cycle, and it could be faster. If demand starts to increase, not just in Singapore but worldwide, maybe the cost will be driven down to a point where it becomes economical.”
Photos: Albert Chua/The Edge Singapore
