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SP Group poised to transform into 'power sector's Uber'
AS WAVE after wave of disruption buffets the power sector, grid operator SP Group is taking steps to turn itself into the industry's "Uber": In time to come, it sees itself providing a platform that matches the supply and demand of power, especially as power generation becomes a fragmented and distributed business.
At the heart of this transformation is the desire to stay relevant to the Singapore consumer, particularly as the progressive liberalisation of Singapore's electricity market will lead to a fully open market by mid-2018.
SP Group - formerly known as Singapore Power Ltd - owns and operates electricity and gas transmission networks in Singapore and Australia. The group, fully-owned by Temasek Holdings, made S$923.5 million in net profit last year, on revenue of S$3.9 billion.
In an interview with The Business Times, group chief executive Wong Kim Yin said that while every industry is being disrupted, the power market is undergoing multiple dimensions of such changes.
Besides digital transformations, the industry also has had to face rapid technological advances in renewables and battery storage. "For the longest time, you cannot store electricity, or rather you cannot store it cheaply or efficiently. But increasingly that is changing," he said. "And the moment you can store power, it changes how power will be delivered or consumed." On top of these, consumers are now demanding sustainability. In order to stay true to its mission of enhancing the quality of life for Singaporeans, the group therefore has to start building capabilities that will allow for the types of life Singaporeans may want to lead in 30 years, said Mr Wong. To do so, the group has adopted a three-pronged strategy: to be exposed to the latest technologies and ideas in the industry; to test promising ideas, and to have the capability to handle proven technologies.
Under the first prong, the group in January this year partnered seven other utilities around the world to launch a global accelerator programme. Called Free Electrons, the programme supports startups developing solutions in areas such as clean energy, energy efficiency and mobility, digitisation, and on-demand customer services.
SP Group has also put money in funds, including the Europe-based Environmental Technologies Fund which invests in clean technologies and greentech sectors. "By getting involved in these, we get exposed to all the ideas that people have come up with," Mr Wong explained. "We also have the opportunity to work with the entrepreneurs and to invest into them if those are things relevant to us."
A technology of interest to SP Group is blockchain, a decentralised and distributed digital ledger used to record data across many computers. This will be useful in the future energy world - one that is expected to be more distributed in nature with consumers also having the means to generate power using renewables or batteries, said Mr Wong.
"Blockchain could potentially be a solution that will enable that distributed transaction to be done between someone who owns a battery and someone who owns a solar panel or even demand management..."
"We don't know whether it works yet. But we want to stay on top of it, we want to stay ahead."
SP Group is supporting Energy Web Foundation, a global non-profit organisation that is working to accelerate blockchain technology in the energy sector, said Mr Wong.
Under the second prong to testbed ideas with high potential, the group has in 2015 started a S$30 million Centre of Excellence, supported by the Economic Development Board. Here it will develop, test and integrate new technologies by other companies in the Singapore grid - regarded as one of the best in the world.
As it does so, the group will gain insights into the problems and also the capability to resolve them. It might also have the option to invest in these solutions, or earn the intellectual property rights which it can then bring overseas, said Mr Wong.
The group is also working with US multinational General Electric to develop a digital replica of the Singapore grid. This will capture real-time data that can be used to enhance asset management, predict failures and optimise maintenance schedules, among others.
Thirdly, to build capabilities in already-mature technologies, the group is installing solar panels at its new Kallang headquarters so as to gain in-house expertise on how solar panels work and interact with batteries.
It has also converted its fleet of service vehicles into electric vehicles. "By doing that we ourselves learn how it charges, what is the variability of the range between one car and another, what the maintenance cycle is like and how often it breaks down," said Mr Wong.
A key plank of its efforts in the third prong is a new app that the group launched in March to allow customers to view and pay bills, and to compare their consumption with those in the neighbourhood.
This app is just a starting point for future plans, said Mr Wong. One possibility is to use it as a platform for consumers to compare various electricity retailers when the market is fully liberalised mid-next year. Or it could be used to aggregate users who are willing to reduce their electricity usage in exchange for payment, a practice known as demand side management.
"Uber is about the matching, and so is Airbnb. So this is about matching also. Demand side management is about matching someone who is willing to back off (from electricity usage) with someone who wants to use it notwithstanding that it is expensive."
Further down the road, it could also be used for consumers to transact with one another, especially if paired together with blockchain technology.
"Think about the possibilities," he said. "We're not there yet, but without this (app) we can't even go there. You need to have something associated with you and the account. And once they are ready this account can be used as a platform, subject to regulatory frameworks."
Reflecting the group's desire to move quickly, the app was built in only three months - compared to the one to two years it would otherwise have taken - by a newly-formed digital team in the group, said Mr Wong.
Besides developing the app, this team - whose current headcount of 60-70 will eventually be expanded to 100 - is also responsible for deploying digital solutions within the group as it embraces technology to improve its work processes. Every employee, for example, was given an iPad in 2015. The group has also experimented with Google Glass.
Even while embracing digital solutions, SP Group is also conscious that it is exposed to cybersecurity risks, and is working with the Cyber Security Agency of Singapore and Ministry of Home Affairs, among others, to ensure it has the latest safeguards.
"As we build new digital capabilities we are always putting in the defences along the way," said Mr Wong. "Having said that, no amount of defence is foolproof. We always plan on the case that they will come in eventually, and when they do that, we need to first identify and contain, slow them and block them, and then recover."
In time to come, SP Group envisions that the digital platform it is developing can also be used by other retailers, especially since the residential electricity market, despite having 1.3 million customers, consume only 15 per cent of Singapore's electricity. As it may not make sense for retailers to set up a call centre to serve these customers, SP Group could provide this service for them.
"We can white-label our products and services to enable the retailers to have their own signature and to engage their customers," said Mr Wong.
"I don't see ourselves competing with the retailers. I see ourselves enabling the retailers, but at the end of the day enabling the consumer. The consumer must win."