Upcoming SlideShare
Loading in...5




Riding the megatrend of sustainability - Senoko (Leading power generation company of Singapore)

Riding the megatrend of sustainability - Senoko (Leading power generation company of Singapore)



Total Views
Views on SlideShare
Embed Views



5 Embeds 20 9 7 2 1 1



Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
Post Comment
Edit your comment

    Senoko Senoko Presentation Transcript

    • RIDING THE RIDING THE MEGATREND OF SUSTAINABILITY MEGATREND OF SUSTAINABILITY SINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK Featuring Award Winners and Strategic/Knowledge Partners of the Inaugural Sustainable Business Awards and Green IT Awards Featuring Award Winners and Strategic/Knowledge Partners of the Inagural Sustainable Business Awards and Green IT Awards SINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK Jointly Published byProudly Produced by© 2011
    • SENOKO ENERGY PTE LTDCase Written By Somnath KansabanikSENOKO ENERGYCommitted to serving the nation’s energy needs in a responsible way, Senoko Energy Pte Ltd is the largestpower generation company (genco) in Singapore, with 3300 MW licensed capacity which is over 30 per centshare of the city state’s entire installed capacity. The company has two power plants. The main plant calledSenoko Power Station (3195 MW capacity) is at the extreme north of Singapore bordering Malaysia. The otheropen cycle gas plant (Pasir Panjang Gas Turbine Plant) is at Pasir Panjang, south of Singapore. Senoko PowerStation is the first company in Singapore to build combined cycle gas turbine (CCGT) plant in 1996 in a bidto reduce its carbon emission intensity. By year 2004, Senoko had converted its three ageing oil fired 120MWsteam plants into three modern 365 MW combined cycle plants. This repowering project increased the totalcombined cycle capacity to 1945 MW as well as reduced the carbon emission by 40 per cent making Senoko thegenco with lowest CO2 emission intensity1. With highest share of CCGT generation2 and lowest CO2 emissionintensity, Senoko is the most efficient and environment friendly power generator in Singapore.SENOKO’S JOURNEY THROUGH PRIVATIZATIONSenoko started its operations in 1976 as a division of the Electricity Department of Public Utilities Board (PUB)and was later corporatized as PowerSenoko Limited under Singapore Power (SP) in 1995. Divestment fromSP to Temasek took place in 2001 when PowerSenoko was renamed as Senoko Power Limited. In fact, priorto privatization and deregulation, the Singapore government’ investment arm Temasek Holdings owned allthe three power gencos in Singapore. Temasek subsequently decided to divest all three gencos in order toprovide a stable and competitive power market in Singapore. Temasek first sold Tuas Power to Huaneng group.Continuing divestment strategy, Temasek sold Senoko Power Limited to Lion Power Holdings in 2008. LionPower is an international consortium comprising Marubeni Corporation (30 per cent), GDF Suez S.A. (30 percent), The Kansai Electric Power Co. Ltd (15 per cent), Kyushu Electric Power Co. Ltd (15 per cent) and JapanBank for International Cooperation (10 per cent). GDF Suez is a French Power Company while the rest of theshareholders are Japanese companies. On 13 January 2010, the name Senoko Power Ltd was changed againand now it is known as Senoko Energy Pte Ltd (SEPL).THE ABCs OF SUSTAINABLE DEVELOPMENT IN THE POWER INDUSTRYSustainable development is defined as the development that “meets the needs of the present withoutcompromising the ability of future generations to meet their own needs”3. A sustainable development requiressimultaneous pursuit of “triple bottom lines”: economy (firm specific), environment and society. Whenever wethink of sustainable development within the power industry, the picture of wind turbines and solar panels comes to mind. Generating power means providing society with the most useful commodity which makes living possible in the modern world. However, the process of power generation must be economically sustainable while minimizing the impact on the environment. Wind and solar power are renewable sources as well as environmentally clean. But the question remains as to whether wind turbines and solar turbines are economically sustainable means of power generation in Singapore. Wind speed of 6Wind Turbine Farm meter/second is the minimum air speed for successfully harnessing wind turbine energy, and for profitable windturbines the required air speed is 9 meter/second4. However in Singapore, averageair speed is 0.06 to 3.4 m/s. So, wind is not a viable option for Singapore. Neitheris solar power a realistic source of energy since the solar panels require large spacewhich the tiny 710 sq km island cannot provide. If the government housing blocks Solar Plant078RIDING THE MEGATREND OF SUSTAINABILITYSINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK
    • (HDB) were upgraded with solar panels which usually operate at 10 per cent efficiency, altogether these panelscould only provide 2 per cent of the nation’s entire electricity need. Nuclear, hydro and bio-energy are the otherenvironmentally friendly choices. Nuclear however requires big investment although operating cost per unitelectricity produced is much lower. Safety is prime concern for nuclear power plant, especially in a small countrysuch as Singapore. Hydro power is not obviously a possibility in Singapore. The other sources of fuel such asbio-mass and bio-fuel are renewable but limited in quantity. Hence, Singapore has to rely on fossil fuels likenatural gas, fuel oil and oil/diesel for power generation. Among these, natural gas is the most environmentallyclean and viable choice. With limited alternative energy solutions, Singapore uses thermal systems for power generation which contribute to half of the total national emissions of CO2, the primary heat-trapping, “greenhouse gas” responsible for global warming. However, it will not be technically correct to say gencos are the only sources of the greenhouse gas problems; they are just a solution provider for the energy needs of Singapore. The manufacturing sector, which is the biggest customer of electricity, also emits CO2 by using directly fossil fuels in their manufacturing processes. So in terms of total CO2 emission, the manufacturing sector tops the CO2emission list with 44 per cent share in overall emission. The other customers of electricity as well as directcontributors of CO2 emission are the transport industry (5 per cent), buildings (30 per cent) and households(18 per cent). Apart from CO2, NOx, Sulphur and industrial waste are the other polluting elements emitted bygencos. Overall, gencos face the unique challenge of fulfilling society’s need for energy while having to remaineconomically sustainable and environmentally friendly as well. The implications of sustainability for powerindustry are much more than just showing lip-sympathy towards the environment. The environmental strategyof gencos will decide whether Singapore can achieve the national target of reducing CO2 emission by 16 percent by 2020 (against business-as-usual level).It is important that a company not only addresses the concerns for environment, economy and society butalso measures on a set of dimensions the impact of its sustainability actions and reports them periodically.Of late, companies have started adopting a holistic approach in reporting non-financial performance of thecompany in the form of sustainability reporting. As per GRI (Global Reporting Initiative) guidelines there are 79indicators to measure sustainability in terms of both human and environmental aspects. While human resourcepractices, community service, corruption/ethics are measures of human aspect of sustainability, there arenumber of indicators for environmental sustainability such as noise level, ambient air quality, carbon footprint,water efficiency, water quality, waste management etc. In Singapore to date about a number of companiesare annually reporting their sustainability performance with SGX. Senoko is in the process of starting to reportsustainability on annual basis. Power Seraya has already ventured into sustainability reporting and has wonthe top position in the Singapore Awards for Sustainability Reporting (SASR) by ACCA5.SELLING CIGARETTES VS. SELLING POWERIn Singapore, there are 1 million domestic customer accounts for the entire population of 5.1 million people6.Domestic retail market is not de-regularized yet, hence SP Power is still the sole retailer in this domestic marketwhich is 18 per cent of the 41.2 Terra Watt hour (TWh) yearly (in 2010) electricity sales in Singapore. Through 079 RIDING THE MEGATREND OF SUSTAINABILITY SINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK
    • the monthly invoices, SP Power communicates the national average electricity consumption data along withthe individual consumption trends. This data is provided in order to raise consumer awareness so that theycan minimize the use of electricity and water. Along with SP Power, all the private operators are also spreadingthe same message of saving electricity. Is not the reduction in consumption going to reduce their revenue?That may be true, but power companies need to look beyond short term revenue base maximization throughpromoting higher use of electricity.In Singapore, tobacco companies are obliged to mention the ill-effects of smoking on the packet itself. On asimilar note, power companies embrace efforts to let the common people know how electricity is generatedin Singapore and how the waste of electricity simply adds to elevated Carbon footprint. Nowadays, almostall environmentally conscious organizations are participating in events like “Earth Hour”. As per the Facebookpage of Earth Hour Singapore, if most people, businesses and government get involved in the Earth Hour andturn off their lights for 60 minutes, electricity consumption could be reduced by 10 per cent of the total demandwhich is equivalent to “taking 48000 cars off from the roads”vii for one hour. Considering all these facts, wecan see the twist while analyzing the strategic angle for economic sustainability of gencos. Their responsibilitiestowards environment and people are much more than any other traditional profit maximizing organizations.But they must develop sound economic strategies to survive in the deregulated power industry and continueserving the society.How Senoko & Its Competitors Generate PowerIn a typical steam plant, fuel is burnt in steam boilers to produce steam that drives the turbines andgenerates electricity. Senoko has a total of 500MW from its two steam plant in Senoko Power Station. Its maincompetitors are Tuas power which has a 600 MW steam plant and Power Seraya which has six units of 250 MW oil-fired steam plants that have a combined capacity of 1500 MW. Natural gas provides the highest efficiency when used in combined cycle power plant (also known as combined cycle gas turbine – CCGT). In CCGT, natural gas is burned to produce energy to drive gas turbine that generates electricity. The waste gas-to-heat, in the form of steam produced in the heat recovery steam generator, is recovered to drive a steam turbine that produces more electricity. The system is equipped with back-up diesel supply, to address gas shortage , if any.source: In Singapore, there is a general shift towards natural gas and hence existingplants are being converted to modern combined cycle plants. The first combined cycle plant in Singaporewas commissioned by Senoko in 1996. Between 2000 and 2004, Senoko completed its first stage repoweringproject to convert its three 120MW oil fired steam plants into three 365 MW combined cycle plant. After Senoko,Tuas Power developed fourcombined cycle plants withcombined capacity of 1470 MW(4 x 367.5)8 between 2002 and2005. By 2002, Seraya alsocompleted two units of 370MW combined cycle powerplant. Seraya also built twounits of 400 MW cogenerationcombined cycle power plants9.The list of different plant types, their capacities and all the power generators in Singapore with their capacitiesare as follows (as of September 2009):080RIDING THE MEGATREND OF SUSTAINABILITYSINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK
    • Plant Mix by Type Installed Cap MW Percentage Company CapacityCogen Plant: Power Seraya 3100Sembcogen 785 7.4% Senoko Energy 3300Keppel Cogen 470 4.4%Sub-total 1,255 11.9% Tuas Power 2670CCGT: SembCorp Cogen 900Senoko 1,945 18.4%PowerSeraya 730 6.9% Island Power 800Tuas Power 1,470 13.6% Singapore Syngas 20Sub-total 4,145 39.2%Orimuision/Cheap Oil: ExxonMobil 180PowerSeraya 750 7.0% Keppel Merlimau 470Steam Plant: Elba Eastern 50Senoko 1,250 11.8%PowerSeraya 1,400 13.3% NEA 250Tuas 1,200 11.3% Total 11740Sub-total 3,860 36.5% Adapted from:OCGT Senoko’s Presentation,Seraya 210 1.0% Consulted following: 1) 210 2.0% php?option=com_content&task=view&id=3&IteSub-total 420 3.0% mid=81 2) 251 2.4% figures/consumption/Licensed_Capacity_in_TOTAL: 10,576 100% Commercial_Operation_LN.pdfFuel For Power Generation: Environment Or Cost?For power generation companies fuel cost comprises 85 per cent of the long run marginal cost10. Cheaper fuelmay give short term profitability but it is detrimental to the environment. Natural gas is costly at present but provides the highest Fuel Price thermal efficiency and emits lowest CO2. As per EMA’s Gas 19.26 SGD/GJ report, estimated gas price is 19.26 SGD/Giga Joule (GJ), whereas High Sulphur Fuel Oil (HSFO) is 18.31 SGD/ HSFO 18.31 SGD/GJ GJ and coal is 6.3 SGD/GJ11. If gas price in Singapore Diesel 23.53 SGD/GJ further comes down, gas would be the Singapore’s answer for global warming issues. Presently, there are Coal 6.30 SGD/GJ three international gas pipes from Malaysia (M-Gas) and Indonesia (I-Gas). Gas contract with Malaysia wassigned in 1990 where gas was bought at 7 per cent premium along with water from Malaysia. In 1998during Asian financial crisis, a contract was signed with Indonesia to buy gas at >20 per cent premium tofacilitate ASEAN’s economic recovery12. By 2013, LNG terminal is supposed to be operational which will furtherincrease supply of gas. LNG terminal will enabletransportation of gas through ships from gas rich Carbon Intensity by Fuel Typecountries such as Iran and Qatar. 1000 922 900How Green Is The “Garden City” Singapore? 800 757 726 629During the UN’s Climate Change Conference in 700 600 kg/MWhBali in December 2007, consensus to reduce 500 417 400CO2 emission by 25~40 per cent by 2020 could 300 200not be reached but all agreed to follow the 100‘Bali Roadmap’ that formed the basis of future 0negotiations on protocols meant to replace the l il l on as oa se O G si ie C ul D rimKyoto Protocols. Following the recently concluded O 081 RIDING THE MEGATREND OF SUSTAINABILITY SINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK
    • Copenhagen summit on climate change, Singapore has now pledged to cut its carbon emissions by 16 per cent(business-as-usual levels) by 2020. Carbon Monitoring for Action ( monitors worldwide emission ofCO2. As per total carbon emission, the world’s top 10 biggest carbon emitters are China, USA, India, Russia,Germany, Japan, UK, Australia, South Africa and South Korea.13CARMA also colour codes different countries based on total carbon emission per unit electricity generated(carbon emission intensity) i.e. kg of CO2 per Mega Watt-hour (kg/MWh) of electricity produced. The colourcoding is shown below:66 Co2 emission intensity colour codes range from red to green > 1,750 Ib/MWh = > 794 kg/MWh (coal) 1,250~1,750 Ib/MWh = 567~794 kg/MWh (oil) 750~1,250 Ib/MWh = 340~567 kg/MWh (natural gas) 250~750 Ib/MWh = 113~340 kg/MWh < 250 Ib/MWh = <113 kg/MWh (nuclear, hydro)Switzerland and France with high ratio of hydro and nuclear facilities are the countries with the lowest carbonemission intensities in the world. With Carbon intensity of 541 kg/MWh, Singapore is “yellow” in terms CO2emission intensity which is considered moderate. Between 2000 and 2007, Singapore CO2 emission intensityreduced by 30 per cent. This reduction is the best in ASEAN region. Given the 100 per cent electricity coverage,Singapore’s achievement is outstanding.Senoko took the first step in Singapore’s journey towards CO2 emission reduction. It was the first genco toconvert the oil fired power plants into CCGT. By implementing CCGT, Senoko recycled the lost heat and reducedCO2 emission intensity.082RIDING THE MEGATREND OF SUSTAINABILITYSINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK
    • ARE SINGAPORE CONSUMERS “GREEN”?While answering a question on the possibility of charging a premium for cleaner source of energy, MinisterMentor Mr. Lee Kuan Yew mentioned how the citizens of this small, densely populated country have learnt to livewith the pricing mechanism. Singapore electricity market “deregulation started in 2001 but smaller consumers still I think Singaporeans are cost conscious;get their electricity through SP Power at regulated tariff. they don’t care from where the energy ”So far, liberalization has enabled only 75 per cent of 15 comes from. Which is the cheaper one?the market for contestability i.e. giving consumers choice - Minister Mentor Lee Kuan Yew,to select their desired power company while buying International Energy Week 2008 14electricity. Singaporean domestic segment (18 per cent ofthe entire 41.2 TWh electricity sale) and the small business segment are not qualified as “contestable” whichmeans they have to buy electricity at the government regulated tariff.Any consumer with monthly consumption over 10,000 kilo Watt hour (kWh) for the previous 12 months iseligible to become a contestable consumer. As contestable customer, non-domestic sectors can buy from theretailer or from SP Services (also known as Market Services Support Limited - MSSL) at competitive prices.Retailers in Singapore are usually vertically integrated. So Senoko Energy Supply ( is the retail arm of Senoko Energy Pte Ltd ( As per EMA’s data inDecember 201016, 27 per cent of the 8064 contestable customers purchased electricity through SP Serviceswhile the rest 73 per cent purchased from retailers. However, the 73 per cent customer accounts represent 94per cent of the entire contestable demand. Senoko is having 15.3 per cent share in the retail market with 450retail customers17.Contestable Consumers can buy from any retailer or directly from the market; they can switch their vendor inreal time. The churn rate among the contestable consumers was 1.76 per cent in December 201016. Althoughconsumers can switch between retailers, there is only one Grid Company called SP Power Assets whichcharges fixed network cost subject to annual review. The entire flow of electricity from generators to consumersis shown below (adapted from 083 RIDING THE MEGATREND OF SUSTAINABILITY SINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK
    • Shown below is the diagram with the locations of different gencos in Singapore and the major grid lines(adapted from Senoko’s presentation):The industry structure and power grid network may be simple to understand, but the structure of NationalElectricity Market Singapore (NEMS) and the market dynamics of the real time energy trading are morecomplicated. First, the different players and their roles need to be understood:66 Energy Market Authority (EMA) – Regulates electricity industry66 Energy Market Company (EMC) – Administers the spot market66 Generation Companies (genco) – Produce & sell electricity in the spot market66 Transmission Licenses (SP Power Assets Ltd) – Owns the network66 Retailers – Buy electricity at spot prices and sell electricity to contestable consumers66 Market Support Services Licensee (MSSL, SP Services) – Provides Spot Market SupportThe overall structure of the newelectricity market is shown below(adapted from market is divided in twoparts: the wholesale electricitymarket and retail electricitymarket. The wholesale marketis called the spot market whereall the wholesalers (powergenerators) “sell” 100 per centof their generation forming an“electricity pool” through whichelectricity is traded. SP Servicesbuys from the pool at a price setas per contract. Small business084RIDING THE MEGATREND OF SUSTAINABILITYSINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK
    • and households have to buy electricity from SP Services at pre-defined tariff. Contestable customers havemany avenues from which they can buy electricity. They can buy from directly from the energy market pool,from SP Services or from retailers who again can choose to buy directly from the market or from SP Services.For a contestable consumer the decision on where to buy electricity would depend on total consumption,consumption pattern and other economic or financial considerations.From April 2011 onwards SP Services has revised theelectricity tariff to 25.58 cents (US$ 208/MWh18) perkWh for households and small businesses19. Out of25.58 cents, 20.52 cents (205 SGD/MWh) will nowgo to gencos. Earlier the price was 18.9 cents (189SGD/MWh). As per Energy Market Company’s tradingreport, the average electricity prices increased from160.79 SGD/MWh in February 2011 to 186.70 SGD/MWh20 in March same year. Domestic consumershowever do not buy at market traded price whichkeeps varying every half hour. For consumers, SPServices sets fixed energy cost taking into accountthe policy objective of promoting efficiency in thermal power plants. Presently, “F Class” combined cyclegas turbine is the most efficient one that caters more than 25 per cent of the system demand. The pricethat consumers pay now reflects the long run marginal cost of most efficient (hence least polluting) powergeneration technology. February 2011 March 2011 Weekdays Saturday Sunday Weekdays Saturday Sunday USEP ($/MWh) Daily Average 160.79 164.08 179.66 186.70 178.87 196.51 Daily Maximum 322.07 426.95 487.28 427.48 414.35 456.87 Daily Minimum 128.15 128.75 129.76 143.60 145.48 148.16 Thursday Friday Saturday Sunday Monday Tuesday Wednesday 21-Apr-11 22-Apr-11 23-Apr-11 24-Apr-11 25-Apr-11 26-Apr-11 27-Apr-11 USEP ($/MWh) Daily Average 219.17 234.48 248.92 211.66 271.13 289.55 286.16 Daily Average 277.36 312.69 457.12 274.15 478.19 468.57 481.28 Daily Minimum 190.04 191.18 180.91 184.14 171.68 191.73 191.69When Singaporeans pay their electricity bills, they are actually supporting CCGT power generation technologywhich is the most efficient and least CO2 emission intensity technology. If a genco buys cheap oil andeventually offers cheap electricity, only some non-domestic contestable customers can buy that. In a way,Singaporeans are helping the nation’s target of switching to natural gas to reduce total CO2 emission. Thatcontributes to making us green. In fact, larger consumers like manufacturing industries, buildings and shoppingmalls are also adopting green technologies by investing in energy saving equipments. They are also invitingexperts for conducting energy audit for identifying electricity wastes and possible improvements by minimizingpower consumption. By adopting the experts’ suggestions buildings and malls are becoming green. Examplesare CDL’s City Square Mall near Farrer Park MRT. Singapore and its people are thus trying to do their part inthis green initiative.The efforts taken by Singapore are indeed remarkable because, for example, Hong Kong, a city comparableto Singapore on many dimensions, still uses coal as its major fuel source. It is further interesting to note that 085 RIDING THE MEGATREND OF SUSTAINABILITY SINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK
    • Singapore has not adopted any tough measure like carbon pricing in Europe. Yet, Singapore and its peoplehave managed to stay “greener” compared with its neighbours and competitors.A PERSPECTIVE ON SENOKO’S ECONOMIC STRATEGYFirst, the alignment of Senoko’s different revenue streams with corporate structure needs to be understood.Like any other generator/retailers such as Power Seraya, Tuas Power, Sembcorp Cogen and Keppel MerlimauCogen, Senoko is vertically integrated i.e. separate generation and retail arms within the same parent company.Senoko Energy Supply, the retail arm of parent company Senoko Energy Pte Ltd., earns revenue from retailcontestable customers whereas Senoko Energy gets revenue from MSSL through its vesting contracts andthrough direct market participants for the nodal sale of electricity.Singapore’s GDP continue to grow and so is the electricity consumption which surpassed 40 terawatt hours(TWh) for the first time in the NEMS’ history, reaching 41.2 TWh in 201021. Out of the total electricity produced18 per cent are consumed by domestic customers while the rest 82 per cent with market size of 33.9 TWhmarket22 belongs to the non-domestic segment in Singapore. Again, within non-domestic segment 18 per centare non-contestable customers and remaining 82 per cent qualify as a contestable customer group representingtotal 27.9 TWh electricity sales23. A small portion of contestable customers choose to buy electricity from SPServices, but 95 per cent of the entire contestable market is shared by five main retailers with total electricitysales of 26.5 TWh in 2010.086RIDING THE MEGATREND OF SUSTAINABILITYSINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK
    • As per NEMS 2010 report, Senoko’s share of power generation is 25.7 per cent of the entire market whereasSeraya’s share increased to 28.4 per cent. Senoko is having 15.3 per cent market share of retail market basedon metered demand24. This is higher than Senoko’s share of 14.3 per cent in 2009. However the current marketshare of Senoko is less than Seraya’s share of 18.9 per cent in 2010 and 18.7 per cent in 2009. As per themetered demand, SP Services is having the highest share of 35.9 per cent. The market share of different retailers based on annual metered demand is shown below (adapted from NEMS2010 report):Considering the fact that SP Services does not produce electricity, rather it buys from the gencosand supplies to the domestic segment, non-contestable non-domestic customer segment and 5per cent of the contestable customers, the non-MSSL retailers’ share of the retail market would bebased on the ratio of their metered demands. Therefore, Senoko with 15.3 per cent would have 15.3 or 24 per cent share of the15.3 + 18.9 + 13 + 7.6 + 9.3 Share of26.5 TWh markets of contestable customers buying Share of Name Contestablethrough non-MSSL retailers. Seraya and Tuas share Generation Market29 per cent and 20 per cent respectively. In terms ofGeneration, respective shares of Senoko, Seraya and Senoko 25.70% 23.9%Tuas are 26 per cent, 29 per cent and 25 per centrespectively. Seraya 28.40% 29.5% Tuas 25.20% 20.3%Seraya is currently the market leader in terms ofPower Generation and Retail Market share as per the SembCorp 9.50% 11.9%above table showing the share of generation versus Keppel 8.30% 14.5%share of contestable market for the top five powercompanies. Seraya has a very strong trading groupthat managed to secure good contracts for cheap oil used in power generation. Although cheap oil emits moreCO2, electricity can be generated at a cheaper rate and that means higher share in a deregulated energy marketwhere some computer algorithm called Market Clearance Engine (MCE) is performing all trades by matching thebid against the lowest offer irrespective of how the energy is generated. 087 RIDING THE MEGATREND OF SUSTAINABILITY SINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK
    • Share of Power Generation Share of Contestable Market Year 2010 : 41.2 TWh Year 2010 : 26.5 TWh SembCorp Keppel Keppel 10% 9% 15% Senoko Senoko 26% 24% SembCorp 12% Tuas 26% Tuas Seraya Seraya 20% 29% 29%However, the government does not encourage the use of cheap oil for power generation and has taken someunique measures in the deregulated market in order to promote efficient and environmentally friendly energygeneration and to control the market power of three major gencos who control 90 per cent of the market.First, there is no mechanism of carbon pricing in Singapore. Rather the interests of plants engaging in CCGTtechnology are protected by vesting contract regime.All the electricity generated by different generator is sold to the electricity pool and a portion of the entire pool(55 per cent in 2011) is under the pricing provisions set by vesting contract, a special financial contract betweenSP Services and each of the three main power generators (Seraya, Senoko and Tuas). With vesting contracts,generators are obliged to produce a specified quantity of electricity (vesting contract level) at a specified price(vesting price/strike price). The strike price is same for all generators, but the level of contracts is differentbased on the generation capacity of each of the companies.If the gencos do not have any A portion ofmarket power, Vesting Contract generationReference Price (VCRP) will be Electricity Pool is pegged tousually higher than the Uniform “Vesting Price”Singapore Energy Price (USEP) 100% of generation Vesting Contracts or “LRMC”which is the average of all nodal is “sold” to the (“Vesting Price”) (Long Runprices of electricity. VCRP is set Electricity Pool. with Marginal Costto reflect the long run marginal SP Servicescost of class “F” CCGT (most Pool revenue, however, fluctuates A portion ofefficient). Beyond the vesting Retail generation islevel, generators compete with every half hourly Contracts and is thus not hedged by Retailone another to sell remaining Contracts withcapacity to consumers. certain. (“Spark Spreads”) large customers OthersHistorically in Singapore, USEPhas always been lower thanvesting contract reference price.Due to vesting price and appropriate level, no company can get unfair advantage by producing electricityby cheaper means over long run. There could be some short term gains, but this cannot sustain as EMAperiodically monitors the licensing requirements of power plants and enforces measures such that gencoseventually switch to efficient and environmentally friendly power generation. Power Seraya, due to cheapoil has enjoyed some economic advantages to bid for cheap electricity sale. Hence retail share of Seraya incomparison to its generation capacity is higher than that of Senoko.088RIDING THE MEGATREND OF SUSTAINABILITYSINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK
    • In 2010, Senoko produced over 10500 GigaWatt hours (GWh) of electricity which is 25.7per cent of national consumption of 41,199GWh. Out of total 10500 GWh, around 4200GWh was sold via SP Services at the vestingcontract hedge price of $172.29/MWh22. Rest6300 GWh energy, which is 24 per cent of thecontestable market by retailers, was sold to its450 contestable customers.A PERSPECTIVE ON SENOKO’SENVIRONMENTAL STRATEGYWith top priority for environment, Senoko isaligning all its major business decisions as perthe “Singapore Green Plan 2012”, which was drafted by Singapore government in order to reduce nationalcarbon footprint. The company took the first step in reducing its carbon emission intensity by embarking on anS$600 million repowering project to convert three ageing oil-fired 120MW steam plants into environmentally-friendly three units of 365MW combined cycle gas turbine (CCGT). The project was completed by 2004 and itincreased the efficiency of power plant by 14 per cent age points. This is known as Stage 1 Repowering Project(2000-04) that reduced the annual carbon emission by 2,500,000 tonnes of CO2, which is nearly equivalent toCO2 emissions of all passenger cars on Singapore roads in one year25.After the huge success of stage I repowering program, Senoko invested in Stage II Repowering programmewith a budget of over S$ 760 million in order to convert three 30 year old oil-fired 250 MW steam plants intotwo units of environmentally-friendly LNG & piped gas-fired 430MW combined cycle plants. Given the factthat Singapore LNG terminal is supposed to start operation from 2013, the project which is expected to becompleted by the latter half of 2012 has important strategic implications. A lot of counties like Japan, India areadopting CCGT technology apart from nuclear technology. It is interesting to note that despite having an export-oriented, energy-intensive economy, Singapore has managed to keep its CO2 intensity measured against GDPat 2000 PPP prices) below the world average and stayed ahead of developed countries like Japan, Netherlandsand Belgium26.Senoko equipped all generator sets with low-NOx burners by investing $16 million. This has lowered the NOxemission level to below 200 mg/Nm3. So far, Senoko has successfully maintained the NOx level in line with theNEA’s new statutory requirement of 700 mg/Nm327.Senoko has consistently increased the use of NEWater (reclaimed water from sewage treatment) and desalinationwater as boiler feed-water for electricity generation. Senoko built a $7 million desalination plant in 2004 inorder to use seawater as boiler feed-water for electricity generation. By this Senoko, since 2004, has reducedconsumption of PUB’s potable water by 80 per cent (750,000 m3, annually) which is 3 per cent of the entiremonthly water consumption in Singaporexx28.Senoko has also established internal measures to encourage employees to reduce water usage and minimizewater wastage. These measures include conducting company-wide awareness briefings, monitoring monthlywater consumption and installing low-capacity flushing systems, flow regulators and spring-loaded faucets inwashrooms. Apart from constant patrolling to ensure minimal water wastage, Senoko also has a helpline forreporting on-site water leaks to facilitate immediate fixing.Senoko engages independent external laboratories in order to carry out monthly water quality test for analysisof contamination of ground water by sewer water. Through this monthly analysis, Senoko identified sources ofseawater infiltration into sewer pipes. Following this, a CCTV system worth $35,000 for surveying undergroundsewer pipes was deployed in Feb-Apr 2008. Moreover, porous sewer pipes were re-lined by spending another$80,000 in May 2008. All these efforts ensured safe discharge of Senoko’s sewer water into public sewers. 089 RIDING THE MEGATREND OF SUSTAINABILITY SINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK
    • Senoko is the first genco in Singapore to be awarded the ISO 14001 certification Environmental ManagementSystem (EMS) which covers policy, commitment, evaluation, review and improvement for environmentalconcerns. Among all the power generation companies, Senoko has taken the lead role in reducing greenhouseemissions and educating Singapore’s youth community on climate issues. Eventually Senoko became the firstgenco in Singapore to be given the Singapore Green Plan 2012 (SGP2012) award in 2005 and the President’sAward for the Environment in 2008.A PERSPECTIVE ON SENOKO’S STRATEGY TOWARDS SOCIETYIn its vision to be the “preferred energy supplier” in Singapore, Senoko aims to deliver competitively pricedelectricity while taking care of its employees, the community and environment. The Executive ManagementTeam (EMT), under the leadership of the president and CEO, determines the CSR guidelines which are identifiedunder the five core values of Safety, Teamwork, Integrity, Commitment, Care and Customer focus. By adhering to Singapore laws (Workplace Safety & Health Act, WSHA) and going beyond to include certificationto international standards (OHSAS 18001 Certification), Senoko is committed to its Workplace Health andSafety (WHS) programme. The board of directors set the WHS policy whereas the safety manager implementsit. Mini-safety committees at section levels have been set up on voluntary basis to discuss reports andbrainstorm safety issues. Senoko is involved in raising the awareness level continuously and also encouragesits employees to participate in Energy Utilities Workforce Skills Qualification (WSQ) scheme launched recently.It also encourages contractors to get involved in safety management by providing them with induction training,checking workers’ qualification for job and rewarding them for good safety practices.Participation of employees and contractors in safety programmes is encouraged and their contribution isrewarded accordingly. Lost Time Injury (LTI) is one of the several operation indicators which together withthe financial performance of Senoko that determine the amount of bonus payment. This helps in aligningsafety behaviour with compensation. Senoko’s policy is to be open about its safety practices and learn“unashamedly” from other organisations. Senoko’s positive image is fortified by the fact that it received theWorkplace Safety and Health (WSH) Performance Award (Silver) from the Ministry of Manpower in 2009 and2010. Along with this, there were requests from NTUC WSH committee, Mount Alvernia Hospital and RSAF togive talks on safety.Some of the examples of Senoko’s other CSR initiatives are as follows:National Weather Study Project (NWSP)National Weather Study Project (NWSP), an inter-school competition on climate change awareness is Senoko’sflagship environmental commitment which was launched in 2005. The concept of NWSP was to raise awarenessamong the student population of how climate and weather patterns have a deep impact on the environment.Through the installation of mini-weather stations at the participating primary schools, secondary schools andjunior colleges, Senoko has invested over S$2.1 million in the competition till today. The NWSP is organizedby the NWSP Working Committee (comprising Senoko’s employees) with the guidance of the NWSP AdvisoryCommittee (made up of individuals from various private and public sector organizations). In the 2009competition, the committee identified 14 winning entries, out of the 235 projects submitted by 152 schools.The overall winners were awarded cash prize and sponsored trips to Germany to present their projects. Withtime NWSP has expanded its scope and is fast becoming an ideal platform for raising awareness of the threatsposed by climate change. The list of official NWSP partners comprising government ministries, statutoryboards, commercial entities, grassroots bodies, NPOs, academic institutions and individuals is growing everyday. Even foreign multinational organizations such as Siemens, are getting interested in the competition bybecoming co-sponsors.Adoption Of Sungei SembawangSenoko officially adopted the 2.5 km long Sungei Sembawang waterway in June 2008 located at the northernSingapore shore, shared with the residents of Sembawang and Woodlands. Senoko collaborated with PUB,the Waterway Watch Society and surrounding schools in collecting litter from park connectors and link-ways,090RIDING THE MEGATREND OF SUSTAINABILITYSINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK
    • under this initiative. A brochure detailing the history, the surrounding bio-diversity, and the areas of attractionalong the map of Sungei Sembawang waterway was commissioned in the process. Students were encouragedto take ownership in the upkeep of the waterway by spreading the message in the brochure to the nearbyresidents and companies.Water quality testing of Sungei Sembawang waterway is conducted on regular basis by Senoko Monthlyvoluntary riverside cleanups at Sungei Sembawang are also organized in which Senoko employees andstudents participate to remove litter from the waterway and its surrounding areas. This scheme was expandedin February 2009 to include part of the Kallang River along the Building and Construction Authority (BCA) withBCA’s collaboration.Corporate & School Partnership Programme (CASP)Senoko adopted 16 schools, mainly located in Woodlands, Sembawang and Yishun under this NEA programme.Training opportunities are provided to the teachers and the students and Senoko also visits these schoolson a regular basis to understand the needs for technical expertise and sponsorship. Every year in November,these adopted schools are encouraged to showcase their environmental projects to the public and otherschools. Senoko sponsorships include technical consultations, on-site assistance, booth space rents and thecost incurred in project showcases. Senoko has been the recipient of the CASP sustainability award for 2005,2006, 2007, 2008, 2009 and 2010 by adopting the maximum number of schools under this NEA programme.Teacher Work Attachment Programme:This is a MOE programme under which teachers and students are attached to Senoko to learn how Senokooperates in an environmentally responsible manner while maintaining profitability at the same time. Senoko isone of the limited lists of organisations that accept teachers and students (going down to primary & secondaryschools) on work attachments. The primary and younger secondary student leaders have shown interestin developing trials on fuel combustion, water processing and environmental monitoring using techniquesof science and mathematics. The older secondary students and polytechnic/university interns undertake thediagnostic investigation of ambient air, indoor air and sewer water quality as well as establish topography ofair & water quality levels from the sources of emission & trade effluent discharge.Teachers are mainly interested in learning how technical knowledge (chemistry, physics, mean square errorsand thermodynamics) is applied in real life environment. They also study how business in private organisationsis conducted and how regulations are monitored and complied with. To date, more than 15 groups of teachersand students have spent time ranging from a few days to four months with Senoko to appreciate the wholeprocess of trade effluent analysis and management.WHAT’S NEXT?Senoko has so far played a leading role in innovation and sustainability. It was the first company to start fueldiversification, the first to build CCGT and thereby answer environmental concerns by repowering existing oilfired turbines to gas fired ones. Even Senoko’s shareholding power companies have international reputationfor environmental concerns. Other power companies in Singapore are following Senoko’s model of upgradingold power plants to modern plants. By doing so, gencos will be able to minimize environmental impactwhile fulfilling society’s need for energy, a very essential commodity. With strong corporate ethics to strive forsustainable development, Senoko has set examples for others.Senoko faces some unique strategic challenges. First, it is a single product company. Second, it is situated atnorth. With the development of the petrochemical and chemical industry cluster on newly reclaimed JurongIsland, the other power generating companies enjoy the advantage of selling steam and thus acting ascogeneration plant. Senoko is unable to do that as there is no substantial customer base for steam aroundits power station. Third, the government has not taken any strong measures like implementing carbon tax onelectricity production. This allowed others to enjoy a short term competitive advantage for profit maximizationand increasing retail market share by producing electricity using cheap oil. 091 RIDING THE MEGATREND OF SUSTAINABILITY SINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK
    • Senoko is positioned as a well managed environmentally friendly company with a strong culture for safetyand ethics. Senoko’s culture, leadership and staff are real assets that will give Senoko long term sustainability.Although Senoko has taken a leading role in implementing key initiatives for sustainability, it has yet to takea leading role in communicating its achievement to the public in the form of sustainability reporting. Senokohas to immediately focus on annual sustainability reporting which the competitor has already started. Overthe long run, Senoko has to build up its corporate image as an environmentally friendly power generator withlowest CO2 emission intensity in Singapore.References:1 Accessed on 28-Apr-112 Accessed on 27-Apr-113 United Nations 1987: “Report of the World Commission on Environment and Development.” General Assembly Resolution 42/187, 11 December 1987. Retrieved: 2007-04-124 Expert Interview (Unless otherwise stated, each of the expert interviews have been conducted internally with members from the company Senoko Energy Pte Ltd)5 Accessed on 26-Apr-116 2010 Census of Singapore7 “Earth Hour Facebook group”: Accessed on 26-Apr-118 Accessed on 27-Apr-119 Accessed on 27-Apr-1110 Expert Interview11 PA Consulting Group Report: Review of Parameters for Setting Vesting Contract Price 2011 – 12, Published at the following URL: http://www.’s%20Final%20Report%20_VC%20Parameters%202011- 2012.pdf12 Expert Interview13 Accessed accessed on April 27, 201114 Videos of International Energy Week 2008 in Singapore accessed at on 26-Apr-1115 Accessed on 27-Apr-1116 Accessed on 27-Apr-1117 Expert Interview18 Based on currency conversion rate on 28-Apr-11 by Press Release by SP Services Accessed on 28-Apr-1121 Accessed,59153/EMC_NEMS_2010-28_March_version_with_links.pdf on 28-Apr-1122 Statistics for Qtr 1 to 4 in 201023 Accessed Dec%2010_%20with_churn_rate.pdf on 28-Apr-1124 Accessed,59153/EMC_NEMS_2010-28_March_version_with_links.pdf on 28-Apr-1125 Expert interview (Data updated as per year 2004 car statistics)26 Accessed on 12-May -201127 Accessed on 14-May-1128 Accessed on 14-May-11, Average water consumption per person 154 litres/day092RIDING THE MEGATREND OF SUSTAINABILITYSINGAPORE SUSTAINABILITY AWARDS COMMEMORATIVE BOOK