1.0 source of energy for our daily consumption and

1.0 Introduction

 

1.1 Introduction to Solar Energy

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Renewable energy is energy that is retrieved from
renewable resources. They are naturally replenished, such as sunlight, wind,
rain, tides, waves and geothermal heat. It usually provides energy for
electricity generation, air and water heating or cooling and transportation.

Singapore
is a small, resource-constrained country and thus imports almost all of its
energy needs. To curb this issue, Singapore is looking into deriving energy
from limited renewable energy options. However, it is difficult to do so, as we
are hampered by many environmental and nature factors.

Commercial
wind turbines operate at wind speeds of 4.5m/s, but the average wind speed in
Singapore is only about 2m/s. Hence, it crosses out one of the already little
number of alternatives we have. Hydroelectric power cannot be harnessed as
Singapore does not have a river system consisting of fast flowing water
throughout the year. Singapore also does not have geothermal energy sources,
and the nation’s sea space are mostly used for ports, anchorage and shipping, thus
limiting the application of ocean energy technologies. (Singapore’s Approach to
Alternative Energy, n.d.) As a result, Singapore is currently
directing its resources to develop Solar energy to help serve as a source of
energy for our daily consumption and needs. 

1.2 Spillovers/ Externalities

Spillovers
or Externalities are a cost or benefit that affects neither the buyer nor the
seller, but instead affects people not involved in the market transaction. In
this situation, the buyer would be the government and the seller would be the
companies that sell solar panels. Negative spillovers include the cost of
nature, whereby since there is insufficient land for the placement of solar
panels, the government has thus resorted to building floating solar energy
farms, however, at the loss of natural landscapes. The people that are not
affected, i.e. third parties, are the Singaporeans who are not too happy with
this arrangement, as although floating solar panels would help sustain energy
in the long run, it is disappointing to know that some reservoirs could lose
their scenic beauty, which thus deprives children of learning from, and about
nature.

 

 

1.3 Fallacy of Ignoring Secondary Effects

It
is the mistake of ignoring unintended consequences that happen as a result of
an action. In this case, the action would be the purchase of solar panels, and
the unintended consequences would be space constraints, loss of natural landscapes
and the ineffectiveness of solar panels.

Firstly,
as Singapore’s energy needs are mostly imported from other countries, there is
a need to constantly seek new ways to find alternative sources of energy. In
the introduction, we concluded that the only source of renewable energy
Singapore can adopt is solar energy, due to it being hampered by various
factors. As such, $24 million has been invested in research for the development
of Solar energy. However, what was neglected was the problem of space
constraints. Urban areas are running out of available rooftops on commercial
and residential buildings. Singapore is restricted by its lack of land and
there is thus limited available land for the large-scale deployment of solar
panels.

This
brings us to the second unintended consequence, which is the loss of natural
landscapes due to the lack of space for utility-scale solar farms to be
developed and even existing areas such as the rooftops of HDBs are
insufficient. Floating solar energy farms cause the loss of natural landscapes.

Lastly,
putting the problems about space constraints aside, it may not necessarily be
the most effective method to use solar energy as there are other problems to be
considered. The presence of high cloud cover across Singapore and urban shading
poses challenges such as intermittency and thus renders solar panels
ineffective.

 

2.0 Market

The
top 3 adopters as of September 2015 are Housing & Development Board (HDB)
with more than 10MWp (Mega Watt Peak), Jurong port with 9.5 MWp and Nanyang
Technological University (NTU) with 5.2Mwp.

There
were only 30 solar panel installations when it was introduced. In 2017, 1,898
solar panels were installed. This accounts for more than 1.5% of Singapore’s
total energy needs and is now on the path to produce more of Singapore’s energy
needs.

 

2.1 Market Size

It
is stated in the articles that from April onwards, anyone who has an installed
capacity of up to 10MW of their own energy will no longer need to register as a
market participant to sell excess energy back to the grid. Those with an
installed capacity of more than 1MW will still need to register.

This increases the market size as sellers can easily enter
said market without the need for registration. This maneuver is deemed to be
effective as it previously took 50 days to register as a market participant.

As
the main factor of increase in supply is the number of sellers in the market,
the supply curve shifts to the right due to a non-price determinant.

2.2 New Markets

It
is a known fact that Singapore lacks the basic necessities to thrive on its
own, thus relies heavily on other means to receive supplies. Singapore has
explored other means to generate energy, such as focusing on renewable energy.

Singapore
is heavily dependent on imported natural gases from Malaysia and Indonesia for
its electrical needs and is in fact, Singapore’s main source of energy.
Singapore venturing into solar energy, places the nation on the right track as
the other forms of renewable energy are not in Singapore’s reach – Namely: Wind
Energy (Windmills), Hydropower (Waves) and Geothermal Energy.

There
are 2 types of solar panels; Photovoltaic Panels (PV) and Solar thermal
collectors. Singapore mainly uses Photovoltaic Panels which means the nation is
focusing on renewable electrical energy and thus heat energy has not been
explored. (The Two Types of Solar
Energy, Photovoltaic and Thermal, 2015)

 

 

 

2.3 Buyers/Sellers

The
$24 million used for research was to allow better planning of the demand and
supply of electricity in the national grid by the authorities (Hong, 2017). This makes it
easier for the government to control the market equilibrium by adjusting the
demand supply as needed.

This
also helps prevent market disequilibrium and the need to impose price floors
and ceilings, which is a clear sign that the $6.2 million solely spent on
forecasting definitely benefited the nation it is now easier to spot and plan
for market disequilibrium’s and equilibriums. The other $17.8 million is spent
on experimenting and researching to better develop energy storage capabilities
to aid in the long run vision of having Singapore solar powered.

 

3.0 Costs

3.1 Savings

A total of 1,898 solar panel systems were installed in
Singapore last year to be used for daily energy consumption. Excess energy was
generated and it was more than enough to fully power a large number of HDB
blocks every month and even sold by companies to recover costs that is not used
to power common services such as lights and lifts to the high demand of buyers
in the market. It is proven that by utilising solar panels, it reduces the rate
of service and conservancy charges.

This means that the government can cut costs and thus just 2
years ago, annual electricity rates declined by 12.9% and last year, it
decreased by 18%. Due to the alternate source of energy, companies and the
government have reduced spending on electricity. Companies thus do not mind
spending on these systems as it benefits their financial statements after all.

Singapore
ventured into the solar capability journey in 2008. As of 2017, only 944 out of
10,000 Housing Development Board (HDB) blocks have solar panels but aims to install solar
panels on 5,500 blocks by 2020 (Au-Yong, 2017).

3.2 Budget breakdown

Even
though solar panels do make a difference in reducing overall expenditure on
energy, the difference is not significant as of now. Solar panels require
constant maintenance and conditioning to keep it in a good working form. The budget
spent on these could be more effectively used for purposes such as on HDB’s
lift maintenance and cleaning of the blocks, which are a higher priority to
Neighbourhood Group Representation Constituencies. (Au-Yong, 2017)

Taking
the long run into consideration, it is not beneficial to focus on the
construction and implementation of solar panels, considering other important
factors of expenditure. As a matter of fact, only a small 5% of energy can be
harnessed from solar energy, of which, only 1 out of that 5% can be used to
fuel Singapore’s energy consumption.

3.3
Costs for installation

The
average cost for installing solar panels can be anywhere between $10,000 to
over $30,000 depending on the size of the house. With that said, lift
installations and/or maintenance costs over $40,000, excluding electricity,
running and maintenance costs. (Cost and
Pricing of Lifts, n.d.). In view of the Lift Enhancement
Programme which is expected to cost $450 million (Ong, 2016),
the government has already set aside this budget solely on lifts. There is
still the cleaning of blocks, painting of blocks and the overall maintenance of
blocks to factor in.

The
government will obviously tend to control the quantity of solar panels
purchased to ensure it does not affect the economy in the long run. Therefore,
not wanting to invest a lot into the installation of solar panels. (Au-Yong, 2017).

As
a result, even though there is an increase in supply, the demand curve is
likely to remain the same due to the reasons stated above.

 

 

4.0 Market Structure

4.1 Monopolistic Competition

The
market structure of the solar panel industry is monopolistic competition. There
are many sellers offering products and many buyers buy them. The product are
close substitutes as all the different companies are selling the same thing
which is solar panel. And there is imperfect knowledge of the market. 

The
solar panel industry is relatively easy to enter and exit as the market is not
costly to fund and easy to obtain licenses. There are approximately 32
companies selling solar panels in Singapore, the dominating few in Singapore
are Sunseap group, Solargy Pte Ltd, Phoenix Solar Pte Ltd, RCS engineering Pte
Ltd and PV world it is also featured that on the website is SunPro energies. (Top Solar Pv Providers In Singapore, n.d.) Also, there is an
absence of barriers to entry such as patents, copyrights, economies of scale
and brand name loyalty.

 

4.2 Product Differentiation

The
products sold by each of the companies are also different and are not identical
which makes it a monopolistic company as there is product differentiation.
There are four ways to differentiate products from competitors.

The
first being location, where better location would enable more people to know
about the company. For example, one of the leading solar panel company, Solar
Power Singapore-SunPro Energies, is situated at Ayer Rajah Crescent which is
located in Queenstown which is not as isolated as compared to another company
which is less renown such as Sinenergy Pte Ltd which is situated at Tuas Avenue
which is relatively remote and not as convenient for consumers to travel
to. 

The
second way to differentiate products from competitors is by service. Solar
Power Singapore-SunPro Energies provides a 4-step service when you choose to
buy their solar panels.

The
first step is consultation, whereby they will conduct a site visit and then
assess the roof. Second step is engineering, where they will custom make a
solar panel to fit the consumer’s house needs. The third step is to install the
solar panel. The last step is where they will monitor and keep track of the
system to ensure that it is running smoothly (SunProEnergies , n.d.).

Sinenergy
Pte Ltd simply only provides the setup of solar panels and nothing else as
elaborate as the previous company that was mentioned. As such, if the pricing
is relatively similar, there is a higher chance that consumers would turn to
the first company for their business, as the services provided are more in
depth and caters to the different locations where the solar panels may be
installed at. 

The
third way is physical difference, such as size, design and variety. Many
consumers have different necessities and preferences. For example, Sun-Pro energies
does physical differences by analyzing each household needs for solar panel and
they custom make their own solar panel to ensure that each customer have their
own solar panel that meets their needs.

Last but not least, product image, which is the real
or perceived differences in the consumer’s mind through product. It can be done
through methods like promotions, advertisements, social media, etc. Sun-Pro
energies does so by uploading videos on YouTube showcasing their solar panels
to consumers.

 

5.0
Conclusion

In conclusion, after reading the 3 articles we know
that in Singapore the government has been trying to control the market
equilibrium and by providing money for research and trying to implement the use
of solar panel. However, it comes with costs such as negative spillover,
Singapore’s scenic beauty is at risk due to the fact of floating solar panels.

Also, fallacy of ignoring secondary effect, which is
space constraints because of the building of solar panels there are limited
spaces available in Singapore. Also, there is high cost needed when consumer
use solar panels as solar panel are costly due to maintenance fees and
installing. There is also Singapore’s economy to account for as investing too
much into solar panel installation would deem detrimental as there is still the
maintenance of HDB blocks we have to keep in mind for allocating said budget.

The solar panel industry is also a monopolistic
competition as there are many buyers and sellers and the product are close
substitutes.