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Regulatory sandbox for smart energy innovations in Singapore has parallels with UK scheme, says expert

Out-Law News | 25 Oct 2017 | 3:40 pm | 2 min. read

Businesses that develop innovative uses for smart technologies in the energy market will be able to test those ideas in a light-touch regulatory environment in Singapore, under plans outlined by the country's Energy Market Authority (EMA).

The EMA's proposed regulatory sandbox will enable businesses to "test new products and services in the electricity and gas sectors", it said.

The EMA said the use of new technologies or application of existing technology in "novel ways" can "create value for electricity and gas consumers, or … improve business and operational procedures", but that there can be uncertainty as to how the new ideas "fit the existing regulatory paradigm which was designed around a traditional power system".

"If innovators are unclear whether an idea complies with regulatory requirements or is worth incurring the cost of regulation due to uncertainty in the market viability of their product or service, they may err on the side of caution by choosing not to proceed. This could inadvertently stifle promising innovations," the EMA said.

"EMA is encouraging more experimentation by enabling such ideas to be tested through a regulatory sandbox. Innovators may submit their ideas to EMA’s regulatory sandboxing for testing. A successful application would allow the idea to be applied in the market, while being subject to relaxed regulatory requirements. At the same time, safeguards (such as limiting the duration of the trial or the maximum number of consumers) can be introduced to minimise risks to consumers and industry," it said.

Technology law expert Bryan Tan of Pinsent Masons MPillay, the Singapore joint venture partner of Pinsent Masons, the law firm behind Out-Law.com, said that smart energy is seen by the Singapore government as "a key pillar for sustainable development in its smart nation initiative".

"Singapore is keen to test-bed various ideas for smart energy given some of its unique characteristics, namely a lot of sun and a large surrounding sea mass," Tan said. "The Singapore energy market should see a diversification away from fossil fuel and gas powered energy and towards these other technologies. More importantly, the opportunity to then export these technologies represents a growth potential beyond the local domestic market."

The regulatory sandbox proposed in Singapore is similar to an existing scheme operated in the UK by energy regulator Ofgem, said smart energy expert Nick Shenken of Pinsent Masons.

"Ofgem operates a similar sandbox approach," Shenken said. "The second 'window' for expressions of interest in the UK sandbox closes on 27 October with the first window, which closed earlier this year, seeing a number of innovators supported. Four of those businesses are in final negotiations for the grant of a regulatory sandbox for their products. Interestingly, two of those final four are trialling products which would enable local peer-to-peer energy trading, something in which we are seeing increasing interest in the market."

"All of this also coincides with the announcement this week of a new pan-industry alliance formed between the UK’s leading energy organisations. The alliance aims to increase customer collaboration when it comes to energy policy in terms of new technology and available services and to 'give households, business and community’s greater control over the way that they use and consume their energy’," Shenken said.

A recent industry survey, carried out for Pinsent Masons, revealed that Germany is the number one market in the world for investing in smart energy.