Kevin L, Author at Kevin Low

Hydrogen ecosystem

Industries in an economy do not stand alone. This was an idea long appreciated by the Singapore government and that was how they continually managed one of the most successful continuous investment attraction programme. Of course it was dynamic and evolved with times and development of technology. The Economic Development Board of Singapore was relentless, and they did a great deal of work mapping industries and value chains, understanding how they connected with each other, working out how they work, and collecting feedback non-stop from their consistent interaction with the industry.

With the energy transition, a lot of government wants to attract and drive more renewable energy investments in their countries. Southeast Asian governments look with interest as Vietnam ran one of the more “intense” feed-in-tariff programme that propelled them into the top solar power generation market in the region. Taiwan had a successful programme as well, and led some of the North Asia Pacific economies in driving development of their offshore wind sector.

Yet we are probably hitting diminishing marginal returns with such policies thinking that the market can do wonders. For one, solar panels are almost pure capital goods, the cashflow profiles are very predictable and easy to model – especially when you have a long term power purchasing agreement. Capital investors can understand such projects more easily and willing to put funds into projects directly. Newer technologies and the next frontiers of the energy transition won’t be so simple.

Battery storage systems and green hydrogen production will require more policy tweaks and efforts from the governments. Battery energy storage systems do not have very established business models around them. Users can use them for energy arbitrage – that is, to buy electricity from the market when prices are low and sell them when it’s high; or to provide ancillary services to the market such as various reserves or supporting frequency and voltage regulation. Or the users benefit from reliability guarantees coming from the batteries. Green hydrogen on the other hand, has so many different applications and potential offtaker but is difficult to transport and store.

These means that the new technologies require a lot more new infrastructure investments or definition of regulations and policies to stabilise their markets and be de-risked enough for investors to come into the community and start their businesses.

Small market II

Exploring transitions of market sizes is something I’m keen to examine a bit more. The richness of capitalist market economy comes not so much from the price competition but competition along other dimensions. That actually is not that amenable to economic analysis despite all the support that traditional economic analysis had given weight to the beauty of the market economy and its efficiencies.

The innovations of the market economy actually requires dynamism rather than static equilibrium. And over the course of the so-called dynamic equilibria, there is actually some degree of disequilibria. More of our experiences are with the changing patterns such as prices, proliferation of new products and shifts in market messaging than with having clear repetitive routines.

There is to some extent a predictability around the fact that people will be fed and services will be provided without central coordination but these are just scarffolding of a much richer and vibrant structure.

So small markets becomes larger by growing in the demand base or demand groups, or when they merge into other broader base markets. These shifts reflect that even the basic fundamentals around our traditional analysis of markets should be oriented not necessarily based on demographics, a need or particular behaviours. The boundaries between markets are more fluid than we think. It takes broader thinking to be able to conquer markets from the perspective of business and to analyse them through the changing times.

Transition as an opportunity

I work with businesses daily and when we speak of transiting to the low-carbon economy, moving away from Oil & Gas assets, to new businesses that would accelerate the transition, the conversation could go both ways: (1) Show me the money; (2) There is no other way.

The motivation for green is hard to be sustained by pure profit motive because that tends to be more short term whereas longer term motivation is driven more by fundamentals.

If there isn’t money right now or that money doesn’t come, then those who claim that they are in green for the money won’t be able to stay on. Even if you have conviction that the money would come, it is almost certainly driven by a longer term, fundamental thesis. And this fundamental thesis, tends towards the “there is no other way”.

A balanced, and pragmatic view of this landscape requires us to recognise that the old incentives and structures need to be dismantled to push for the new but at the same time, we need to keep proving that the new works. After all, the oil & gas industry and technology had decades to build up to the scale they have today.

Small market

Singapore is a small market, everyone would say. Yet it imports and exports so much goods and services it would be considered an important market for different businesses. Take bunkering for example; it is the largest single point of sales for the refueling of vessels in the world.

So how do markets grow? What drives them? It depends on who are the customers, and what grows their numbers or their demand in the goods and services of the market. How do supply help to drive demand? Be it through advertising, increasing distribution and availability, etc.

On the other hand, we got to think about how markets shrink as well. How did the market for video or movie rental shrink in face of the growth of streaming? When would an original big market be considered small for the incumbent to start looking elsewhere?

Market for green premium II

Airlines are in the business of transporting people around. Or maybe it’s about curating and creating the best experience in air travel? Or about building a brand? Or is it about bringing people to places and catalysing activities, businesses for locations that would otherwise be overlooked by travellers? Seen that way, the fuel cost of an airline would always be considered a cost. Therefore, to keep cost low, or deliver the greatest profits, the airline will see their fuel as a commodity.

What if the choice of fuel they use starts impacting the customer segments they are targeting or they can serve? What if using sustainable aviation fuel allows them to attract more premium customers? What if they could sell their air tickets at a higher price when they are demonstrably emitting less carbon dioxide? And what if doing so also help them comply with some ICAO requirements?

The market for green premium turns various cost parameters in businesses into a tool for something else. There’s an opportunity to use these new parameters to disrupt the business. Years ago, the low-cost carrier disrupted some of the most traditional airline businesses. Would a low-carbon carrier do the same? What other elements of the whole airline business can be refashioned to fit the whole sustainable, low-carbon identity?

Market for green premium

The energy transition and decentralisation of energy had quietly started shifting the capital markets since close to a decade ago. While the traditional energy players continue to compare the cost of green energy against the cost of their own fossil fuel based energy, they found no reason to diversify their business. Even in face of some subsidy, or some Feed-in-Tariffs, they were reluctant to invest.

There was no scale, and they thought they were going to face more competition and erosion of any green premiums they could secure. But then the capital holders started taking notice. The projects were simple enough to invest into. Solar farms had minimal requirements from an operational perspective, and represented to some degree a pure capital good where almost all the cost are paid upfront for a stream of revenue in long term.

From a risk perspective, it was safe. And so long-term funds which needed safe investments at moderate yields started piling in. The utility scale projects expanded, driving down the cost of equipment, and fostered more innovation there. Here is a case where, the technical simplicity of the operations enabled investors to bypass the typical operating businesses to get into the underlying projects themselves. All of a sudden, it is not about looking for the premium anymore. Because you’re alright with scale.

Sometimes, growing and developing a market is about finding customers who are willing to pay a higher price; but other times, it is about finding investors who are willing to accept a lower expected return for other attributes.

Projection vectors

I had a very interesting conversation with my colleague about projections of reality. When you take a picture of a scene, what you are doing, is to capture and preserve the light that is reflected off the three-dimensional scene and projected on a flat two-dimensional surface such as a film, or a sensor chip. Using mirrors, lenses, and all the other photonic gizmos, we are able to shrink the pictures, create effects on the projection, or to just make edits after the projection has been made.

What happened however, was that a three-dimensional reality is captured somehow in a two-dimensional world. The picture, is a projection of reality at some point of time. That is what we were referring to as projections.

We were speaking more about how we perceive the world as projections – cast not on a surface but in our minds. Each and everyone of us experiences the world differently but the richness of the world is not fully captured by the experience we have because we are limited in our ability to perceive. It is as though our ability to perceive each represents a dimension. Not just the five senses of sights, sounds, smell, taste and touch but there are psychological lenses, cultural lenses by which we perceive and experience the world, and recognise patterns formed from combinations of those senses, and our logical or irrational interpretation of reality, or even events, how they had been sequenced, how they line up in the dimension of time.

If the richness of reality contains N-dimensions, then our ability to perceive is often limited to (N-x) dimensions, where x is an unknown non-negative number and potentially really large. We don’t get to really experience reality, only what can be captured by that (N-x)-dimensional hyperplane that will never truly encapsulate the contents of the N-dimensional hyperspace that the reality consist of.

I hope to be able to explain this better some day – but for now, this hopefully suffice to help encourage me to develop further my capabilities to grow my hyperplane of perception.

Manufactured feel

When we travel, we visit places of interests, stay in hotels or some kind of accommodation with “curated experiences” and follow guides to eat the popular foods in a place. Is this sort of traveling about experiencing the local life or about manufacturing the feeling or a “foreign experience”?

It’s probably both.

When does an experience feel manufactured? And is that a bad thing? After all, we manufacture things because they are not readily available in nature. We might be the only specie that tries to manufacture feelings or experiences or put ourselves through something radically different than our “everyday life”. Monkeys don’t go on exchange programmes with a different tribe; Donkeys don’t try to live the day in the life of a camel.

So what do we really gain? Why do we dread the everyday? What is wrong with routine life?

Learning from mistakes I

The tricky part about trying to learn from mistakes is to overly focus on the mistakes rather than the lessons that are being taught by the mistakes. The lessons are often things you discover upon making the mistake; they represent new knowledge or information that you previously weren’t aware of. Yet we rarely dwell on those; because we’ve been told that finding those ‘reasons’ are actually just finding ‘excuses’.

A few good questions to tease out the lessons to learn would be:

What is something I did not know that I now know, having made the mistake?
What new relationship between variables did I discover upon making the mistake?
What are some patterns that should raise red flags for me in future?
What are false red flags created by this mistake that may cause me to be overly worried or cautions about actions in future? How do I tell?

Moving past blame and finding fault after discovering a mistake is not easy, but it starts with a mindset that is focused on learning, and moving forward. To release oneself from the emotional downward spirals, diving deeper into some of these questions is useful.

Healthy competition and values

I was put in a system where we were regularly assessed relative to our cohort, made to feel anxious about our position amongst our peers, and put in an artificial environment where we were taught to improve through ‘healthy competition’.

The society’s definition of healthy competition does get out of hand. Guardian recently ran a piece commenting on the number of ‘Forbes 30 Under 30’ featured people who landed in jail or at least trouble with the law.

It’s not just that competition gets out of hand but a question of what kind of values we are sending young people into the society with. Beyond the glamorization of the ideas around hustling and ‘faking it till you make it‘, there is clearly a lack of clear direction on the moral boundaries that should govern the claims made by companies to get ahead in terms of creating investor interest, or customer demand. Is it not time we draw a line, and re-align definition of success with actual activities that will move society and the world forward?