Singapore’s hydrogen strategy must go further
SINGAPORE is committed to achieving net-zero greenhouse gas emissions by 2050, and hydrogen is a key plank of the country’s clean energy transition plans. The National Hydrogen Strategy (NHS) has set a 2050 Hydrogen Goal to have the gas account for at least half of Singapore’s entire fuel mix by mid-century.
The combustion of hydrogen is entirely emission-free; the only byproduct is water. However, hydrogen is not a fully developed decarbonisation pathway yet. Technology relating to the production, distribution, storage and end-use of hydrogen is full of potential but still relatively nascent. Also, Singapore is largely restricted to being a net importer of hydrogen. As a result, Singapore could be adversely affected by any volatility in the production of hydrogen overseas and international cooperation in the trade of hydrogen.
Does the NHS stand up to these potential headwinds? In our view, the NHS is a commendable start but more needs to be done if Singapore is to achieve its 2050 goal.
A step in the right direction
The hydrogen goal is Singapore’s “holy grail” and is essential to Singapore achieving net-zero greenhouse gas emissions by 2050. In order to succeed, the NHS broadly targets the adoption of hydrogen across the power generation, industry, maritime, aviation and land transport sectors. Together, these sectors account for 97.9 per cent of Singapore’s current greenhouse gas emissions.
Taking a pragmatic view of Singapore’s unique circumstances, the necessity of international cooperation to facilitate the global trade of hydrogen and the present state of technological developments, the NHS provides a firm foothold for Singapore to pursue the 2050 goal.
Due to land area constraints, high urban density and limited potential for producing renewable energy locally, it is not presently feasible for Singapore to produce hydrogen locally. As a net importer, Singapore will be dependent on international hydrogen supply chains and the production of hydrogen overseas. However, there are presently no international standards or universal methodologies for determining the greenhouse gas emissions of hydrogen production.
A NEWSLETTER FOR YOU
Friday, 12.30 pm
ESG Insights
An exclusive weekly report on the latest environmental, social and governance issues.
Various countries have adopted differing regulations for hydrogen, which could potentially skew producers towards cheaper, more carbon-intensive hydrogen production methods for low-cost export to regions with lenient or no regulations. This would leave little supply for countries with more stringent regulations. International cooperation is therefore necessary to harmonise global hydrogen regulations and facilitate international trade in hydrogen. It remains to be seen if Singapore, which regularly punches above its weight in international affairs, can advance the development of globally harmonised regulations to measure the greenhouse gas emissions of hydrogen production.
The NHS plays to Singapore’s strengths and focuses on international cooperation and research and development (R&D). For instance, the Low-Carbon Energy Research (LCER) Funding Initiative is the primary weapon in Singapore’s R&D arsenal. As part of the first phase of the LCER, Singapore has awarded S$55 million to projects in areas such as the development of catalysts for ammonia cracking and methane pyrolysis. An additional S$129 million has been earmarked for the second phase of the LCER.
The NHS does not go far enough
However, the NHS, which is Singapore’s only hydrogen strategy to date, does not provide a detailed plan to achieve Singapore’s 2050 Hydrogen Goal. To encourage investment, it needs to include, at the very least, concrete targets, demand-creation and investment risk mitigation policies to unlock hydrogen adoption, and consolidation of local regulatory frameworks.
Concrete targets are essential for clarifying priorities and measuring progress. However, the NHS has no clear targets for the import, storage, distribution and utilisation of hydrogen. Whilst this could be due to the incremental approach of Singapore’s hydrogen strategy, other countries such as South Korea also face similar challenges – including the high cost of investment in hydrogen infrastructure and uncertainties surrounding the technological and supply chain development of hydrogen – but have been able to set concrete hydrogen import targets. There is no reason why the NHS cannot do so as well.
Demand-creation policies to unlock hydrogen adoption across the power generation, industry and transport sectors are necessary given that only 0.04 per cent of global hydrogen demand (around 40 kilotonnes) is presently for applications across these sectors. Investment risk mitigation policies are equally necessary given that only 4 per cent of hydrogen production projects announced worldwide have reached a final investment decision due to the associated technological and economical risks.
The NHS lacks both demand-creation and investment risk mitigation policies. Demand-creation policies can help project developers secure off-takers, which in turn unlocks investment in production assets, scales up production, reduces costs and sparks innovation. Investment risk mitigation policies can help boost production capacity, infrastructure development and equipment manufacturing capacity to pave the way for future projects until hydrogen supply chains can transition from relying on public to private capital.
Demand-creation policies could take the form of quotas for the use of low-carbon hydrogen, such as in India and several European Union member states; low-carbon fuel standards or renewable transport obligations, such as those which are already in place in Canada, the United Kingdom and California; and purchase subsidies or tax benefits, such as those in place in France and Denmark. An example of an investment risk mitigation policy is a contract for difference, such as the H2Global Initiative in Germany, which compensates the difference between supply prices and demand prices with funding from the government.
Singapore has no hydrogen-specific legislation in place at this time and the NHS does not set out any plans for the adoption of a consolidated legislative framework for hydrogen in Singapore. As a result, the licensing, import, storage, sale and transportation of hydrogen remain governed by a patchwork of legislative frameworks such as the Fire Safety (Petroleum and Flammable Materials) Regulations 2020, the Workplace Safety and Health Act 2006, the Workplace Safety and Health (Major Hazard Installations) Regulations 2017, the Fire Safety Act, the Fire Safety (Building and Pipeline Fire Safety) Regulations, the Maritime and Port Authority of Singapore Act and the Maritime and Port Authority of Singapore (Dangerous Goods, Petroleum and Explosives) Regulations 2005. Such a situation could lead to diminished business interest and investment because of the perceived complications stemming from a set of overlapping legal frameworks, each subject to the overarching authority of a separate regulatory body.
The next steps
As Lao Tzu, the famous Chinese philosopher, once said: “The journey of a thousand miles begins with a single step”.
Singapore’s hydrogen journey has only just begun. The NHS is a step in the right direction, with its focus on international cooperation and R&D. However, if meaningful progress is to be made towards Singapore’s 2050 Hydrogen Goal, further steps have to be taken.
That being said, Singapore is not alone on its hydrogen journey. Given its likely position as a net importer of hydrogen, it is crucial that Singapore continues to work in tandem with like-minded international and industry partners, such as the Asia Zero Emission Community, to develop global hydrogen supply chains and facilitate global trade in hydrogen while concurrently taking steps to bolster the domestic hydrogen economy.
The writer is a partner at Reed Smith LLP
Copyright SPH Media. All rights reserved.
