Singapore is on a timer to decarbonise power sector

ENERGY flows where attention goes - sums up Singapore's efforts to green its power sector as it shifts away from fossil fuels to other more sustainable forms of renewable energy on the long road to zero carbon.

The city state's power sector accounts for 40 per cent of total carbon emissions, and hence plays a significant role in the nation's climate change efforts. This is true globally too, with energy and transport being the largest culprits of greenhouse gas emissions.

Singapore's clean energy push has its own unique constraints. Foremost among them is that the city state, a net energy importer, is pressed for land and resources. Its hands are therefore tied in terms of indigenously growing renewable sources.

For that reason too, Singapore looks to play a different role in the region's energy sector and the green transition, said Paul Carthy, Accenture South-east Asia's managing director and resources lead.

Singapore is the only Asean country to implement a carbon tax so far, he says. It is also taking a leading approach in exploring future renewable energy supply chains; leveraging rooftop and reservoir space for solar panels; and sussing out low-carbon solutions such as hydrogen and carbon capture technologies.

The city state is also set to raise its green game with the launch of a global exchange and marketplace for high-quality carbon credits by the end of the year to incentivise emissions cuts.

One major move, deemed a game changer for the city state's decarbonisation goals, is clean energy imports from the region, which have gained momentum lately. Singapore has announced plans to trial the import of low-carbon or clean electricity from Malaysia, Indonesia and Laos. The country plans to import 30 per cent of energy from low-carbon sources by 2035.

"Singapore's move to import green power from its neighbours is one that is born out of necessity but is also likely to have the effect of encouraging renewables planting in these neighbours (both to export to Singapore as well as for domestic use)," according to Carthy.

This is because companies that produce and export renewable energy are likely to acquire experience and capabilities in this area that may encourage them to plant renewables for domestic consumption, he said.

Clean energy imports are also an economic imperative for Singapore. The importing of energy is also a "strategic move to remain attractive to the increasing number of companies that are looking for markets where they can source green electricity to invest and create jobs," said Gilles Pascual, EY Asean power & utilities leader.

Large scale imports, however, are still some way off.

"Singapore may import natural gas from overseas, but there is a network of domestic infrastructure in place that ensures our energy security - the electricity production facilities are predominantly domestic, multiple sources of supply from pipes and LNG exist, and there is emergency storage in place," said Dale Hardcastle, partner and co-director of Bain & Company's global sustainability innovation centre.

The equivalent infrastructure is not yet available to do this at scale for renewables.

"Our cross-border transmission lines are still being built, energy storage solutions are being developed, and Singapore's domestic renewables capability is too small and intermittent to supply our electricity demand when needed," he said.

"Without the infrastructure to address energy security concerns, importing renewable energy is likely to be an electricity source at the margin for the foreseeable future."

One step at a time

The clean energy transition began two decades ago, when Singapore decided to progressively switch from fuel oil to natural gas - the cleanest fossil fuel for power generation - with its first cross-border import of piped natural gas from Indonesia.

By 2010, natural gas accounted for 77 per cent of the city's energy fuel mix; last year, it had grown to 96 per cent. Meanwhile, petroleum products as a fuel source shrank from 20.2 per cent to 0.2 per cent over the period.

Cementing this shift further, a liquefied natural gas (LNG) terminal was opened in 2013 - with sufficient capacity to supply the country's total natural gas demand. Singapore imports natural gas from more than 10 countries and is expected to rely significantly on natural gas over the next 2 decades for power, even as it ramps up renewable energy capacity.

Solar power is the most viable source of renewable energy for Singapore and is the centrepiece of its push towards a low-carbon future. It is one of "four switches" in Singapore's energy roadmap. The others are natural gas; regional power grids; and low-carbon alternatives such as hydrogen and carbon capture, utilisation and storage, which are now being studied for commercial viability.

Singapore is now one of the most solar-dense cities in the world, having multiplied its solar capacity more than seven times since 2015. It has set its sights to quadruple its solar capacity to 1.5 gigawatt-peak (GWp) by 2025 and achieve at least 2 GWp by 2030 - a target that is enough to power some 350,000 households. This target will take its clean energy contribution to the country's total electricity demand to 4 per cent, up from the current 1 per cent.

But Bain's Hardcastle noted that even if Singapore achieves its aim of 2 GWp of solar energy by 2030, solar would represent less than 3 per cent of the country's 2030 electricity needs.

"To achieve its emissions target, Singapore will have to significantly shift its energy mix towards low/no-carbon sources and rely on more than domestic renewable energy production. Accessing larger quantities of green power, whether through importation or otherwise, is going to be important as it moves on the pathway to net zero," he said.

Singapore will have to address the issue of managing the intermittency of renewables power generation. Fortunately, the technologies to manage such issues, such as batteries and smart grids, are fast becoming mainstream and cost effective, said Carthy of Accenture.

"With local regulators and national utility players well on their way to pre-empt such issues and looking into incorporating such technologies into the grid, we believe Singapore will continue to be at the forefront of developing a green energy sector," he added.

All in this together

KPMG's Singapore-based head of infrastructure advisory Sharad Somani expects commercial & industrial (C&I) platform players to also fire up the green trail. He pointed out that in recent years a "multitude of regional solar C&I platforms have been set up in Singapore, driving the regional green growth story".

"What will emerge as an effective complement to utility scale renewable projects are private sector B2B solutions led by C&I platform players offering direct corporate power purchase agreements (PPAs)," he said.

These "behind the meter" solutions are playing an important role in not only helping to meet the renewable energy procurement targets of RE100 companies, but also creating an end-to-end ecosystem that makes the renewable industry both vibrant and cost-competitive.

RE100 is a collective of businesses committed to eventually sourcing 100 per cent of their electricity requirements from renewables.

C&I platforms have the potential to meet between a quarter and a third of total renewable energy requirements of countries in the region. Such platforms benefit from speed of execution, bankability of power purchase agreements (given strong counter-parties), immediate strong demand from RE100 and technology companies, as well as the ability to offer attractive tariffs, Somani added.

Green goals

The emergence of green funds and sustainable finance options have spurred further activity in the renewables space. These are essential elements for well-structured platforms and projects to access sufficient capital.

"A number of energy-focused funds and institutional capital have started to look at these opportunities earnestly. While the size of these transactions is still not yet at a level expected by larger institutional capital, an approach to aggregate and consolidate platforms would position it as an attractive asset class in the short- to medium-term," said Somani.

Singapore must, and is, looking at bridging the green finance gap for small- and medium-sized enterprises (SMEs), added Accenture's Carthy.

"Accounting for a significant proportion of the local economy, SMEs need to be part of the equation to achieve (national) carbon targets and a greening of the energy space. There is a need to level the playing field to make it more attractive economically for SMEs to tap new opportunities and make the transition towards generating less carbon, using less water, and leveraging renewable energy," Carthy said.

Helping to facilitate this change, UOB launched U-Solar - Asia's first integrated financing platform for solar power - two years ago. Under the programme, UOB works with 15 solar partners and hopes to incentivise the adoption of solar power by businesses and home-owners through flexible financing solutions.

U-Solar is available in Singapore, Malaysia, Indonesia and Thailand; and is supported by the UOB Smart City Sustainable Finance Framework - the first dedicated financing framework by a bank in Asia that supports sustainability-related projects.

U-Solar's solutions include providing cash management and green financing to solar project developers, as well as end-to-end contract-based financing solutions to engineering, procurement, construction and commissioning contractors. From the time of its launch two years ago up to end-August 2021, U-Solar has reduced more than 113,000 tonnes of CO2-equivalent greenhouse gas emissions - equivalent to nearly 25,000 cars taken off the road for a year or close to 2 million new tree seedlings growing over 10 years.

Karunia Tjuradi, head of UOB's sector solutions group, sees the role of the bank as one that simplifies sustainability for customers, "acting as an enabler to support their sustainability-related targets and aspirations".

• This is the eighth in a 20-part Green Business series, in collaboration with UOB, exploring sustainability trends across businesses and industries.