SINGAPORE will eventually seek financing to upgrade and expand its current energy grid infrastructure so that it can receive low-carbon electricity imports from its neighbours, said Energy Market Authority (EMA) chief executive Puah Kok Keong.
This would mark the next phase in the Republic’s clean energy import plans, which is one of its main strategies to decarbonise its power sector.
EMA has in recent years been inking clean energy import agreements with countries around the region to build up its supply.
Over the next few years, EMA will work with SP Group – the owner and operator of Singapore’s power grid – to determine the details on the expansions and enhancements required for the grid to receive these imports.
In his first interview with selected media after taking on the chief executive role in July this year, Puah said SP Group will “work out the plans, and therefore the amount of investments” needed to renew and maintain Singapore’s energy grid.
“These are the cost estimates that, once agreed upon between EMA and SP Group… will eventually translate into the grid charges that all of us as consumers will have to bear.”
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SP Group, a private company wholly owned by state investor Temasek, will be in charge of constructing the required upgrades, and will raise funds by either issuing bonds or borrowing directly from financial institutions.
The multi-year project involves locating a launch site in one of the countries with which EMA has inked clean energy import agreements, establishing a route for the supply cables, and locating a landing site for these cables in Singapore.
EMA and SP Group will work out the types of equipment needed in Singapore to receive the green electrons, as well as the power grid transmission lines and substation connections required to distribute them around the city-state.
Actual economic cost
Renewable energy-starved Singapore has set a target for its power sector to be net-zero by 2050, with four strategies for reaching that goal: the import of low-carbon electricity through the establishment of a regional power grid; continued reliance on natural gas; increased deployment of domestic solar power; and the development of other low-carbon alternatives, such as hydrogen.
Of these, low-carbon electricity imports currently present the most technically and commercially viable option until at least 2035. Singapore recently raised its import target to 6 gigawatts (GW) by that year, from 4 GW.
So far, the Republic has agreed to import up to 5.6 GW of low-carbon electricity from its neighbours. The plans include an operational project that carries green electrons generated from hydropower in Laos – with a route through Thailand and Malaysia – as well as conditional licences for projects in Indonesia, Cambodia and Vietnam.
Puah said that it is still too early to tell how much funding is needed to expand and upgrade Singapore’s grid for it to be import-ready. Hence, it cannot be determined if these development works will result in higher electricity tariffs in the future.
However, the costs incurred to maintain and upgrade the power grid will eventually be recovered from consumers of electricity through the grid charges that are regulated by EMA.
Singapore does not subsidise electricity, believing that these natural resources – including water – should be priced according to their actual economic cost.
This does not mean that electricity tariffs in Singapore will inevitably increase, as fuel and power generation expenses are also part of the overall cost structure, in addition to the grid charges.
Prices of natural gas have stabilised after a volatile period following the outbreak of the Russia-Ukraine war, while the costs of solar power generation have come down. But there is no way to tell how the prices of other low-carbon imports will trend, said Puah.
Nonetheless, if tariffs eventually do increase, EMA said that the government will continue to provide support to vulnerable households to help them cope.
Enlarging the pie
When asked how Singapore navigates potential hiccups in cross-border electricity trading deals – given reports that the multilateral deal involving Laos was allegedly stuck – Puah said he hopes for more of the Republic’s partners to see the benefits of working together and having a long-term goal for regional access to sufficient supplies of low-carbon energy.
“In the short term, if the pie is limited, if the supply of renewable energy is limited, then more for you means less for me. But actually, the renewable-energy potential in this region of the world is very large,” he said.
“If you see the long-term goals and we allow for more investments to come in, then the pie will be larger.”
Besides earning revenue from exporting clean energy, export markets can also unlock their renewable-energy potential through such cross-border projects, as they enable them to supply clean energy to their own domestic consumers.
For example, in Indonesia, there is currently no strong economic case for private developers of solar farms due to the low cost of coal-generated power. While the Indonesian projects for which EMA has granted a conditional licence are purely for export purposes, these developers could one day expand their capacity for domestic supply, said Puah.
He added that these projects can also help to kick-start ancillary industries in Singapore’s neighbouring countries.
In the case of a solar farm, there would be demand generated in clean energy export markets for solar panels and battery storage systems.
“So we do think by doing that, not only Singapore benefits (from) having a source of green electricity,” he said.
“The countries that are hosting these projects will also seek investments in renewable energy… seek investments in manufacturing of the equipment – in solar and battery, for example, in their countries.
“And all these will also need interconnections, cables, and so on. So if there’s sufficient demand for cables in this part of the world, even subsea cables, then there could also be a possibility of attracting investments to set up cable manufacturing plants in this part of the world.”
But this all boils down to developing an Asean power grid. Without it, the green electrons produced cannot be transmitted and sold.
“In order to attract investments to develop renewable energy resources in this region, you will need to find a way to conduct supply and demand, and the way to do it is to strengthen and build this regional Asean power grid,” said Puah. “So we think… countries in this region (can) get win-win outcomes from investing in strengthening interconnectivity.”
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