Singapore eyes breakthrough in landmark regional clean-power deal by October: EMA chief

Business Times

5 days ago

[SINGAPORE] The Republic hopes that talks on how to charge for clean electricity flowing across four South-east Asian nations could be finalised by October, paving the way for it to expand imports under a landmark regional grid deal that could deliver up to 200 megawatts (MW) of renewable power, said a top executive of the city-state's energy authority.
The parties in the four-way agreement involving Laos, Thailand, Malaysia and Singapore are 'looking through what are the transmission charges – or sometimes they call it wheeling charges – the different grid operators will impose', Puah Kok Keong, chief executive of the Energy Market Authority (EMA), told The Business Times in an interview.
Wheeling charges refer to the cost of using power infrastructure to transfer electricity from one point to another.
'We are hoping that by the coming Asean energy ministers' meeting in October, that that should be finalised,' said Puah, who has led EMA since July last year.
The first phase of the Laos-Thailand-Malaysia-Singapore power integration project (LTMS-PIP) was launched in 2022. It involves the export of up to 100 MW of hydropower from Laos to Singapore, via the other two countries.
The second phase doubles the capacity, with additional supply also coming from Malaysia, as announced by EMA last September.
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The LTMS-PIP is one of several efforts to build an Asean power grid – an idea that was conceptualised decades ago but picked up steam only recently.
Puah believes that the development of a regional grid is 'riding on good momentum' – with Malaysia pushing for greater interconnectivity as this year's Asean chair, while Indonesia in June signed an agreement with Singapore on cross-border electricity trade.
Electricity imports are a key strategy for Singapore in its goal to hit net-zero emissions by 2050. While the city-state is also studying alternative energy sources and technologies – such as geothermal power and carbon capture – these will need time to mature, Puah noted.
'Therefore, electricity imports – quite clearly already really feasible, as shown in Europe and many other regions around the world – is something that will be a key strategy for us in the short to medium term to decarbonise,' he said.
Revenue support for imports
Singapore aims to import 6 gigawatts (GW) of low-carbon electricity by 2035, accounting for about a third of its power demand then.
EMA has thus far granted conditional licences to six projects importing clean energy from Indonesia – amounting to a total capacity of 3 GW. Another four projects, with a total capacity of 4.35 GW, have been granted conditional approvals.
One of the biggest challenges for a project is in moving from a conditional approval to a conditional licence. 'This is where, I will say, the rubber really hits the road,' Puah said.
'From the developer point of view, they will really have to finalise their numbers. They will have to call for contracts… so that they can nail down exactly how much it will cost. This is also the time that they will try to nail down their customers in Singapore, talking to various potential offtakers.'
Securing customers is crucial, as project developers face high upfront costs for infrastructure such as hydropower dams and solar farms. Projects located further away also have to procure high-voltage direct current cables, for which demand is surging globally.
Acknowledging these challenges, Puah noted that since the launch of the first request for proposals in 2021, EMA has allowed participants to request 'revenue support' if needed.
This would mean that EMA steps in as an offtaker, giving developers more certainty on their long-term revenue profile and lowering risk and financing costs.
'The project may last 20 to 30 years, and therefore, over this period they (need to) make sufficient returns to justify why shareholders are parting with their money. We understand that,' Puah said.
He declined to disclose whether the import projects thus far have requested such revenue support, citing commercial confidentiality.
He also noted that EMA will consider such support carefully.
'First, we have to think about the national interest. If we are entering into various support (agreements) with the importers… we are doing it on behalf of the overall energy sector. Therefore, we will make sure that we get a decent deal,' he said.
'Resilient' LNG market
While Singapore is pushing for more renewable energy, the city-state is still reliant on liquefied natural gas (LNG) for 95 per cent of its power generation. Puah is sanguine about the stability of Singapore's LNG supply and prices, even amid geopolitical tensions.
In March, China halted its purchase of US LNG as the tariff war escalated. But more recently, Asian economies such as Vietnam have been looking to increase US LNG imports to negotiate with the Trump administration.
Despite the uncertainty over how these developments will play out, Puah believes that the LNG market is 'quite resilient' to disruptions.
'The US today is a major exporter of LNG, but the LNG market is also a global one that is very fluid… If you don't buy from country A, you can buy from country B,' he said, adding that while there could be some impact from disruptions, the market is 'well-honed to manage it'.
Market experts are also anticipating a 'very healthy stream' of investments globally into new LNG capacity, Puah noted, with increases in LNG terminal operations and shipping to meet rising demand for the fuel.
'So we think that the supply of LNG will increase, and that is good for an LNG buyer like Singapore,' he said.
Puah also highlighted that Singapore has introduced safeguards since the 2021 energy crisis, when several electricity retailers went bust.
These measures include a temporary price cap to mitigate volatility in the wholesale electricity market, as well as more stringent requirements for electricity retailers in terms of paid-up capital and hedging.
Another safeguard is the formation of a new centralised gas buyer, Gasco, which can buy fuel contracts of varying durations and contracts, as well as those tied to various price indices.
This is so that 'if a particular price index were to shoot up, then maybe only some of my gas supplies are affected', Puah said.
'This diversification across geographies, markets (and) tenures will help to prevent (or) reduce the shock that we have in future if there's a spike in oil and gas prices,' he added.
No 'big impact' from tariffs
He is likewise optimistic that the US' tariffs on clean-energy components – such as solar panels – are unlikely to have a big impact on projects to import renewable power into Singapore.
In April, the US imposed tariffs as high as 3,500 per cent on solar exports from four South-east Asian countries: Cambodia, Malaysia, Thailand and Vietnam. This month, US solar manufacturers petitioned for such tariffs to be extended to Indonesia, Laos and India.
While the tariffs will certainly affect regional solar panel makers, they are 'not really having a big impact' on project developers sourcing the panels.
'(If) exports to the US are going to be less competitive, maybe the manufacturers will look into the domestic market to offload their capacity,' Puah said.
Regional geopolitics is another issue Singapore will have to navigate as it imports clean energy. Last year, a senior minister in Indonesia said that the country may review plans to export clean electricity as the government prioritises national interests.
Asked about this, Puah noted that the Riau Islands and Sumatra – where several projects are based – are close to Singapore and far from the 'major energy demand centres' in Indonesia, such as Java.
Therefore, the projects 'do not in any way compete with the supply of renewable energy to other demand centres in Indonesia', he said, adding that there are also economic benefits for Indonesia.
'Apart from attracting investments to Indonesia and creating jobs, (they) would also help to allow supplies of panels and batteries for Indonesia's own domestic demand,' he said.
'As costs continue to come down, they will come to a price point that many more locations in Indonesia will want to deploy solar energy. We do think, quite clearly, it will be mutually beneficial.'
Another positive trend is that the solar and battery industry has also expanded, with manufacturers seeing higher demand.
'As they gain scale, as they gain more manufacturing know-how, costs have continued to come down. So that bodes well for the developers and bodes well, eventually, for the consumers in Singapore,' Puah said.