New firm could accelerate S'pore clean energy import ambitions by plugging financing gap

Straits Times

2 days ago

Singapore has a target of importing 6 gigawatts of electricity by 2035 – about a third of the country's energy needs then. ST PHOTO: KELVIN CHNG
SINGAPORE – Singapore recently took one step closer to satiating its hunger for clean power from the region, with the set-up of a government-linked company to oversee the development of electricity interconnectors between countries.
This development is significant as it directly addresses a key pain point in importing electricity – the set-up of grid infrastructure to deliver electricity from where it is generated, such as a solar farm in Indonesia, to the households and offices here.
There is currently low appetite among financial institutions to fund such infrastructure, largely due to the perceived high risks and large upfront costs.
As Ms Sharon Seah, coordinator at the Asean Studies Centre and Climate Change in South-east Asia Programme at the ISEAS – Yusof Ishak Institute in Singapore, noted, a big hurdle to realising a regional grid is project financing and assessing whether projects are bankable.
But the set-up of Singapore Energy Interconnections (SGEI) in April could help to increase investor confidence and attract new funding – and accelerate the Republic's drive to import more clean-generated electricity.
SGEI had on May 30 told ST that its role is to invest in, develop, own and operate interconnectors to import electricity. This comes after SGEI announced its first deal to develop a new subsea electricity cable between Indonesia and Singapore.
Singapore has a target of importing 6 gigawatts of electricity by 2035 – about a third of the country's energy needs then.
The Republic currently relies on natural gas, a fossil fuel, for around 95 per cent of its electricity, and cutting emissions from the power sector is critical if the country is to meet its eventual goal of reaching net-zero emissions by mid-century.
Ms Dinita Setyawati, a senior energy analyst at energy think-tank Ember, said the establishment of SGEI is likely to attract increased financing and leverage additional resources for the grid, such as capital, expertise and technology.
Ms Seah added: 'Governments need access to financing, investors want to assess viability of long-term infrastructure projects and companies also need to be assured of such support.
'Investors will be assured of long-term viability of infrastructure projects with the involvement of SGEI, which is government-linked,' she said.
The Asean power grid, first mooted in 1997, finally made headway after Singapore said in 2021 that it plans to import around 30 per cent of its electricity from low-carbon sources, such as renewable energy plants, by 2035 .
The Laos-Thailand-Malaysia- Singapore electricity import pilot was launched in 2022. That same year, Singapore started importing up to 100MW of hydropower from Laos via existing interconnectors – cross-border electricity transmission lines – between the four countries.
While additional financing and resources are critical enablers of Singapore's electricity import target, establishing such partnerships also require a great deal of coordination, which SGEI can help to smoothen.
According to a May 15 report by Ember, cross-border grid projects require strong political coordination, harmonised regulations and long-term investment commitments.
This is because development timelines can span years and investors may view such projects as high risk due to the complexity of regional governance and financing structures.
SGEI could help in this area. The firm had said that it will work with partners in Asean and other stakeholders to create the required infrastructure to enable cross-border electricity trade as it focuses on building, owning and operating regional power interconnections.
It also said it will work closely with regional partners to develop renewable energy projects and promote best practices, as well as facilitate technical cooperation, within the power sector.
Moreover, with SGEI overseeing the development of the interconnectors, successful projects could also become proof of concept that can increase cross-border trade bilaterally or even, multilaterally.
While there are already existing interconnectors within the region – such as those between Malaysia and Singapore – lessons can be drawn on how the company works with others to plan, finance and develop new interconnectors and associated assets for low-carbon electricity to be traded between countries when these projects come to fruition.
Lessons from these bilateral projects could also pave the way for the development for an Asean-wide power grid.
That Singapore is taking the lead on the Asean grid is unsurprising, given the lack of renewable energy resources within its borders. But for a regional grid to take off, other countries also need to be willing to participate.
' While Singapore might take the lead in off-taking clean energy through shared infrastructure, other Asean member states need to be onboard in order to establish a meaningful multilateral cooperation towards a scalable and sustainable regional power market,' said Dr Victor Nian, the founding co-chairman of independent think-tank Centre for Strategic Energy and Resources Victor Nian.
For example, countries will need to establish mutually accepted codes and standards, as well as a market and governance framework for regional power trade, he said.
Countries can also show strong political commitment for decarbonisation, amend national laws such as allowing foreign investments in critical infrastructure, or provide data to help assess projects' bankability, said Ms Seah.
Independent research and energy intelligence firm Rystad Energy's lead renewables and power analyst for Asia Pacific Raksit Pattanapitoon said reaping benefits from a regional grid will require coordinated cooperation between countries.
Supplier countries, for instance, will need to know what benefits they can reap from being linked up with another market, he said.
When more countries start to signal its demand for renewable energy, like how Singapore is committing to up to 6GW of electricity imports, it could help to create a regional market and provide an impetus to develop the grid.
In South-east Asia, renewable resources are unevenly distributed, so having a connected grid could allow countries to trade electricity freely to meet rising demand. Such a grid would hedge against the intermittencies of renewables.
Bilateral agreements could also be stepping stones to eventually have interconnections for the region to trade low-carbon electricity to realise the vision of the Asean power grid.
Progress is already being made on bilateral deals, as seen with deals between Singapore and various countries such as Indonesia, Malaysia, Cambodia and Vietnam.
Connecting the national power systems of all 10 Asean countries is a tricky and mammoth task fraught with many technical obstacles.
But National University of Singapore's Sustainable and Green Finance Institute's senior research fellow and energy transition lead, Dr David Broadstock, said that large grids are not uncommon, as seen in regions like Europe, where Asean can learn from.
He added that recent developments point to an appetite for an Asean grid.
Other than the progression of bilateral and multilateral agreements, a feasibility study of a Brunei-Indonesia-Malaysia-Philippines power integration project is also expected to be completed in 2025.
These provide a glimpse of how countries can come together to make the grid a reality.
Chin Hui Shan is a journalist covering the environment beat at The Straits Times.
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