Commentary: The changing geopolitics of clean energy will impact Singapore’s Green Plan
As Singapore transforms itself to reduce its reliance on fossil fuels, it will find that it is still vulnerable to geopolitical and economic shifts of a new energy supply chain, says Energy Studies Institute’s Philip Andrews-Speed.
SINGAPORE: Over the last month, as different ministries debated in Parliament at the Committee of Supply, two key speeches on the energy component of Singapore’s Green Plan were made.
Minister for Trade and Industry, Chan Chun Sing and Second Minister Tan See Leng outlined how we will move from fossil fuels such as natural gas and oil to low-carbon energy sources while still ensuring that the country’s energy supply is reliable and affordable. This affects large swathes of industries.
To electrify road transport, large numbers of charging stations will need to be installed across the city and the electricity grid upgraded. Both shipping and aviation should also transit to cleaner fuels of different types.
SHIFTS TOWARDS SUSTAINABLE ENERGY
The shift towards renewable, clean energy has been underway for some time but the scope for solar energy is constrained by the available space for solar panels. Raising the share of low-carbon energy will almost certainly require the country to import energy through regional electricity grids or in the form of hydrogen.
A final component of a sustainable energy system involves energy saving and energy efficiency. Energy saving involves not using energy, for example by switching off unused lights, setting the air conditioning at a higher temperature and bicycling rather than using a car or bus.
Changes in lifestyle choices and consumer habits will determine how much energy saving can be achieved, more than policy or technological advances. In contrast, energy efficiency requires appliances and processes to use less energy to produce the same output or benefit.
This new, sustainable energy ecosystem will be supported by smart energy systems that will match supply and demand instantaneously to ensure greatest efficiency and reliability.
Many countries around the world are undergoing a similar low-carbon energy transition, though the exact nature of the transition varies between countries depending on their energy resource endowment and economic structure.
Saudi Arabia, for example, though long dependent on its oil resource has plenty of sunshine and land space and so has ample opportunity to develop large scale energy as well as nuclear power. In contrast, northern Europe can take advantage of its climate to develop wind energy across the North Sea.
A NEW ENERGY SUPPLY CHAIN
As the world makes the green transition, changes in the energy landscape will have global implications that impact all countries.
While national governments are focused primarily on the domestic challenges of the transition, all countries will find themselves engaging with supply chains that are radically different from those built up during the second half of the 20th century based on hydrocarbons.
These new supply chains will involve flows of energy, energy vectors like hydrogen, equipment such as batteries and solar panels, and the components and raw materials that make up this equipment.
This transformation will have geopolitical as well as economic and business consequences and Singapore as a resource-poor nation will experience this to the full as it will continue to be heavily dependent on external sources of supply both for energy and for related technologies.
While the global supply chain has changed with the rise of consumer electronic goods crossing borders, the security of energy supply remains a critical concern for Singapore.
Singapore has already embraced these changes to import energy for its needs. With the expansion of its LNG terminal completed in 2018, Singapore can steadily reduce its dependence on gas piped from Malaysia and Indonesia.
Natural gas is likely to continue to provide a significant share of the nation’s energy supply for some time to come.
As the international market for LNG becomes more globalised, the number of potential suppliers becomes larger and the supply risks diminish.
Singapore’s energy diversification strategy now includes the import of electricity. Last October, the Government announced that the country will start to import electricity from Malaysia on a trial basis.
On Mar 2, Singapore’s Sunseap announced that they had formed a joint venture with Malaysia’s grid company, Tenaga Nasional Berhad, to invest in renewable energy in Malaysia and import it to Singapore.
Assuming the trial period is successful, such projects will reduce the risk of overdependence of hydroelectricity from Laos, the source of low-carbon electricity identified by the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project.
Laos’ hydro resources, though abundant, are risky. Seasonal droughts, climate change, growing domestic demand for electricity and China’s control of the upstream flows together challenge the reliability of this source of clean energy for Singapore.
An under-sea power cable bringing renewable electricity from Australia is another source of import for Singapore. However, this will pass through Indonesia waters which carries geophysical risks related to earthquakes as well potential political ones.
CHANGES IN THE HYDROGEN LANDSCAPE
Hydrogen will play a major role in decarbonising energy use around the world, as a source of energy. Today, most hydrogen is consumed by industrial processes such as oil refining and the production of ammonia, methanol and steel.
Its use in transport in the form of fuel cells is growing slowly. Hydrogen is also being blended with natural gas in heating systems and can be used for generating electricity with gas turbines.
The key challenge is to produce hydrogen with minimal carbon emissions. So-called “green hydrogen” comes from the electrolysis of water using renewable energy. However, most hydrogen today is “grey”, being produced from natural gas.
Singapore will have a choice between importing grey hydrogen or making it from imported LNG. If the manufacture of grey hydrogen is accompanied by carbon capture and storage the product is considered “blue” hydrogen.
The production of very large quantities of green hydrogen in Singapore and even in Southeast Asia is probably not feasible given the low quality of the natural solar energy. The nearest sources of hydrogen export are likely to be Australia and the Middle East, two places which are already major suppliers of LNG.
FRESH RISKS AND OPPORTUNITES WITH A CHANGING ENERGY SECTOR
The transformation of Singapore’s energy system will require the adaptation or replacement of energy infrastructure and equipment.
These will include plants for importing, storing and manufacturing hydrogen, new district cooling systems, pipelines to transport carbon dioxide to underground storage sites, energy storage capacity such as batteries, appliances and materials to make buildings more energy efficient, solar panels and information technology to manage energy systems.
Much of this will not be made in Singapore.
The country will thus become dependent on new and emerging supply chains that encompass not just the final assembled equipment but also the components such as solar cells and chips as well as the raw materials that make up these components.
Many of these supply chains will be quite different from those that characterise the hydrocarbon industry on which Singapore’s economy is currently based.
From these observations we can see that as the nature of the global energy sector changes, so will the risks. For a country like Singapore that will continue to be dependent on the import of energy and energy equipment these risks will differ from those that characterise the current fossil fuel world.
For example, the COVID-19 pandemic has revealed the vulnerability of chip supply to demand shocks. Similarly, China’s increasing grip on the global supply of technology minerals such as rare earth metals poses a risk to manufacturers of crucial energy equipment such as wind turbines and batteries.
However, the risks should be just as manageable and the threat to the nation’s security need be no greater than today.
In the long-term, consumer energy prices should see little overall change as the costs of new technologies decline. However, if market forces continue to operate in some form or other both within Singapore and internationally, there will be times of higher prices and times of lower prices, depending on supply and demand.
The short-term will be different. The need to accelerate the low-carbon transition requires new technologies and investment in new infrastructure. These will have to be paid for either by higher consumer prices or by government subsidies.
READ: Commentary: Singapore's oil and gas sector should embrace transition to a green future with confidence
The principal risk of a sudden surge of energy price lies in events that disrupt or threaten to disrupt supply chains such as military conflicts, natural disasters, pandemics and unilateral action by key players along a supply chain.
But this has been the case in the fossil fuel economy for decades. Examples include the oil embargo of the early 1970s, military conflict in the Middle East and hurricanes in the Gulf of Mexico.
The steady decline of the global hydrocarbon industry over the coming decades will hit Singapore’s oil refining and petrochemical industry. Indeed, Shell and Exxon have already announced staffing cuts.
However, as Mr Chan outlined in his speech, the low-carbon transition provides the country with the opportunity to transform itself into a low-carbon industry and services hub for the region.
Many of the building blocks are already in place, such as clean energy technology providers, research institutes, project developers and financers.
Examples include Sunseap, Vena Energy and the Solar Energy Research Institute of Singapore (SERIS), as well as regional headquarters of multinational corporations like Siemens.
So, the outlook for Singapore is not just green but could also be affluent provided the necessary transformations are made.
Philip Andrews-Speed is Senior Principal Fellow at the Energy Studies Institute, National University of Singapore.
Listen to Minister for Trade and Industry Chan Chun Sing talk to CNA's Jaime Ho on how the government plans to build and pay for a new green economy, the oncoming energy “reset” and how discussions are made about trade-offs in cabinet on The Climate Conversations podcast: