Commentary: Singapore’s plans to import clean electricity could meet resistance abroad

SINGAPORE: As COP26 approaches, Singapore has made several announcements regarding plans to decarbonise its energy sector.

Chief among them is its plan to import 30 per cent of its electricity from low-carbon or renewable sources by 2035.

Amid the global energy crunch and disruptions to the local electricity retail market, Singapore’s plans to diversify its energy sources are a welcome development.

However, purchasing electricity overseas exposes Singapore to the internal political dynamics of its partners.

Importing electricity is not simply a convenience for Singapore, but a necessary measure to meet its electricity needs and climate goals.

Around 95 per cent of Singapore’s electricity supply is dependent on imports of natural gas.

Plans to indigenously produce renewable energy through rooftop and floating solar installations are important steps but would at best fulfil 4 per cent of the island’s electricity needs by 2030.

PLANS IN PLACE FOR IMPORTING ELECTRICITY

To meet Singapore’s climate target of peaking greenhouse gas emissions around 2030 and halving them by 2050, it is necessary to seek green energy from abroad.

At present, Singapore will trial importing up to 100 megawatts (MW) each of low-carbon or clean electricity from three sources: Malaysia, solar power from Indonesia, and hydropower from Laos via Thailand and Malaysia.

There are also initiatives by Sembcorp and Sunseap to respectively develop a 1GWp (Gigawatt peak) solar and energy storage project in Indonesia’s Batam-Bintan-Karimun region and a combined 7GWp development in the wider Riau islands, some of which will be exported to Singapore.

These plans help lay the basis for the long-awaited ASEAN Power Grid, which will help facilitate cross-border electricity trading, creating considerable efficiency gains across the region.

However, the country that most directly determines if Singapore can reach its electricity-importing goals is Australia.

Through the A$30 billion (S$30.15 billion) Australia-Asia Power Link (AAPL), Australian company Sun Cable aims to dispatch solar energy from a 12,000 ha solar farm in a northern Australian desert to Singapore through a 4,200km undersea cable. Commercial operations are slated to commence by end 2028.

The project can satisfy 15 to 20 per cent of Singapore’s total electricity needs. Its export capacity of 2.2GW dwarfs Singapore’s current arrangements with Malaysia and Indonesia, and promises to cut Singapore’s emissions by 6 million tonnes per year.

The project has been moving rapidly – Indonesian Minister for Maritime Affairs and Investment Luhut Pandjaitan approved the route through its waters in September. Surbana Jurong is facilitating the project by mapping out required regulatory approvals and providing technical services for landing the power in Singapore.

The AAPL, together with the larger (but currently on hold) Asian Renewable Energy Hub, undergird the Singapore-Australia Green Economy Agreement (GEA), which commits both countries to economic growth and decarbonisation through rules-based trade. Australia’s role in Singapore’s renewable energy plans is therefore not to be understated.

POLITICAL UNDERCURRENTS OF RENEWABLE ENERGY TRADE

While these plans give cause for optimism, they are subject to local pushback in exporting countries. Two overlapping political forces might derail Singapore’s attempts to import renewable energy from its partners.

First, there are strong domestic coalitions who stand to lose if their countries ramp up their renewable energy capacity. Australia and Indonesia are the world’s top two coal exporters The coal industries of both countries wield considerable political influence.

On the surface, exports of renewable energy have minimal short-term impact on the operations of coal giants. Yet this might change if either country uses these initiatives as a springboard to ramp up their renewable energy capacity to capitalise on demand for exports.

Subsequent policy changes, such as further restrictions on new coal plants or the removal of subsidies for downstream investments, would hurt the bottom line for the industry.

Faced with competition, the coal industry might respond by lobbying to safeguard their interests. Several corruption scandals have rocked the Indonesian coal sector in recent years, with companies caught attempting to bribe officials to greenlight projects and officials sentenced to prison terms.

Second is the issue of energy nationalism. Indonesia in February 2020 announced it will end natural gas exports to Singapore to concentrate on domestic use after the existing contract expires in 2023.

Malaysia’s recent announcement that it will limit renewable energy exports to Singapore to meet its own climate goals follows this trend too and might complicate plans to expand electricity trade trials.

Granted, investments could incentivise countries to continue supporting projects. The Sun Cable project, for example, runs through Indonesian waters, but also includes US$2.5 billion (S$3.37 billion) of promised investments into the country.

RENEWABLES VS COAL

Nonetheless, the combination of these two issues means that the renewable energy export policy of these countries might be subject to political compromises and bargaining between different interest groups.

Australia provides a case in point. Former Australian Prime Minister Malcolm Turnbull had previously attempted to move the country away towards renewables, only to be ousted by his own party, a large portion of which is strongly backed by coal interests.

The coal industry is politically influential, employing around 40,000 Australians across several mining towns located in swing constituencies.

With an election next May, current Prime Minister Scott Morrison will have his hands full balancing the different interests of the Liberal and National parties in his coalition.

Australia’s commitment to net-zero emissions by 2050 was not done without significant infighting. These political dynamics make it unclear if Morrison can withstand the political pressure to pull through with exporting renewable energy to Singapore.

ENERGY DIVERSIFICATION IS KEY

Consumers may wonder how Singapore’s energy import arrangements affect them. After all, Trade and Industry Minister Gan Kim Yong remarked on Monday (Oct 25) that the switch to renewables would not necessarily lead to lower prices, an attention-grabbing statement amid an electricity price hike.

One way to interpret Singapore’s approach is as a quest for balance. As noted by Minister for Manpower and Second Minister for Trade and Industry Tan See Leng, Singapore faces an energy trilemma, where it will inevitably have to make trade-offs between security, affordability and sustainability.

The move to increase the share of renewables in Singapore’s energy mix might increase prices but would be offset by gains in energy security and sustainability.

Thus, the current approach of importing 30 per cent of Singapore’s energy needs is a much needed compromise. Policymakers will have to stay flexible and set more ambitious targets towards cleaner energy when opportunities arise.

Broader efforts to diversify energy sources at the regional level could also help to enhance Singapore’s energy security. As mentioned by Minister Tan in a March parliamentary speech, Singapore aims to leverage the abundant renewable energy capacities of its neighbours and eventually develop an ASEAN grid.

Taken in isolation, each 100MW link with Indonesia and Malaysia would only provide 1.5 per cent of Singapore’s peak electricity demands. When combined, however, the network of energy sources would help to create a more resilient energy landscape.

Even if one or a few countries were to renege on their energy trade commitments, the diversification of Singapore’s energy links would limit the overall fallout on its electricity market. The practice of not putting one’s eggs in a single proverbial basket is a good practice for states in general.

While a fully realised ASEAN power grid remains a work-in-progress, it would not only benefit Singapore’s energy transition, but those of other ASEAN member states as well. This is a worthy goal to aspire towards.

Quah Say Jye and Kevin Chen are researchers at the Asia Competitiveness Institute, Lee Kuan Yew School of Public Policy, National University of Singapore.