Singapore says energy shift may not bring cheaper electricity

by BLOOMBERG 

SINGAPORE • Singapore’s move away from dependence on natural gas may not bring lower power costs, the country’s trade minister said, after the nation-state faced a dramatic spike in electricity prices. 

“The transition to renewable energy, including imported electricity, may not mean cheaper electricity,” Trade and Industry Minister Gan Kim Yong said at the Singapore International Energy Week conference. 

“While the cost of generation may be lower, the costs of transmission and backup, as well as necessary grid enhancements, will add to overall costs. This is an inevitable but necessary trade-off.” 

Singapore plans to import as much as 4GW of lower-carbon electricity by 2035, or about 30% of its anticipated supply, according to Gan. 

The country will begin the process by “ironing out” technical and regulatory issues in cross-border power trading that observers say have stymied progress on a South-East Asian-wide grid for decades. 

Countries around the globe are wrestling with surging fuel prices and power shortages or curbs that are stifling key industries, posing a threat to global growth.

Singapore has been hit as some power providers have announced they will cease retail operations after wholesale prices surged to a record. 

The tiny state generates 95% of its power from natural gas imported by pipeline or tankers. 

Singapore has decided to deploy some of its older, retiring combined-cycle gas turbine capacity as backup generation in the event of emergencies, said Gan. 

The country’s total electricity generation capacity decreased to 12GW in 2020 largely due to the retirement of these units. 

Longer-term, the country is increasing its investment in projects researching the use of hydrogen in the power sector as well as carbon capture and storage technology. 

“What we are experiencing is transitional pain,” said Wong Kim Yin, CEO of Sembcorp Industries Ltd, at the conference. 

“In 10 years-time, we’ll be seeing the cost of hydrogen enter a price range where it will be feasible.” 

Singapore is putting out a request for proposals from companies in November to import as much as 1.2GW of electicity starting in 2027, the Energy Market 

Authority said in a statement. Another call for proposals will be made in the second quarter of 2022 to import the remaining amount by 2035.

The country has awarded a trial licence to YTL PowerSeraya Pte Ltd to import 100MW of electricity from peninsular Malaysia to Singapore via existing interconnectors in a two-year trial that will begin in early 2022. 

Singapore will also commission a pilot project around 2024 to import 100MW of non-intermittent electricity from a solar farm in Pulau Bulan, Indonesia, via a new inter-connector.