New government-linked firm could speed up Singapore’s clean energy import plans

Singapore recently took one step closer to satiating its hunger for clean power from the region, with the setting 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 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 noted by Ms Sharon Seah, coordinator at the ASEAN Studies Centre and Climate Change in Southeast Asia Programme at the ISEAS – Yusof Ishak Institute in Singapore, a big hurdle to realising a regional grid is project financing and assessing whether projects are bankable.

But the setting 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 30 May told The Straits Times 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 its energy needs then.

The Republic currently relies on natural gas, a fossil fuel, for around 95 per cent of its electricity.

Dr 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.
 

While additional financing and resources are critical enablers of Singapore’s electricity import target, establishing such partnerships also requires a great deal of coordination, which SGEI can help to smoothen.

According to a 15 May 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 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 interconnectors.

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, 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 the one 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.
 

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.

“ASEAN member states need to be on board in order to establish meaningful multilateral cooperation towards a scalable and sustainable regional power market,” said Dr Victor Nian, founding co-chairman of independent think-tank Centre for Strategic Energy and Resources.

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.

When more countries start to signal their demand for renewable energy, it could help to create a regional market and provide an impetus to develop the grid.

In Southeast Asia, renewable resources are unevenly distributed, so having a connected grid could allow countries to trade electricity freely to meet rising demand.

Bilateral agreements could also be stepping stones to eventually having 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 Dr David Broadstock, senior research fellow and energy transition lead at NUS’ Sustainable and Green Finance Institute, said large grids are not uncommon, as seen in regions like Europe. 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 power integration project involving Brunei, Indonesia, Malaysia, and the Philippines is also expected to be completed in 2025. These provide a glimpse of how countries can come together to make the grid a reality.
 

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.