Whole-of-Nation Approach to Power Singapore’s Energy Sector into the Future

By Neil McGregor

Climate change is real, and the urgent need for climate action is being felt across the world. The United Nations recently announced that more than 90 countries have committed to achieving net-zero carbon dioxide emissions by 2050. Over 200 of the world’s most influential companies have pledged to use 100 per cent renewable energy by mid-century, at the latest.

The accelerated pace of decarbonisation, while critical, also puts governments and the power industry globally in a delicate balancing act.  Ambitious climate goals need to be harmonised with the equally vital imperatives of ensuring energy security and driving cost-effectiveness for consumers.

Striking a sustainable and economically efficient balance between all the objectives may remain our single biggest challenge for years to come.

Asia’s Energy Conundrum

For governments across Asia, supply security and grid stability are among the top priorities to support national economic growth, attract investment in power-intensive industries, eliminate energy poverty, and meet the lifestyle aspirations of their fast-urbanising populations.

Several other key factors shaping the power industry – technology, market structure, consumer behaviour and regulation – are in a state of flux, with unpredictable evolutionary paths.

Despite the difficulties in being able to envisage what the key market characteristics might look like even a few years down the road, the industry needs to sustain a strong investment momentum. It needs to spend not only to ensure that installed generation capacity keeps pace with the projected rise in the world’s electricity intensity, but also to boost the share of green power through renewables and the application of clean technologies.

That said, we must acknowledge that the power sector is highly capital-intensive and needs reliable returns on projects that typically have a life span of several decades. Major investment decisions are predicated on regulatory certainty.

While the current era of cheap capital is supporting an influx of new companies and new sources of funding into the power sector, established players with institutional knowledge, stamina and know-how will remain the industry’s pillars in the long run.

No One-Size-Fits-All Solution

Whether it is the seasoned or new players, it is crucial that the industry makes informed and holistic decisions to direct capital at the right combination of technologies.

Renewables are vital for reducing the power sector’s carbon footprint, but countries are realising that there is no one-size-fits-all solution. While a few countries in Europe have achieved 100 per cent or near-100 per cent renewable power, it cannot be a reality for the majority of the world.

That means the power sector needs a combination of renewables, natural gas and the application of energy-efficient technologies along the value chain to lower its carbon intensity.

Within that framework, each country must identify its own optimal mix, taking into account its geography and available natural resources, emission reduction targets, market size and growth prospects, existing utility landscape, and the cost-effectiveness of available solutions.

Singapore’s Unique Answer

Singapore is a good example of a country in the process of crafting its own unique path to a low-carbon future, including greener power. The island-nation relies on imported pipeline and liquefied natural gas for 95 per cent of its power generation, a reality that is here to stay. Geographic and climatic conditions, as well as a dense urban landscape limit its capacity to add solar, wind, or hydroelectric capacity unless cross-border solutions become a reality. 

That makes it vital for Singapore to encourage strategic investments in the latest and most reliable combined-cycle natural gas technology that will maximise energy efficiency and minimise carbon emissions while providing security of supply and meeting exponential demand growth.

The complexity and velocity of such energy transitions demands a constant review of energy policies. Frameworks governing the power sector must be nimble and open to recalibration or harmonisation. In the move towards integrated green energy solutions, especially in the urban landscape, policy-makers need to look into convergence across sectors to minimise the likelihood of conflicting or contradictory strategies.

Energy transition has to be managed from the supply as well as the demand side. Supply-side measures can include carbon pricing as well as a redesign of markets to support and promote the efficient use of available technology. Demand-side measures can comprise of fiscal policy relaxation and affirmative action to support initiatives including mainstreaming of electric vehicles, rapid adoption of energy-saving digital and smart technologies in the urban environment, as well as industrial waste reduction and resource conservation.

An increasingly consumer-centric world and electricity market liberalisation adds another variable to the equation. The phased liberalisation of the electricity market in Singapore, which reached the retail segment over the past year, has engendered new market structures and business models. Players from other business sectors, such as telecommunications, have entered the power retail business. We are likely to continue seeing the emergence of a new breed of digitally-driven companies that cut across the traditional boundaries between various utility services and the domains of different government agencies.

Setting, implementing and monitoring national goals and objectives encompassing the environment, the energy sector and public services will increasingly require a whole-of-nation approach.

A Multi-Stakeholder Approach

Singapore has an opportunity to take the lead in this new regulatory frontier with forward-looking energy policies and a multi-stakeholder approach. It has already set the course for encouraging partnership between people, private and public sectors – the 3Ps of collaboration – for climate action.

The recent partnership between Sembcorp, the Energy Market Authority and the Nanyang Technological University to develop Singapore’s first Virtual Power Plant (VPP) is setting an example. The VPP will enable more clean and distributed energy resources to be integrated into Singapore’s energy mix while keeping its power system stable. The project leverages Sembcorp’s capabilities as Singapore’s largest home-grown international renewable energy player as well as the UK’s leading flexible distributed energy player with one of Europe’s largest battery storage developments. Applying our expertise in battery energy storage systems and integrated energy solutions, the aim is to help deepen Singapore’s supply mix, and develop new customer-centric business models underpinned by digital platforms.

There is no playbook and no precedence for managing the kind of monumental change that is sweeping through the power industry. A collaborative approach and a full alignment of goals and priorities between the government and stakeholders in the industry will help Singapore stay on top of the transition. After all, the country’s history is testimony to its ability to thrive by finding unique local solutions to global challenges.

The writer is Group President & CEO of Sembcorp Industries, a global integrated energy & urban player, and Singapore’s largest home-grown international renewable energy player.