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APAC Energy Buzz: Singapore can channel its fear of missing out to tackle carbon emissions
Decarbonisation must climb faster up the city-state’s political and social agenda
Vice Chairman, Energy – Asia Pacific
Vice Chairman, Energy – Asia Pacific
Gavin oversees our Asia Pacific research helping companies identify and build their international growth strategies.
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The word kiasu regularly crops up in surveys on Singapore’s national values and identity. From the Hokkien dialect, it describes a uniquely Singaporean concern of missing out, no doubt in part due to the island’s small size and limited resources. Think of kiasu as FOMO on steroids.
While it may have slightly negative connotations, many Singaporeans see their kiasu culture as having played its part in their economic transformation. Driven to succeed, Singapore’s citizens are now amongst the world’s richest, with the country a global leader in finance, biotech, energy, and transportation. A fear of missing out has served Singapore well.
But much of this success has been reliant on hydrocarbons. Singapore is a major refining and bunkering centre and one of the world’s largest aviation hubs. Its oil sector contributes around 5% of GDP, placing Singapore amongst the top three export refiners globally. Combine this with a power sector almost wholly dependent on fossil fuels and Singapore unsurprisingly sits near the top of the Asia Pacific per capita carbon emissions table.
Tackling its emissions won’t be straightforward. Not only will it require massive levels of investment and innovation but will also run up against a particularly Singaporean bugbear - being reliant on others. It’s just not kiasu.
To find out what the ‘red dot’ must do to transform itself once again, I spoke to my colleagues Asti Asra, Jom Madan and Lim Jia Liang.
As an energy disadvantaged economy, Singapore is wholly dependent on imported oil for its refining, bunkering, and transportation sectors and generates around 95% of its electricity from imported pipeline gas and LNG. This is not sustainable. Efforts to tackle both its hydrocarbon dependency and emissions must focus on four distinct areas: expanding renewables and storage capacity, increasing renewables imports through regional grid expansions, low-carbon hydrogen, and the use of carbon capture and offsets.
Solar the only realistic addition to the domestic power sector
Singapore’s domestic renewable potential is limited by its size and location, placing it bottom of the league for renewables generation across Asia Pacific. This is unlikely to change in the near-future and we expect gas/LNG will still account for about 94% of generation by 2030.
Rooftop solar installations are Singapore’s only commercially scalable form of renewable energy. Solar supplied just 0.7% of generation in 2021 but this should grow to 3% in 2030 and 13% in 2050, supported by about 3.4 GW of battery storage capacity. A push into grid-scale floating storage could add a few extra GW of solar capacity, but still leaves gas’s share of total generation at 69% by 2050.
The wildcard is nuclear. While no firm plans exist to develop a domestic nuclear project, Singapore’s Energy Market Authority earlier this year announced that nuclear power could meet up to 10% of the country’s energy demand by 2050. Nuclear does play a part in our Accelerated Energy Transition 1.5-degree scenario for Singapore, but it remains a long shot.
Renewables-by-wire offer a further option
Singapore kicked off renewable imports in 2022 through 100 MW of hydropower supplied from Laos via Thailand and Malaysia. This is a promising start, but a drop in the ocean compared to what Singapore needs.
More ambitious is the Australia-ASEAN Power Link (AAPL) which aims to bring solar energy from Australia’s Northern Territory to Singapore via a high-voltage direct-current transmission system. The AAPL could supply up to 20% of Singapore’s total electricity needs from 2027 if it proceeds, but this is a big if: infrastructure development, regulatory and geopolitical hurdles must first be overcome.
Low-carbon hydrogen seen as Singapore’s trump card
Singapore’s recently announced National Hydrogen Strategy suggests that low carbon hydrogen has the potential to supply up to half of the nation’s power needs by 2050 and play a major role in decarbonising Singaporean industry. This is hugely ambitious and will only be achieved if the government commits to massive investment and multiple partnerships with future exporting countries and companies. Going it alone is not an option.
This shouldn’t be a deterrent. Singapore is ideally positioned to leverage its position as an international energy hub to support the development of global hydrogen supply chains and to grow the physical and paper trade in low-carbon hydrogen. Singapore’s LNG sector – from infrastructure to trading to its transparent legal framework - could serve as a useful blueprint. But to-date Singapore has little to show beyond plans and studies. The serious money has yet to flow.
Capturing carbon at home and storing it abroad
Carbon capture and storage (CCS) and offsets will also need to play a role in decarbonising Singapore. Several proposals are on the table, including those by ExxonMobil and Shell, for planned CCS hubs to capture emissions from local industries and store these in region. Along with bio-feedstocks for renewable diesel and sustainable aviation fuel production, CCS hubs would support efforts to reduce emissions from Singapore’s critical refining and bunkering operations.
But companies can’t do this alone. This type of cross-border CCUS hub will require dedicated regulatory, commercial, and technical support from governments on a scale that has yet to be seen in region.
So, why isn’t Singapore moving faster to decarbonise?
Despite a slew of recent policy announcements and revised emissions targets, Singapore has been slow out of the blocks. Singapore remains a society cooled, transported, and fed by hydrocarbons, with arguably limited pressure from its own population on the government to seriously address climate change.
Carbon price is a good example. Despite being one of the wealthiest per capita countries in the world, Singapore’s current carbon price is only around US$3.5/tonne, with plans to increase this to above US$30/tonne by 2026. Beyond this, Singapore’s level of carbon price becomes vaguer. And while Singapore has blazed a carbon price trail in Southeast Asia, compared to most other developed economies it has much further still to travel.
Source: Wood Mackenzie Carbon Price Tracker, Q2 2022. US/Canada carbon price is the Western Climate Initiative emission trading systems price from a group of Western US states and Canadian provinces.
With countries - and their companies - increasingly being measured by their low-carbon credentials, falling behind could hurt Singapore in the race to attract the investment and global talent. For a country with a fear of missing out, Singapore must be leading from the front.
APAC Energy Buzz is a weekly blog by Wood Mackenzie Asia Pacific Vice Chair, Gavin Thompson. In his blog, Gavin shares the sights and sounds of what’s trending in the region and what’s weighing on business leaders’ minds.