by Akira Tsuruta, 2024.09.13

Snapshot

1. To achieve carbon neutrality, Singapore will need to source 30% of its renewable energy from external suppliers in the future.
2. With the increasing popularity of renewable energy sources, such as distributed photovoltaics, the grid system has become unstable. Foreign demand-side management solution providers, including energy storage management system (ESS) providers, can seize this opportunity to enter the Singapore market.
3. As an aviation hub in the Asia-Pacific region, Changi Airport has the potential to become a sustainable aviation fuel (SAF) refueling station for international flights. Starting in 2026, flights departing from Singapore will be required to use SAF, with the goal of increasing SAF usage to 1% of total fuel and plans to raise this proportion to 3%-5% by 2030. Sustainable aviation fuel developers and distributors can leverage this opportunity to enter the Singapore market.
4. Singapore has the potential to become a leading international hub for carbon trading. Carbon Capture, Utilization, and Storage (CCUS) projects in Southeast Asia could be traded on the Singapore carbon market

#Singapore #Changi #SAF #CCUS #carboncredit #PPA #Green

Introduction

As widely known, Singapore serves as the economic hub and gateway to Southeast Asia for many multinational corporations. In terms of decarbonization and new energy sectors, Singapore appears to be an interesting city. The green transition in the world presents a substantial opportunity for Singapore to become Asia’s environmental hub. Singapore itself aims to achieve net-zero emissions by 2050, mirroring the goals of many other developed countries. The city is home to local corporations and numerous Asian headquarters of multinational companies that prioritize sustainability, showcasing their green initiatives.

For instance, GSK, a global medical corporation, attempts to achieve 100% renewable electricity for all its manufacturing sites in Singapore starting in 2025 mainly by onsite RE generation and renewable energy certificate purchases from Sembcorp’s solar projects.

Figure 1. GSK’s Global Vaccine Manufacturing Site in Tuas, Singapore.

Singapore’s growing demand for renewable energy is set to drive significant investments in clean energy projects across the region and given Singapore’s unique conditions, including limited land resources for renewable energy sources, lower wind speed, and no geothermal resources, achieving the target may require collaboration with neighboring countries.

Beyond being the economic hub in Southeast Asia, Singapore is anticipated to become a decarbonization hub for other Asian countries. Singapore Changi Airport has the potential to become a major refueling hub for supplying Sustainable Aviation Fuel (SAF) to international flights. Also, Singapore has two major carbon credit exchanges: Climate Impact X and AirCarbon Exchange. In the early stages of the decarbonization era, this city is likely to present numerous business opportunities. Attention should be paid to this city as a demonstration model, which could serve as the next major business opportunity for scaling up in other Asian regions, such as Indonesia. Here are some unique opportunities found in Singapore:

1. International / Cross-border Green PPA

To achieve carbon neutrality, Singapore will need to purchase a significant amount of renewable energy from external sources. According to Maybank, the largest bank in Malaysia, by 2035, Singapore expects to decrease its dependence on natural gas to roughly 50% of its energy mix, down from the current 94% in 2023. Approximately 30% of the energy supply is anticipated to be sourced from renewable energy imports. This could encompass low-carbon electricity, mainly solar, from Indonesia; 1GW of solar, hydropower, and potentially wind from Cambodia; and 1.2GW primarily from wind energy in Vietnam. The remaining 20% might include solar energy, various forms of hydrogen, biofuels, nuclear power, and geothermal power.

Figure 2. Singapore’s Energy Mix in the Future.

Some energy developers in neighboring countries have the potential to seize these opportunities. For example, on September 8th, 2023, a subsidiary of Medco Power, a leading independent power producer in Indonesia, and Gallant Venture, a Salim Group company, and Pacific Medco Solar Energy in Singapore received Conditional Approval from the Energy Market Authority for a 600MW solar project. This project aims to import competitively priced and reliable renewable energy from Bulan Island, Indonesia, to Singapore via a dedicated high-voltage subsea cable (“Bulan Solar Project”).

2. Development of Demand-Side Power Solution as the Large Microgrid

As renewable energy sources like distributed PV become more prevalent in the grid system, power generation becomes more variable because the RE generation amount, like PV’s generation amount, depends on natural resources and cannot be controlled though it can be forecasted. As a result, there is an increased demand for solutions on the demand side such as storage batteries, demand response (DR), Virtual Power Plants (VPP), and energy management systems (EMS). Conceptually, Singapore can be considered a large microgrid. When transitioning a microgrid to 100% renewable energy, several solutions are required, including backup power, power balance management as well as distributed PV. Foreign demand-side management solution providers like ESS (Energy Storage System) suppliers, can seize the opportunities to enter the Singaporean market. (The article: Expanding to Southeast Asia: Choosing the Right Country and Understanding Local Subsidies (Part 1) mentions about the expansion of foreign battery manufacturers to Southeast Asia)

Figure 3. Transition of Singapore’s PV Amounts.

Interestingly, Singapore is an ideal city for implementing scalable Demand Response (DR) and Virtual Power Plants (VPP) partly due to its abundant adjustable loads from numerous air conditioning (AC) resources. Approximately 80% of households in Singapore install HVAC. To address the unstable operation of the grid system like oversupply or even power shortages, the grid needs to manage power balance by adjusting the amount of power consumed. Given Singapore’s status as a crucial economic hub, there should be a strong demand for secure grid operations, prompting a willingness to construct a VPP.

For example, Hitachi ABB Power Grids has been chosen to implement its cutting-edge energy storage solution to aid in the creation of Singapore’s first VPP project. Initiated in 2019, the project is spearheaded by the Energy Research Institute at Nanyang Technological University, Singapore (ERI@N), with financial support from Singapore’s Energy Market Authority (EMA) and Sembcorp Industries (Sembcorp)

Also, the Chinese company Envision has partnered with PSA Singapore to transform the Singapore port into the world’s first ‘net zero superport.’ Utilizing the EnOS™ platform, Envision has tailored five smart energy applications specifically for PSA: micro-grid control, energy efficiency management, VPP, power trading, and green certificate trading.

Currently, the Energy Market Authority (EMA) and SP Group (SP), a leading utilities group in the Asia Pacific, are set to pilot a Residential Demand Response (R-DR) program aimed at empowering households equipped with smart meters to actively reduce electricity consumption during peak demand periods. Scheduled to launch in the second half of 2024, this innovative pilot is the first of its kind in Singapore, leading to future business opportunities for suppliers and solution providers as mentioned.

3. Changi Airport as the SAF Supply Center

Changi Airport, widely regarded as the hub of air traffic in the Asia-Pacific region, has the potential to serve as a major refueling station for Sustainable Aviation Fuel (SAF) for international flights. Currently, SAF is the buzzword in the energy development sector as a means to decarbonize the aviation industry. Starting in 2026, Singapore will mandate the use of SAF on all departing flights. This requirement is part of a new sustainability blueprint released by the government in advance of the Singapore Airshow. Transport Minister Chee Hong Tat unveiled the sustainability blueprint at the Changi Aviation Summit. As part of this plan, he outlined a goal to reduce domestic aviation emissions from airport operations by 20% by 2030, with the ambitious target of achieving net-zero domestic and international aviation emissions by 2050. The country’s SAF targets start with a 1% SAF requirement in 2026, which will increase to 3-5% by 2030. Airlines will be supported through a SAF levy on fuel purchases, which will be adjusted based on a pre-determined levy and the prevailing SAF price. Given that Changi Airport ranked 5th among the top 10 busiest international airports of 2023 according to OAG, it will be able to become a central hub for the SAF market. Many SAF developers and distributors should take note of this opportunity.

In June 2023, Cargo flights of Cathay Pacific, which aims to use SAF for 10% of its total fuel use by 2030, were refueled at Changi airport for its first commercial SAF flight. This neat SAF supplied by ExxonMobil Asia Pacific was produced entirely from used cooking oil and complies with the International Sustainability and Carbon Certification (ISCC) EU standards.

Figure 4. Cathay’s Cargo

Neighboring countries like Indonesia and Malaysia possess substantial resources to produce SAF through HEFA, G+FT, AtJ, and PtL pathways. According to a report developed by the Roundtable on Sustainable Biomaterials and supported by aircraft manufacturer Boeing, by 2050, South-East Asia has the capacity to meet 12% of the global demand for sustainable aviation fuel, which could be enough amounts to cover the demand in the region unless exporting it to other regions. Various types of feedstocks, such as used cooking oil (UCO), cassava, rice husks and straws, palm oil residues, sugars, and municipal solid waste, along with renewable power, can be utilized to produce SAF in the region. National oil companies in the region are developing their capacity to produce SAF.

For instance, in Indonesia, where palm oil resources are abundant, Pertamina is developing its own method to produce SAF called Bioavtur, using refined bleached deodorized palm kernel oil. In October, flag carrier Garuda Indonesia launched its first commercial flight using Bioavtur, operating from Soekarno-Hatta Airport to Adi Soemarmo Airport.

In the same period, Petronas in Malaysia and Idemitsu Kosan, a Japanese petroleum company, agreed to collaborate in ensuring a steady and efficient supply chain for the development of SAF. This effort involves investigating the supply potential of non-edible oil feedstock trees like Pongamia and Jatropha, which are suitable for producing SAF. Additionally, they plan to establish a sales and distribution network for SAF to ensure airlines have reliable access to the fuel.

If successfully establishing classification and collection systems for garbage and agricultural residue, the G+FT or AtJ pathways to SAF appear promising. Additionally, given a number of CCUS projects mentioned in the following sector, the PtL pathway also holds potential to utilize captured carbon for SAF in the region. Southeast Asia can be considered an ideal location for demonstrating SAF projects. In the future, an increasing number of SAF development projects are expected to appear, with Singapore Changi Airport playing a pivotal role in distributing and replenishing SAF for international flights.

4. The Center of Carbon Credit Trade

Last but not least, the carbon credit trade should be mentioned. Singapore is establishing itself as a carbon trading center, offering related services such as carbon monitoring, credit verification, and climate risk analysis. It already has more than 70 related carbon-related service providers, showing the highest concentration in ASEAN. Singapore is highly likely to become a trading hub for the international trade of carbon credits, such as VCUs. Currently, two major exchange platforms, Climate Impact X and AirCarbon Exchange, are based in Singapore. Their current average price ranges 8-13 USD per tonne in 2023 (6.14-9.98 SGD per tonne @2024.09.11). These figures are expected to rise as the demand for decarbonization increases with the approach of target deadlines such as 2030.

Also, CCUS is a crucial solution for achieving carbon neutrality, and CCUS project owners/developers have the potential to issue voluntary carbon credits. Southeast Asia is emerging as a strong contender in the region, providing some of the most cost-effective CO₂ storage solutions in the APAC area. Notable players are Malaysia’s Petronas, Indonesia’s Pertamina and Australian companies like Santos and Woodside Energy. This also attracts countries like Japan and South Korea, in their pursuit of cross-border solutions, to form partnerships with East Asian companies, along with entities in Southeast Asia and Australia. At least 15 CCUS projects in Southeast Asia are identified in 2023. ExxonMobil and Shell have created the S-Hub consortium to assess and advance a cross-border carbon capture and storage (CCS) initiative aimed at lowering carbon dioxide (CO₂) emissions in Singapore. The rising momentum of CCUS in this region could result in an increase in the number of carbon credit providers.

Furthermore, in the voluntary market of carbon credit, many multinational corporations with Asia-Pacific headquarters in Singapore are likely to join the market for bulk transactions of carbon credits (voluntary market). Also, in terms of the compliance market (mandatory market), in Singapore, a company is classified as a large emitter if it releases 25,000 tons or more of carbon dioxide equivalents (tCO₂e) annually. They are required to pay a carbon tax to be accountable for their emissions and may have the option to buy carbon credits to offset up to 5% of their taxable emissions. The current carbon tax is 5 SGD per tCO₂e. Consequently, a company emitting at least 25,000 tCO₂e annually will need to pay a minimum of 125,000 SGD each year. In 2022, it was announced by the government that the carbon tax would increase gradually over the next few years to achieve Singapore’s climate goals, potentially boosting the demand of carbon credit.

Figure 5. Singapore Carbon Tax Is Expected to Rise

In this way, the carbon credit ecosystem is emerging around Singapore. Service sectors such as carbon credit trading agents, carbon emission management companies, and ESG consultants will compete with each other to seize this future opportunity.

References:

[1] NCCS. Singapore Climate Target. Overview

[2] Singapore Economic Development Board. 2024.06.27. GSK set to achieve 100% renewable electricity at all manufacturing sites in Singapore from 2025.

[3] Maybank. 2024.01.05. Singapore 2024 Outlook, Time to Cherry Pick.

[4] Pacific Light.2023.09.11. Pacific Medco Solar Energy Granted Conditional Approval by EMA for 600MW Solar Import Project from Indonesia

[5] Energy Market Authority. Installed Capacity of Grid-Connected Solar Photovoltaic (PV) systems by User Type.

[6] CAN. 2024.07.13. How to beat the heat in Singapore, without air-conditioning

[7] Hitachi Energy.2021.2.04. Hitachi ABB Power Grids to provide energy storage solution for Singapore’s first virtual power plant.

[8] Envision. Carbon Neutrality Report 2021.

[9] Energy Market Authority. PSA corporation

[10] Energy Market Authority. 2023.10.24. New Residential Demand Response Pilot to Empower Households to Reduce Electricity Consumption During Demand Peaks.

[11] Airport Technology.2024.02.19. Singapore unveils SAF targets in sustainability blueprint.

[12] OAG. The busiest airports of 2023.

[13] Cathay Pacific Airways Limited. 2023.07.10. Cathay Pacific completes its first overseas refuel of Sustainable Aviation Fuel on commercial flights.

[14] ADB. Southeast Asia Development Solutions.2024.02.21. Southeast Asia Poised to Become a Key Supplier of Sustainable Aviation Fuel.

[15] Recessary. Judy Chao.2023.03.01. Carbon neutral: How to buy carbon credits (Part II)

[16] RystadEnergy.2024.05.30. APAC advances in cross-border carbon capture and storage, fostering value chain growth.

[17] Exxonmobil.2024.03.01. ExxonMobil and Shell selected to work with the Government of Singapore on a carbon capture and storage value chain [18] Earth JOURNALISM NETWORK. Gwyneth Cheng.2023.10.25. Clearing the Air: Questioning Singapore’s Carbon Credits Decisions.