Thursday, 5 November 2009

Singapore ups ante to secure energy stocks

Weekend Australian
Saturday 31/10/2009 Page: 6

THE dominant concern in Asia's city state, Singapore, is energy security given it has no resources of its own and imports all its fuel but its government has big ideas to take advantage of the region's global-warming concerns. With 76% of their electricity needs generated by gas-fired plants and almost all the gas coming from Malaysia and Indonesia, plus another 22% of their needs met by importing fuel oil, Singaporeans worry about reliability of power supply and fuel costs, but their government has kept an eye on opportunities for renewable energy investment.

With more than $S300 million ($238m) committed to supporting energy research and development, and half of it on solar energy development, the Singapore government aims to increase the value-added component of its energy industry from $S20 billion to $S34bn by 2015 and to triple employment in the sector to more than 15,000 people. Given its position on the equator, solar energy may seem to be a no-brainer as a home-grown energy source for Singaporeans, but the reality is different. Most of the city's five million people live in high-rise blocks, making their use of rooftop photovoltaics almost impossible, and the 10,000 businesses that consume 75% of Singapore electricity demand a non-intermittent, lower cost source of power than PVs.

Business concern about costs has been exacerbated by the global financial crisis, which has led to Singaporean exports being slashed by 28% and gross domestic product falling by 10%. This has been a big blow for a country accustomed to strong growth; its GDP improvement had averaged 5.5% a year from 2000 to last year. Nevertheless, in a state strongly focused on innovation know-how and on seeking economic and employment opportunities, the Singapore government has hit on an answer: it has attracted a $S6.3bn development by the Norwegian company Renewable Energy Corp to manufacture the wafers, cells and modules needed by the solar industry, targeting the export market in Asia.

The plant, scheduled to open next year, will produce sufficient products for 1500 MWs of solar energy capacity each year, a large introduction to the international market where total global PV output a year stands at just more than 2000MW. The development is more than twice the size of REC's existing 650MW capacity factory in Norway, the world's largest, although the company has plans to double its size. The Singapore government says the future for use of solar energy in the state will depend on when the sector can get its price for a kW hour of electricity down to the level of tariffs charged to buy it from the grid.

While the government is willing to encourage the residential take-up of PVs through a feed-in tariff equal to four times the going price for electricity, neither it nor Singaporean home owners are holding their breath waiting for a big breakthrough by solar energy. The reason can be illustrated by the latest project to provide a handful of government housing blocks with just sufficient PV panels to power lifts, lights and water pumps; the capital cost of $5600,000 is way beyond the price of grid connection, which has to take place anyway to provide reliable electricity for the residents for all their needs.

For Australia, the big energy opportunity involving Singapore may come in the form of selling the city-state liquid natural gas drawn from the conventional gas fields off Western Australia and the Northern Territory or the large coal-seam methane resources of Queensland. The Singaporean government intends to have an LNG receiving terminal built early in the next decade at a cost of $S1bn, enabling it to import up to three million tonnes of frozen gas a year. The global economic crisis undermined initial investor interest in the project, but the government has stepped in to run the development and is poised to invite tenders for construction before the end of the year.