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Sustainability leaders welcome $5 bil Future Energy Fund, hope for hydrogen breakthrough

Jovi Ho
Jovi Ho • 6 min read
Sustainability leaders welcome $5 bil Future Energy Fund, hope for hydrogen breakthrough
DPM Lawrence Wong announced the Future Energy Fund in his Budget 2024 speech on Feb 16, while describing the critical infrastructure needed for Singapore’s shift to low-carbon electricity. Photo: Bloomberg
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Sustainability leaders praise the government’s decision to inject $5 billion into a new fund to help Singapore transition towards cleaner energy sources, and they hope funds will be channelled towards solving current limitations on hydrogen power.

Deputy Prime Minister Lawrence Wong announced the Future Energy Fund in his Budget 2024 speech on Feb 16, while describing the critical infrastructure needed for Singapore’s shift to low-carbon electricity. These include laying submarine cables to facilitate the import of low-carbon electricity and upgrading Singapore’s existing power grid.

“All of these investments will be costly,” says Wong. “They cannot be done by the private sector alone, and will likely need some catalytic funding from the government.”

The government’s $5 billion commitment is “no trivial amount”, says Terence Tan, director, carbon management at UN Global Compact Network Singapore (GNCS). “Compared to past government initiatives and funding announced, this is an extremely resonant display of commitment and urgency to prioritising Singapore’s energy transition.”

GCNS was registered in 2005 with three principal members: the Singapore Business Federation, the National Trades Union Congress and the Singapore National Employers Federation.

Currently, over 95% of Singapore’s electricity needs are supplied by natural gas imports.  “Diversifying our energy sources is the first and most critical step to enhancing the sustainability of our energy supply while ensuring energy security and affordability,” says Tan, who worked at Shell for over three decades until 2020. “[This is] aligned to Singapore’s ‘Four Switches’ national strategy: solar, regional power grids, emerging low-carbon alternatives and natural gas.”

See also: Government to set up Future Energy Fund, inject $5 bil to invest in energy transition infrastructure: Budget 2024

While Singapore is “making progress” on importing low-carbon electricity, Wong says “there is a limit” to importing electricity without compromising security. Hence, Singapore will start testing and deploying ammonia — a hydrogen carrier — for power generation and bunkering on Jurong Island, says Wong. 

Wong launched Singapore’s National Hydrogen Strategy in October 2022, and the government believes hydrogen could supply up to half of our power needs by 2050.

Singapore is also “actively studying” geothermal power, says Wong in his Budget speech, and is not ruling out nuclear power “further out in the future”.

See also: Budget 2024's 'investment tilt' to benefit banks, industrials, energy plays, says Maybank

That said, these innovative green energy solutions remain at varying stages of development and maturity, says Tan. He hopes the fund will be used to invest in and scale proven renewable technologies like solar, while simultaneously exploring emerging solutions like hydrogen and geothermal, which “hold the potential to unlock vast reserves of renewable power”. 

Tan is less optimistic about nuclear power. The accessibility of local sources of renewable energy “must be further explored”, says Tan. “Similarly, although small modular nuclear technology is a promising route, its technical and commercial viability are nascent when compared against other renewable energy sources.”

A future for hydrogen?

The fund will “certainly” give a big boost to the implementation of the regional renewable power imports, towards the future potential in piped hydrogen and to the implementation of ammonia for bunkering and power generation in Singapore, says Tan Wooi Leong, senior executive director, energy, Surbana Jurong Group.

Green hydrogen — and its carrier ammonia — has emerged as a promising source of clean energy, adaptable to all types of transport and storable for long periods of time, says Tan. “However, the green hydrogen economy will not succeed without a safe and efficient infrastructure for transportation of hydrogen.”

Processes around producing, handling and storing hydrogen are well-established in the industry, says Tan. “However, the evolution of the infrastructure, particularly transporting hydrogen on a large scale, presents new challenges, [such as] selecting suitable materials to build the pipelines and storage infrastructure.”

According to Tan, the industry is exploring the viability of using existing energy infrastructure instead of expensive new builds. The industry must also figure out how to safely handle, operate and maintain the infrastructure, along with the best corridor routes to transport green hydrogen or its carrier “safely and reliably”. 

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Amandeep Bedi, managing director and head of Southeast Asia at sustainability consultancy ENGIE Impact, thinks the fund could be spent on developing shared infrastructure for handling and distributing hydrogen to power producers. 

“Additionally, funding could be allocated towards measures to improve power distribution for the energy import projects — [both] land and underwater — including battery storage. The fund could further play a pivotal role in supporting industry pilots for emerging technologies,” says Bedi. 

Current limitations

Singapore faces many challenges when making the switch to hydrogen, says Justin Lee, director, investments at Singapore-based venture capital firm TRIREC.

Hydrogen production is costly, particularly through electrolysis using renewable energy sources, says Lee. “While the cost of renewable energy technologies like solar and wind has declined significantly in recent years, electrolysis remains relatively expensive compared to conventional, fossil fuel-based hydrogen production methods. As such, there is a need for continued innovation and technological advancements to drive down costs and improve the efficiency of hydrogen production.”

Another challenge is the limited availability of suitable land and resources for large-scale hydrogen production and storage facilities in Singapore, adds Lee. “Additionally, the need for large land areas for solar and wind farms to power electrolysis plants may compete with other priorities, such as housing, industry and conservation.”

There are also technical challenges associated with hydrogen storage, transportation and distribution, says Lee. “Hydrogen has a low energy density by volume, which requires large storage tanks or compression systems to store and transport sufficient quantities for commercial use. Moreover, hydrogen is highly reactive and can leak from storage tanks and pipelines, posing safety risks and requiring stringent safety measures and regulations to mitigate potential hazards.”

Thus, policymakers must provide clear and consistent policies that incentivise investment in hydrogen infrastructure and encourage the adoption of hydrogen technologies, says Lee. “This includes measures such as feed-in tariffs, carbon pricing, tax incentives and regulatory standards for hydrogen production, storage and transportation.”

Pain points of SMEs

One aspect that may be overlooked is Singapore’s small- and medium-sized enterprises (SMEs), which dominate the business landscape here, says Benjamin Soh, founder and managing director of STACS, a Singapore-headquartered ESG data and technology solutions company.

“SMEs in general will be key in the adoption of corporate sustainability initiatives that can lead towards the country hitting its carbon-neutral goals, as they often operate in the upstream segments of the value chain in any project, and their actions can determine the ‘green-ness’ of the projects and products being delivered downstream,” says Soh. 

Thus, Soh hopes the government will address “pain points” experienced by SMEs as they transition to a low-carbon system. These include making sustainable energy solutions more affordable and accessible to all businesses in Singapore and greater transparency of supply chains.

Alternative and sustainable energy sources will be the future of how we power our lives, says Soh. “On top of these greener energy sources, businesses will benefit from emitting lower emissions in their ordinary course of business.”

Soh adds: “This will make Singaporean businesses competitive, as they continue to play a leading role in Asia’s supply chain in providing goods and services to the rest of the world.”

Read more about Budget 2024 on The Edge Singapore.

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