Southeast Asia faces a pivotal moment in its shared energy future as the changing role of gas transforms the regional energy outlook. As a land-scarce nation seeking innovative solutions to meet low-carbon energy needs, this journey could have important implications for Singapore.
In Boston Consulting Group’s (BCG) analysis, Can Gas Be Green? The Role of Gas in Southeast Asia’s Climate Transition, we look at how this remarkable transition period could radically shift the regional energy paradigm and how countries, companies and decision-makers now face a defining moment in their respective energy futures.
Southeast Asia is a vibrant and growing region with surging energy demand. Electricity demand has tripled over the last two decades, supported by a six-fold increase in coal-fired generation. On the current trajectory, electricity demand is expected to triple further by 2050 as rapidly growing economies seek to meet growing residential and industrial needs.
Numerous nations across Southeast Asia have now put in place net-zero commitments, seeking to mitigate 1,700 metric tons (Mt) of annual regional carbon emissions. Current commitments put Southeast Asia on track to lessen 60% of emissions by 2060 — behind the 80% of emissions projected to be abated globally by 2040.
Singapore recently confirmed an intention to achieve net-zero emissions by 2050, with the public sector achieving this target by 2045, highlighting the importance of accelerating the adoption of innovative low-carbon solutions.
Sourcing a low-carbon future in Singapore
The city-state’s total energy demand is expected to reach 52 terawatt hours (TWh) in 2022, representing 1.3% year-on-year growth. The majority of the nation’s power needs are today met by gas, which accounts for 95% of the energy mix — the second highest in Southeast Asia behind only Brunei.
Several innovative power-sourcing plans have been introduced recently to help Singapore achieve its ambition to source 30% of its power needs from low-carbon sources by 2035. That includes the pioneering multilateral Laos-Thailand-Malaysia-Singapore (LTMS) Power Integration Project, which commenced in June and has piloted the import of 100MW of low-carbon hydropower from Laos. The nation is also exploring the Sun Cable project, seeking a path to import solar power generated in Australia.
These energy-sourcing efforts complement existing innovations, such as rooftop solar power and floating solar farms, which aim to improve the low-carbon share of power in a way that overcomes the challenges of limited land availability. The recent 2022 United Nations Climate Change Conference (COP27) stressed how important this goal of reducing the emissions intensity of economies is for all nations of the world, reaffirming the commitment to the 1.5C pathway and highlighting a need to boost low-emissions energy.
Singapore now approaches a pivotal moment in its energy transition, exploring how to leverage evolving gas technologies and low-carbon innovation. The nation’s mature existing gas infrastructure has a powerful platform to embrace innovations and unlock low-carbon opportunities to achieve a more secure and sustainable energy future.
Given its lack of natural resources, Singapore has historically been a gas importer. In the coming years, Singapore faces an additional challenge, with its reliance on neighbouring Indonesia to import gas. The current contract ends in 2023, and although recent reports indicate that it will be extended to 2028, the end of this contract could spell a 7bil cubic meter gap in Singapore’s vital gas supply.
Gas generates between 40% to 80% of the CO2 emissions per unit of energy compared to coal and offers an increasingly cost-competitive fuel for many nations across the region. A comprehensive regional switch from coal to natural gas could see CO2 emissions in power generation falling by 3,000 megatons (Mt) to less than 700 Mt CO2 and below 200 Mt if capture and storage (CCS) technology is implemented.
The strategic potential of CCUS and hydrogen in Singapore
With rapid changes in the energy landscape, emerging gas technologies offer vital flexibility to the region’s energy journey. Innovations in carbon capture, utilisation, and storage (CCUS) and expanding hydrogen technologies open up new transition potential, future-proofing existing gas infrastructure.
CCUS will play a particularly critical role in energy ecosystem decarbonisation, mitigating emissions from extraction through processing to power generation. CCUS has the potential to remove up to 90% of CO2 from gas combustion in power plants, amplifying the low-carbon credentials of this attractive transition fuel.
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Today, the region’s energy industry produces around 20 million tons per annum (Mtpa) of CO2 emissions, mainly due to raw gas processing for export. CCUS offers the chance to mitigate these emissions by taking advantage of abundant geological storage resulting from legacy fossil fuel extraction, providing an accessible and cost-effective carbon storage option at scale.
Evolving hydrogen technologies provide a further synergy with the region’s existing energy infrastructure, offering a path to retrofit gas power plants to use hydrogen and to leverage gas pipelines for hydrogen transport.
A shift to green hydrogen (produced entirely from renewable energy) or blue hydrogen (produced from natural gas and CCUS) offers a significant and sensible net-zero shift for Singapore while looking to complementary opportunities such as CCUS to decarbonise the nation’s gas usage further. Combined-cycle gas turbines (CCGTs) can be retrofitted to co-fire or burn green hydrogen while existing LNG infrastructure can also be adapted to transport it. The nation’s first hydrogen-ready powerplant is already in the works, with a 600MW state-of-the-art CCGT plant commissioned by Keppel Energy due to be producing power by 2026.
The recent launch of Singapore’s National Hydrogen Strategy offers an encouraging step towards this opportunity and puts hydrogen front-and-centre of Singapore’s energy future as it continues its drive towards the 2050 net-zero future. This includes Singapore’s ambitions to be a hydrogen hub, leveraging existing infrastructure and a strategic location for shipping to underpin this move, complemented by a US$25 million ($34 million) research facility aimed at making green hydrogen a viable green energy source for the country.
Singapore’s Hydrogen strategy commits to experimenting with advanced hydrogen technologies through various pathfinder projects, supported by an announced $129 million investment in research and development to boost low-carbon technologies. It also pledges to pursue international collaborations to enable low-carbon hydrogen supply chains backed by long-term land and infrastructure planning. Importantly for legacy oil and gas workforces, it also promises to support workforce training and development for the broader hydrogen economy.
With its forward-looking National Hydrogen Strategy and broader innovations around energy sourcing, Singapore is already demonstrating a positive vision for realising a low-carbon energy future. Achieving these goals provides much-needed sustainable energy security for the nation and a path to unleash new economic opportunities from finance to legacy energy industries. Successfully delivering on this strategy could unlock a sustainable and resilient energy landscape for the city-state that powers a future-proof economy alongside it.
Marko Lackovic is managing director and partner at Boston Consulting Group and Kar Min Lim is principal at Boston Consulting Group