Two months have passed since the historic COP28 agreement, where nations collectively pledged to triple renewable energy production by 2030. The attention now shifts to the realities and implications of realising this ambitious agenda in Singapore and the Asean region. It is time to get practical.
Beyond a doubt, renewable energy is the key to the energy crisis, the 1.5°C goal and our net-zero targets for 2050. But we need to question if tripling renewable energy production is right for each country, what the considerations are for “transitioning away” from fossil fuels, whether demand for renewable energy will also triple, and finally — how to finance the cost of tripling renewables.
A central commitment of COP28 is the “transitioning away” from fossil fuels. However, power purchase agreements (PPAs) linked to fossil fuel energy and government subsidies, some with long-term commitments, may get in the way.
Prime examples, such as Indonesia’s struggles with take-or-pay commitments, underscore the need for adaptability as injecting renewables into their grid incurs additional costs on top of the fossil-fuel energy they are contracted to buy.
While political and economic motives may become obstacles, to meet critical energy goals, there might be no other way than for governments and PPA parties to mutually agree to break or renegotiate their commitments.
The commercial viability of renewables such as solar also means that the cost of renewables is already lower than subsidised fossil fuel energy. What is stopping renewable energy’s growth are infrastructure constraints like grid bottlenecks, regulators who may have to grapple with the consequences of stranded fossil fuel assets and the owners who will have an interest in slowing renewable energy down.
See also: Total pauses New York offshore wind farm plans after Trump win
While tripling renewable energy capacity is commendable, it does not necessarily signal an immediate phase-out of fossil fuels, especially if the overall demand for electricity outpaces the growth in renewable energy.
For example, China quadrupled fossil fuel facilities in 2022 despite being at the forefront of renewable production, and this challenges assumptions that renewable energy expansion will swiftly replace traditional energy sources.
The Asean region, however, encounters a different set of hurdles and a more gradual transition from fossil fuels may not be a bad thing.
See also: Trump years could prime LNG markets for ‘golden era’, but tariffs risk disruption: Rystad Energy
This sounds altogether contrarian, but the reality is that there are intermittency and energy distribution issues to resolve once renewable energy penetration crosses a critical threshold. Beyond the thresholds, renewable energy introduces not just a surge in supply but also demands a corresponding rise in energy consumption, unless fossil fuel sources retire.
If renewable production rises disproportionately to demand, we might need significant investments in storage and transmission infrastructure. Imbalances in supply and demand will escalate costs and could potentially undermine the economic viability of renewable energy projects.
However, much of Asean is growing and so is the demand for electricity, which then puts the creation of a shared Asean grid into the spotlight.
A shared regional grid would level renewable energy production and intermittency, and match it with demand. So, instead of adding storage, it is about distributing electricity around the region and adding hydropower as a buffer.
This means that fossil fuel and coal plants need not be phased out so urgently, as renewables will serve as a vital supplement, particularly in growing economies.
We can expect bilateral agreements, such as those between Singapore and Indonesia, and Singapore and Malaysia, as a prelude to a fully regional Asean grid.
Tripling renewable energy generation by 2030 requires a CAGR of 17%. In Singapore, renewables contribute just 2.3% of the overall electricity supply, and to triple that is no problem. In fact, at a panel discussion we hosted at the Singapore Pavilion at COP 28, regional industry players confidently stated that quadrupling, and even generating six times the current production of renewables, was possible.
Sink your teeth into in-depth insights from our contributors, and dive into financial and economic trends
However, for countries like Vietnam, this may not be so easy. At 17% of the electricity supply, tripling that to 51% requires storage infrastructure, which will significantly drive up costs.
Not all countries can afford to and should triple the generation of renewables; they need significant investments in supply infrastructure, reskilling and upskilling among other costs and this ambition needs to align with country-specific needs, resources and developmental stages.
Finally, attracting investments for renewable projects remains challenging due to the perception of lower returns compared to traditional energy ventures. To triple renewable energy production, substantial green finance pipelines are essential to establish large manufacturing capacities across the entire value chain.
According to a recent survey that SEAS conducted on the energy transition with regional clean energy players, more than half believe that available green finance schemes currently do not enable project owners to succeed. Financial backers are risk-averse, while project owners struggle to secure funds with their lack of track record.
The public and private sectors need to prioritise clean energy finance. Blended finance could unlock capital from fossil fuel companies, while well-designed Renewable Energy Certificate (REC) markets could serve as market-based mechanisms, encouraging investments in renewables.
Singapore, as a finance and technology hub, could play a significant role in enabling the renewable industries. Investing in renewable infrastructure in the region is a given, but other strategic moves can reduce our reliance on traditional energy sources.
Singapore does not hold a vested interest in coal mines or oil wells, so there is no obligation to indigenous fuels. We import fossil fuel energy through a combination of pipelines and LNG tankers. If we can partly replace ships and pipelines with cables, we would be importing electrons. In this way, we can dial down our reliance on oil and gas and dial up the import of clean electricity, which enables us to transition faster.
The commitment to tripling renewable energy production by 2030 requires careful consideration of regional dynamics, financial intricacies, and strategic advantages. As Singapore and the Asean region navigate this transformative journey, flexibility, adaptation and collaborative efforts will be crucial to overcome challenges and realise the shared vision of a sustainable, renewable energy future.
Kavita Gandhi is the executive director of the Sustainable Energy Association of Singapore (SEAS) and Christophe Inglin is the vice-chairman of SEAS and managing director of Singapore-headquartered renewable energy installer Energetix
