Who will be the winners and losers in Singapore's energy transition?

11 Apr 2022

Search for balance between sustainability, security and costs, and as new growth sectors emerge, will yield opportunities and risks.

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SINGAPORE'S power sector has to be prepared to make bold changes in the coming years, as it navigates a global energy situation that will be "very unlike" that of the last two centuries, said the nation's Energy 2050 Committee in its report out last month.

The transition will yield both opportunities and risks; which are the sectors and industries that will benefit, and what should businesses do to ensure they are equipped for the journey?

Sectors impacted

"Singapore's power sector accounts for almost 40 per cent of total carbon emissions in the country. Hence, most industries that are heavily reliant on fossil fuels for their energy needs will be impacted by the transition," says Sharad Somani, partner and head of Infrastructure Advisory at professional services firm KPMG in Singapore.

"These include the transport, heavy industries, marine and built environment sectors. As companies in these sectors regain their footing and refocus on post-pandemic growth, energy demand is expected to increase in the coming years. This could add more strain to these sectors as they strive to find a balance between energy sustainability and energy security and costs."

Abhi Bhuchar, head of consumer and industrials, South-east Asia, and energy, Asia- Pacific, at management consulting firm Oliver Wyman, believes the transition is generally an opportunity: "There will be some pain, but most large multinational
companies (MNCs) in Singapore don't have an asset book that is large enough to 'break the bank'.

"What it does do is create a wonderful sandbox for companies with all the right elements
- like regulatory support and a large ecosystem of small and medium enterprises - to be able to innovate on technologies and business models that can then be exported to other parts of the world."

Still, he adds, incumbent power generation companies could very well be impacted negatively. "However, given the time horizon in mind, and the age of this gas fleet, Singapore may actually have a real chance to be one of the few economies in the world with an 'orderly' transition."

Surbana Jurong, a consultancy focused on infrastructure and urban development, says this is a whole-of-society transition that will impact everyone - down to the neighbourhood mom and pop stores.

"An increase in energy costs will hit their bottom lines. Energy security and diversity concerns will keep growing and that could affect large MNCs' ability to operate, says Tan Wooi Leong, senior director, energy & industrial, at Surbana Jurong.

Like Somani and Bhuchar, Tan believes the energy and chemicals sector - as well as the data centres - will face particular challenges to transform their energy sources.

Justin Gabbani, chief executive officer (CEO) Asia, of multinational construction, property and infrastructure company Lendlease, acknowledges that the real estate and construction sector - being responsible for 40 per cent of the world's emissions - will be among those most affected by the transition to a low-carbon world.

"In general, companies across the board face major challenges in transforming into lower-carbon businesses. This is because new technologies that enable such a transformation - such as kinetic floor tiles, mini wind turbines and building integrated photovoltaic (PV) - still cost too much to implement for now.

"In addition, there are still many readily available technologies and best practices that are not in buildings today. Take, for instance, air conditioning: most buildings in Singapore are still using 50-year-old technology, such as VAV (variable air volume) systems, which are more energy-intensive compared to systems like active chilled beams, which we are using in Shaw Tower," Gabbani says.

Ivy Lai, country manager at health technology company Philips Singapore, recognises that the healthcare sector will also be impacted - with the world's healthcare systems accounting for over 4 per cent of global carbon emissions, which is higher than that of the aviation or shipping sectors.

"Generally, hospitals have the most intensive energy demand out of all publicly-funded buildings and emit 2.5 times more greenhouse gasses than commercial buildings.

"(But) all players - health-technology companies, healthcare decision-makers and other stakeholders - have a responsibility to act," she says.

Growth areas

Sectors related to the low-carbon green economy - including those focused on energy efficiency and new technologies such as carbon capture, green hydrogen, battery storage and e-mobility - are likely to benefit the most, Somani says.

"In a bid to position Singapore as a low-carbon hub for the region, the country has also signalled that it will be exploring geothermal, biomethane, nuclear fission small modular reactors (SMRs) and nuclear fusion technologies. The multiple pathways that Singapore has developed in its strategy towards a net-zero future will cut across all sectors, boosting the economy and creating jobs."

He also sees increased demand for talent in the areas of smart metering infrastructure, risk-based maintenance, and energy consumption optimisation leveraging the Internet of Things (IoT), artificial intelligence (AI) and machine learning, which can support the development and commercialisation of these green technologies.

Like Somani, Tan is also expecting growth to be triggered for alternative renewable energy sources. In particular, he has noted that hydrogen plays a major role in many of the Energy 2050 scenarios: "Hydrogen supply chain players, covering production from a range of sources and feedstocks, storage and transport, onshore receiving infrastructure, and even the commissioning of H2 ready gas turbines - every single one of these companies will have a crucial part to play in our energy future."

New growth sectors from the energy transition may also include energy storage and subsea cabling, which can help to enable Singapore's ambition to import power, Tan adds.

Riding the wave

Resolving the risks and challenges that come with the transition will require multiple ecosystems coming together and flourishing, which will involve significant investments in physical engineering, financial structuring, and infrastructure build, says Bhuchar.

"A lot of the specific niche capabilities don't exist at an industrial scale in Singapore yet, and in some cases even the world. And therein lie the winners.

"Organisations that can start to invest ahead of the curve and position themselves for this en-masse transition across the value chain of new energies will see themselves win. Not least because of the scale in Singapore, but also because a number of countries will be fast followers behind path-breakers like Singapore and these capabilities will be desperately needed there."

Somani advocates a three-step approach for businesses to make the most of the transition: assess, assimilate and act.

Businesses should start with a holistic assessment of the impact of climate change on their existing business practices, including the material issues, risks and opportunities.

Secondly, they should evaluate how they can assimilate new technological breakthroughs and eco-friendly solutions in their processes as they develop their low- carbon strategy.

And, lastly, they will need to act on executing their strategies across the entire value chain, from procurement of raw material to shipping of finished goods. Incorporating innovative technology solutions to optimise the entire business energy value chain would be an imperative, Somani says.

Tan stresses that, in making all these decisions, businesses have to make the right trade-offs between short-term pain and long-term gain.

"It might seem prudent to save money in the short term by continuing to use high- emissions sources of energy ... but investing in cleaner alternatives (and in research and development) today can drastically reduce tomorrow's variable costs and give businesses an edge over their competition."

It's also important to develop and hire the right people. "Businesses must invest in training, retaining, and recruiting talents who are visionary and entrepreneurial - willing to think out of the box and to embrace the unknown. This will allow organisations to survive, and even grow, as the energy transition picks up pace," Tan says.

Gabbani believes all sectors and companies need to pursue energy efficiency measures aggressively and familiarise themselves with the clean energy sources available.

There are distributed energy sources (DERs), such as rooftop solar PV units or electric vehicle batteries, and new technologies for clean energy generation, including kinetic floor tiles, mini wind turbines and integrated PV systems, he says.

"Businesses would need to look for suppliers of such sources. As the costs of relying on such sources for now are quite prohibitive, businesses will have to start exploring new business models enabling them to manage these costs and transform to a
decarbonised future."

Like the others, Gabbani strongly advocates the use of digital innovation to help businesses manage the transition and stay efficient. Lendlease, for its part, has launched a S$40-million product development centre here to steer the sector towards autonomous buildings in future, and also a digital property lifecycle platform called Lendlease Podium, aimed at streamlining complexities across the supply chain.

As for Singapore's healthcare sector, Lai believes continual innovation is needed - through adopting new business models, embedding circular practices, and applying eco-friendly thinking and design to hospitals and healthcare facilities throughout the country.

Philips, for instance, helps healthcare providers upgrade the software - and sometimes hardware - of their installed medical equipment, to extend their lifecycle and make them more energy efficient.

Lai also cited Ng Teng Fong Hospital as an example of eco-friendly design: "The hospital's internal hot water supply is provided by solar energy. Harvested rainwater is the main source of irrigation for rooftop gardens, while NEWater is used in the cooling towers of the air-conditioning system."


Source: The Business Times © SPH Media Limited. Permission required for reproduction