New Energy Realities - What does it mean for you?

The British Chamber’s Energy & Utilities Business Group held its year-end Breakfast Club event in December 2016.  Entitled “New Energy Realities - What does it mean for you?”, this panel session served as a post-Singapore International Energy Week (SIEW) event to review key themes and look ahead at prospects for the sector in 2017. This article summarises the issues and key takeaways from the discussion.

Published 22nd March 2017

 

By Tim Rockell & Peter Godfrey

 

During a British Chamber panel event on the 1st December 2016, speakers James Cameron (HSBC), Edwin Khew (Sustainable Energy Association of Singapore), Ng Wai Choong (Energy Market Authority), Goh Swee Chen (Shell) and Peter Godfrey (Energy Institute), addressed the following questions alongside themes emerging from the SIEW.  Attendees gained insights on how local and regional impacts would affect their roles in 2017 and new opportunities for the sector in Singapore.

 

  • With commodity prices in a 'lower for longer' environment, what are the impacts on investment flows and funding mechanisms in the energy sector?
  • What are the impacts from the trend to increase renewables in the energy system? What will be the reaction of the oil & gas industry to this trend in Southeast Asia?
  • Should Singapore be a leader in technology and innovation and; what are the implications for the sector?

 


The world is transforming around us


The International Energy Agency’s end of 2016 forecast suggest that there will be a major transformation of the global energy system over the coming decades as governments aim to tackle climate change and energy efficiency takes effect.  Singapore’s Minister for Trade & Industry (Industry) Mr S. Iswaran at SIEW said that new energy realities are characterised by lower for longer energy prices, new impetus of greener energy systems and key advances in technologies and energy systems and networks.


Is there an under calculation around the interplay of old energy, and gas as a transitional fuel, in a move to renewables following commitments given by nations in COP21?


Old energy - fossil fuels including coal - is not going away. Nuclear remains a significant part of the energy mix. There is a miscommunication somewhere. A number of financial institutions and investors are quite binary in their views. Many European investors will not make new investments into greenfield or high emission projects. Coal however continues to play a significant role in the power sector. One area that governments should collectively focus is on creating a pricing mechanism for carbon to level the playing field by factoring in externalities. Large growth markets for renewable energy will continue to be in China, with India displaying fastest new targets for growth.


Can Singapore create an industry out of solar? From regularity standpoint we are in a world where structurally we cannot make money from new energy, so what new frameworks are required?


When we think of new energy realities we should remember that electricity only accounts for around 20 percent of total energy demand. We need to consider new energy solutions more broadly.  One major use of fossil fuels and natural gas is in petrochemicals. The world is developing fast and we need products for plastics e.g. in cars and tyres. There is an opportunity for smart nation’s type solutions, e.g. conversion of HDB blocks and meters and revised regulation.  Energy storage and contracts with fluctuations to supply will enable buildings to be smarter in the system.


Singapore believes in pricing energy right; so competition and the market decides. The government is seeking more solar deployment through R&D, innovation and reduced red tape. The allocation of land for a test-bed with industry to allow the accommodation of more solar in Singapore is a reality.  With land at a premium, innovative deployment of floating solar PV on reservoirs will test options to allow for greater roll out.


Singapore will focus on a tropical solar model and micro grids. Most solar in the world is manufactured to European standards - designed to withstand northern climates.  In the tropics we are able to make thinner glass modules with greater irradiance and reflection. This provides more energy per square metre me so each module becomes more energy efficient.  If every square inch of Singapore was covered in solar panels then buildings could put power back in to the grid.


The word ‘digital’ is taking on a range of meanings depending on the role of an organisation in the energy value chain. What will we see in Singapore in new technology, digitalisation and innovation?


The world is becoming very digital and we have seen a shift in power to the consumer and resource holders.  Singapore can take on a role to discover what is in the mind of consumers and how to connect them. Singapore has set a minimum energy efficiency standard for buildings and appliances e.g. refrigerators in place by December 2017.  What matters today is not overall consumption but demand profiling.  Singapore launched Project OptiWatt at the SIEW in 2016 to look at different ideas for optimising energy consumption; with the aim to shift demand from peak to off-peak. Sixteen public and private organisations and research institutions each signed an establishment MOU. 


All new ideas need money. Are there different mechanisms such as crowd funding and distributed customers doing their own thing? How do we create a dialogue between players, including finance, to take new energy realities to the next level?


The finance sector is excited by new energy and understands the macro trends that need to be supported. It presents a tremendous opportunity for innovation in the finance industry with an active and healthy dialogue including the public and private sectors.  2016 was a watershed year for transactions with a move in investor appetite towards boards that are keen to decarbonise their businesses, and issue sustainable bonds and green bonds. Asset managers are being incentivised to show the sustainability their portfolios. 


Old energy’s oil & gas and nuclear is here to stay for some time. New energy advocates are not conversing well with old energy. How does old and new energy communicate?


We may see a trend towards more companies partnering rather than acquiring technology in the new energy ecosystem. It is worthwhile putting into perspective that ‘old energy’ will be important for the next 100 years. Currently USD 300 billion is being invested per annum into new energy, however old energy investment is USD 800 billon.  Cumulative investments in the existing energy system is USD 55 trillion. It will take a lot of new investment dollars to change that. 


With the current uptake of renewables the planet will not get to net zero emissions by 2050 without large scale carbon capture and storage; without it we will not meet global climate change objectives. The issue is that is that right now carbon capture and storage is not currently financially feasible - but neither was a lot of renewable energy, which has seen unit costs falling more rapidly than predicted.


Summary


The fact is that we went from a world dominated by Western economic might where 50% of us worked on family farms to where less than 2% do today, but that took us 8-10 generations. There are big changes brewing, and it is up to us to determine what those changes will be. We live in a world where the relative wealth of nations is changing so rapidly and the multiple millions who make their living in the “traditional industries” of the past whether in energy or other industry sectors see their jobs fundamentally transform or even evaporate in little more than one single generation. In an energy world in transition, it is up to new and forward-looking leadership of countries and communities to make sure that everyone is protected – equally – and to do so without burdening future generations with the task of paying for the solutions they come up with. This is beginning of longer discussion on the future old and new energy.  Government and private sectors, older and younger generations together. The British Chamber of Commerce and Energy Institute is keen to play its part and create opportunities for the United Kingdom and Singapore to play a role together.

 

About the Singapore International Energy Week 

 

The 9th SIEW was held at the end of October 2016 by the Energy Market Authority (EMA) and attracted over 13,000 energy executives to discuss a range of topics under the heading of ‘New Energy Realities’.  The 10th edition of the SIEW will be held October 23-27 2017 at Marina Bay Sands, Singapore.

 

about the authors

 

Tim Rockell relocated to Singapore to launch the KPMG Global Energy Institute for Asia Pacific in November 2012. Peter Godfrey is Managing Director of the Energy Institute (UK) in Singapore.   

Both Tim and Peter are members of the British Chamber of Commerce Energy & Utilities Business Group Committee, which meets on a regular basis to discuss the latest trends in the industry and to develop relevant events for the Chamber in this sector. More events under these themes are planned for 2017.

Member companies represented within this group include BP, DNV GL, Energy Institute, InfraCo Asia, KPMG, Shell, Simmons & Simmons, Societe Generale and the UK Department for International Trade. Find out more at http://www.britcham.org.sg/businessgroup-details/energy--utilities

 

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