BritCham in the Press: 'Solar and clean energy projects in Asia to benefit from $655m secured by S’pore climate initiative'

Source: The Straits Times

The US$510 million (S$655 million) that Singapore recently secured for green investments in South-east Asia and South Asia will fund a range of solar energy projects and a scheme that turns agricultural waste into electricity.

These green initiatives – which can reduce about 350,000 tonnes of carbon emissions a year – were announced by Singapore’s Ambassador for Climate Action Ravi Menon on Sept 9.

The solar energy projects will include battery storage that can capture and store excess electricity for future use. The bio-energy project in several South-east Asian countries will use agricultural waste and feedstock instead of planet-warming fossil fuels to produce cleaner electricity.

Mr Menon said the investments will be made in the coming months, but did not disclose the countries in the region and South Asia that will benefit from the greener electricity.

Other projects include those related to electric vehicles, as well as water and waste management, he said at The Sustainability Dialogue by the British Chamber of Commerce Singapore.

These green projects tend to be less bankable and are not readily supported by private finance players.

The details of the projects come a day after the Monetary Authority of Singapore (MAS) announced the amount of funding raised by the national climate finance initiative.

The amount was the first to be commercially secured under the Financing Asia’s Transition Partnership (Fast-P).

The aim of Fast-P – a blended finance initiative by MAS – is to bring together public, private and philanthropic capital to help finance Asia’s decarbonisation, with the aim of eventually raising up to US$5 billion.

“US$510 million is a lot of money but trivial compared with the scale of financing needed for Asia’s transition,” said Mr Menon, who noted that Asia faces a shortfall of at least US$800 billion annually in climate financing.

There are three funding pillars under Fast-P, with the green investments pillar being the first to close, securing US$510 million from a range of financiers including Temasek, HSBC, and the Australian and European governments.

As a start, US$1 billion will be raised for each pillar, with the remaining US$2 billion kept in reserve. 

The second pillar is on energy transition, which will help countries phase out coal plants and replace them with renewables, battery storage and grid infrastructure.

The third pillar focuses on helping emissions-intensive sectors, such as cement and steel production, to decarbonise while supporting technologies like carbon removal.

The Fast-P initiative typically starts with capital from public or philanthropic sources as a catalyst. This will then spur the private sector – which holds most of the world’s wealth but is risk-averse – to invest in sustainable projects.

Revealing more details on how the US$510 million was raised, Mr Menon said it started with US$51 million committed by the Singapore Government.

This amount was later doubled to US$102 million through contributions from other governments, philanthropies and commercial players.

The initiative also drew US$408 million in commercial capital, bringing the total to half a billion US dollars.

“With US$51 million, the Singapore Government has crowded in a pool of capital 10 times larger to facilitate Asia’s green transition,” said the former MAS chief at the Pan Pacific Singapore.

The US$51 million comes from the US$500 million that the Singapore Government pledged to Fast-P. This will be in the form of concessional funding, such as grants and loans provided at more favourable terms and below market rates. 

Achieving the US$510 million was not easy, and the green investments pillar had to overcome several challenges, noted Mr Menon.

For one thing, Fast-P needed to balance the objectives of commercial investors with those of public and philanthropic investors.

Commercial investors prefer bankable projects with adequate returns and acceptable risks.

Public and philanthropic investors, however, are willing to bear risks – but only for projects that would otherwise not be financed by private players, explained Mr Menon.

Fast-P is now actively exploring the inclusion of insurance companies, he said. 

“Insurance companies, because of their expertise in identifying and assessing risk and being able to cover for risks, can also play an important role.”

The Fast-P team has been consulting with the World Bank Group’s Multilateral Investment Guarantee Agency, which encourages foreign investment in developing countries by providing insurance against political risks. 

“Asia accounts for 50 per cent of global emissions and will account for 90 per cent of the world’s future growth in energy demand. Without decarbonising Asia, the world will not reach net zero,” Mr Menon said.

Beyond blended finance, he outlined how Singapore is advancing into low-carbon technologies, during a time when “the global momentum behind climate action has seen better days”.

He was referring to climate denial emerging from the US, and its federal policies taking a dramatic turn against renewables and clean technology.

Mr Menon noted that other countries are using the US as an excuse to review their own climate targets, while friction in global trade and geopolitical risks “have added to the list of excuses for slowing down climate action”.

Low-carbon fuels such as ammonia and advanced solutions like carbon capture are crucial for emissions-intensive sectors that contribute nearly 40 per cent of global emissions.

These sectors include steel, cement, aviation, maritime and chemicals.

“These are sectors that have no economically or technologically feasible pathway to net zero. Simply phasing them out is not a practical solution,” said Mr Menon.

Addressing Singapore and British businesses at the dialogue, Mr Menon outlined how both countries are working to help decarbonise their respective maritime sectors, while advancing carbon capture.

For example, the Global Centre for Maritime Decarbonisation – headquartered in Singapore – has been conducting pilots and trials with British companies such as BP and Ashurst.

In August, trials using biofuel blends achieved a 24 per cent reduction of the carbon emissions from conventional marine fuels, he said.

Mr Menon noted that ports also need to be retrofitted to allow for safe bunkering with cleaner fuels like ammonia, which is known to be corrosive and flammable. 

On carbon capture, Sembcorp Industries is working with a British firm to build the UK’s first net-zero emissions power station. The 300MW plant’s carbon dioxide emissions will be captured and stored offshore.

“Amid a general gloom pervading the climate agenda, there are many bright lights of hope and progress,” said Mr Menon.