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How Indonesia and Singapore Can Deepen Their Renewable Energy Cooperation

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How Indonesia and Singapore Can Deepen Their Renewable Energy Cooperation

In many ways, the two nations are natural partners in the development of green energy sources.

How Indonesia and Singapore Can Deepen Their Renewable Energy Cooperation
Credit: Depositphotos

A major milestone in the bilateral renewable energy cooperation between Indonesia and Singapore occurred when the two nations committed to elevating their cooperation at the 2020 Singapore International Energy Week. The commitment bore fruit a year later, when, through a joint consortium, the two governments inked an agreement to cooperate on developing land-based and floating solar farms.

Expected to begin operations in 2024, the solar power plants will be situated on Bulan Island, a small island south of Batam and a traditional source of pork exports to Singapore. In addition, floating solar farms will be constructed on Duriangkang Dam in Batam. The consortium aims to produce at least 0.8 gigawatts of low-carbon electricity by 2035, or about one-fifth of Singapore’s current clean energy import target. The electricity generated from the solar plants will then be transmitted to Singapore via subsea cables.

The energy cooperation demonstrates the two nations’ bilateral commitment to exploring transnational renewable energy synergies.

Between Strategic and Market Commodities

As close neighbors, Indonesia and Singapore enjoy long-standing cooperation in the energy sector. The relationship is an interdependent one whereby Singapore relies on Indonesia to supply natural gas via submerged pipelines while Indonesia imports refined petroleum and petrochemical products from Singapore.

Singapore’s lack of hydrocarbon resources means that crude oil and natural gas imports are crucial to sustaining its economic growth. In 2020, the city-state imported 93 percent of its energy needs in the form of petroleum products while about 6.5 percent was imported natural gas.

Despite being dwarfed by Singapore’s crude oil imports, natural gas is the source of energy for 95 percent of its electricity needs. For this reason, a consistent supply of piped natural gas from Indonesia is critical to the stability of the electricity supply and highlights Indonesia’s importance to Singapore.

Indonesia on the other hand, possesses abundant natural resources. Electricity is generated using domestic supplies of coal, oil, and gas, in addition to the country’s growing renewable energy capacity. The official government report also suggests that Indonesia enjoys a significant electricity surplus of around 4.79 GW, or 12.6 percent of the nation’s electricity capacity. As a result, under favorable market conditions, Indonesia has strong incentives to export energy products.

The Shift Toward Renewable Energy

Singapore began exploring alternative energy sources in 2014. In that year, it initiated the SolarNova Initiative, the deployment of solar photovoltaics on the roof of Singapore’s House Development Board (HDB) buildings as well as public facilities and infrastructure. Two government institutions, the HDB and Economic Development Board (EDB), have set a target of generating more than 1GW in renewable energy beyond 2020. The government believes that solar energy can contribute to a significant proportion of Singapore’s electricity needs and safeguard its energy security.

While the SolarNova Initiative is still work in progress, its importance was highlighted by a disruption in the supply of piped natural gas from West Natuna and South Sumatra in mid-2021, which forced a handful electricity companies in Singapore to temporarily shut down. Nonetheless, the termination of a gas supply contract with Indonesia is on the horizon, and could end as soon as 2023. This shortcoming is exacerbated by the surge in the global price of liquefied natural gas, which remains too expensive to offset the reduced piped gas supply.

The move toward clean energy also represents Singapore’s commitment to the climate change agenda. As Singapore relies heavily on foreign direct investment, staying relevant at the global arena in the fight against climate change is as important a strategy as securing affordable energy for its citizens. According to Gilles Pascual, a renewable energy consultant based in Singapore, importing energy is also a “strategic move to remain attractive to the increasing number of companies that are looking for markets where they can source green electricity to invest and create jobs.”

Indonesia similarly regards clean energy as an opportunity to attract more foreign direct investment. At the recent COP26 Summit held in Glasgow, President Joko Widodo’s attendance – a rare appearance on the international stage – highlighted his interest in seizing the international climate change agenda for Indonesia’s benefit. Indeed, at the summit the president made substantial progress in encouraging investment commitments in Indonesia’s renewable energy sector.

At home, the Indonesian government has also sought to finalize the relevant regulatory frameworks, including a Grand National Energy Plan and Renewable Energy Act, to enable the movement of clean energy investments into the country. With these regulations in the pipeline, the government has given a commitment to gradually shut down the existing coal-fired power plants as well as to halt new requests for non-environmentally friendly projects. The country has projected that electricity generators built after 2030 will be predominantly solar powered.

Energy Transition: A Key Building Block

One way to interpret the two countries’ relationship in energy cooperation is that of Singapore setting the tone and Indonesia following market demand – an existing foundation that will likely shape future bilateral cooperation on the development of clean energy. On one hand, Singapore is planning to move away from natural gas but is frustrated by geographical limitations in developing solar energy as a major contributor to its electric grid. On the other hand, Indonesia’s favorable geography and its abundant natural resources, can help Singapore achieve its energy transition plan. This would also open opportunities for Singapore with its leading know-how in solar photovoltaics to conduct technology transfer with Indonesian counterparts.

Even though renewable energy cooperation serves as a promising key building block for Indonesia and Singapore to buttress their bilateral cooperation moving forward, there are pitfalls to be considered. The lack of a power grid (in the forms of subsea cables) connecting Indonesia and Singapore is an obstacle to progress on clean energy cooperation, and in Indonesia, subsea cables have also been compromised due to ship anchoring and disruptive fishing activities. To alleviate this shortcoming, the two governments should work to create a joint infrastructure development plan.

Another issue is the different pace of clean energy development in the two nations. Compared to Singapore, which has boasted a clean energy ecosystem since 2014, Indonesia is still at the initial stage of its transition from fossil fuel to renewable energy, with the expectation that the Renewable Energy Act will be enacted by the end of this year, if not in early 2022. Until the bill is passed, there will still be questions over regulatory assurance for oil and gas players in Indonesia to start shifting towards cleaner forms of energy. The different pace between Indonesia and Singapore would mean that both governments should work together to ascertain a strategic plan to guide their progress toward shared objectives.