Southeast Asia cross-border clean energy trade gets a boost with Laos-Singapore sales

A project to send solar power from Australia to Singapore has also been deemed investment-ready. These are important milestones for multilateral energy trade in Asia-Pacific, said experts, but the incremental gains reveal huge challenges.

Nam Gnouang Dam on a tributary of the Nam Theun River in Laos
The Nam Gnouang Dam on a tributary of the Nam Theun River in Laos. The development of hydropower can affect local communities' livelihoods and food sources. Image: WorldFish, CC BY-NC-ND 2.0

Singapore has started to import hydroelectricity from Laos, using existing cables running through Thailand and Malaysia, according to a statement on Thursday by policymakers and utility firms in the two transacting countries.

At the same time, the Australian government has labelled a project to send solar power from Australia to Singapore via thousands of kilometres of undersea cables “investment ready”, signalling the authorities’ greater confidence in the deliverability of the proposal.

Both represent progress in plans, many years in the making, to trade renewable energy in Asia Pacific, though it could still take till the end of the decade to see large-scale transactions happening, according to current plans.

Laos-Singapore trade

According to a two-year power purchase agreement announced by Singapore electricity retailer Keppel Electric and its Laotian counterpart Électricité Du Laos (EDL) on Thursday, Singapore will import up to 100 megawatts of electricity from Laos. The inking of the agreement comes eight years after the inception of the plan. 

The price of the imported electricity was not revealed. The import quantity, however, represents under one per cent of Singapore’s current electricity generation capacity. This traded amount will also drop to 30 megawatts during the dry season, when water levels at the Laotian dams dip, said media reports from Laos and Vietnam. 

Elrika Hamdi, an analyst at US-based think-tank Institute for Energy Economics and Financial Analysis (IEEFA), said the Laos-Singapore transmission is a new milestone for power interconnections for Southeast Asia.

But the eight-year gestation period highlights the challenges such projects face, Hamdi said.

“Cross-border interconnections are always faced with geopolitical, security, regulatory and social-economic issues, on top of technical ones,” she said.

“Scaling the project up will not be easy. Land-constrained Singapore might not have many choices to accelerate their decarbonisation target unless the neighbouring nations agree to work together with the city-state,” she added. Indonesia recently announced a halt to clean energy exports to focus on fulfilling local needs.

The new Laos-Singapore purchase agreement is the first time electricity is being passed along four Southeast Asian countries from seller to buyer. Previous sales in the region have either been bilateral, or through one intermediary country.

The Laotian hydropower is Singapore’s first overseas consignment of renewable energy. Singapore has an ongoing energy import trial with Malaysia, but Malaysia has a ban on clean energy exports.

Singapore and Laos authorities say the transactions will guide the development of multilateral electricity trade in Southeast Asia — an idea first mooted in 1997 but that has faced obstacles in scaling up.

“Interconnected power grids can accelerate the deployment of renewable energy, promote supply diversification and strengthen grid stability for the region,” said Ngiam Shih Chun, chief executive of Singapore’s energy market authority.

“We believe this project is just the beginning of a new era where distance is no longer an obstacle,” Chanthaboun Soukaloun, managing director of EDL added.

Singapore wants to have 30 per cent of its energy needs fulfilled via clean energy imports from its neighbours by 2035. A tender launched last year received proposals to get the energy from Indonesia, Laos, Malaysia and Thailand.

Laos is one of the world’s largest electricity exporters, owing to its nearly 80 hydroelectric dams. Nearly 250 other hydropower projects are in the planning stage, according to Washington-based Center for Strategic and International Studies.

Laos is already selling electricity to countries like Cambodia, Myanmar, Thailand and Vietnam.

While hydropower is considered renewable, river damming in Laos has led to warnings of silt build-up and loss of wildlife in one of the most biodiverse places in the world.

Australia-Singapore cable

The Australia-Asia PowerLink, or AAPowerLink, is now one of eight proposals the Australian government deems to be of national importance and is ready to accept funding.

The project was announced in 2019, and included in Australia’s priority list of developments in early-2021.

It involves building solar panels on 12,000 hectares of land in northern Australia to generate a maximum of 20 gigawatts of electricity, coupled with battery storage. Over three gigawatts is set aside for the Darwin region in Australia, while about two gigawatts will be sent through subsea cables to Singapore, 4,200 kilometres away.

Sun Cable, the Australian firm behind the project, said it expects to provide 14,000 jobs, US$5.5 billion of investment into Australia and US$1.4 billion in annual export revenue from 2028 onwards.

The project is valued at about US$20 billion in total. Sun Cable raised US$150 million in March to work on the project.

Construction is expected to start in 2024, with electricity flowing to Darwin in 2027 and Singapore by 2029, the company said. Indonesia has agreed to maritime surveys in its waters for the subsea cables needed.

“This is clearly positive and a step in the right direction towards a final investment decision. It would however be a further boost to have a firm view on the offtakes for this power in Singapore — and in Australia’s Northern Territory. If there was some evidence provided of power purchase agreements, that would certainly help a lot,” said Marc Allen, an energy consultant and co-founder of Singapore climate-tech platform Unravel Carbon.

Singapore’s trade and industry ministry said last November that Sun Cable needs to file a proposal first if it intends to sell electricity to the city-state. Sun Cable could not be reached on Friday for a query on whether it has filed an application, or intends to do so.

“This is an innovative project and definitely the sort of visionary thinking that is required but the overall business case remains challenging — particularly as Singapore has started importing renewable electricity from Laos and the beginnings of an ASEAN power grid are starting to be seen,” Allen added.

Australia is currently the world’s second largest supplier of coal, one of the most pollutive forms of fossil fuels. The country’s new prime minister Anthony Albanese, voted in last month, has promised to turn it into a renewable energy superpower.

“Sun Cable’s project will position the Territory as a renewable energy powerhouse,” said Natasha Fyles, chief minister of Australia’s Northern Territory, in a statement, echoing Albanese’s campaign promise.

Australia also has a 26-gigawatt “Asian Renewable Energy Hub” situated in the state of Western Australia and helmed by a group of energy firms. United Kingdom-based oil giant BP acquired a 40 per cent stake in the project last week to use wind and solar power to produce hydrogen fuel, which can be shipped to other countries in Asia Pacific.

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