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Friday, Oct 31, 2014

Singapore

Dynamic future in power generation

The Straits Times | Friday, Oct 31, 2014

Singapore is well-suited for solar energy, given the perennial sunny climate.

It takes a certain degree of courage to try to envision what Singapore's environmental landscape will be in the far future. By this, we are referring to at least 30 to 50 years' time - and this is sufficiently distant not to be too bothered if the predictions do not pan out.

In the energy sector, three developments will converge to create two shifts in the way energy is obtained here.

The first shift will be in fuel mix. Currently, the bulk of Singapore's fuel comes from natural gas piped in from Malaysia and Indonesia. However, with improvements in technology to harness and store electricity, we expect to see a greater reliance on renewable energy, specifically solar energy. Already, it was announced yesterday that Singapore will be able to produce five to six times more energy from the sun by the end of next year, as the Government chases its target of having solar power meet about 5 per cent of electricity demand by 2020.

Singapore is well-suited for solar energy, given the perennial sunny climate. Prices of solar panels have also fallen dramatically since China's entry as a producer into the solar panel market.

The obstacle that has prevented more widespread adoption of solar energy has not been price, but dependability - the difficulty of storing cheap solar energy produced in the day for use at any time. As electricity storage technology improves, we foresee a shift away from natural gas to a greater use of solar energy.

The other development that will drive the shift in Singapore's fuel mix away from piped-in natural gas is developments in clean technology regarding burning coal and shale gas extraction. Coal and shale gas are very similar in that both are abundant and, therefore, extremely cheap.

However, concerns about their environmental impact have limited their growth. For shale gas, the concern is over the pollution - such as groundwater poisoning - caused in the "fracking" extraction process. For coal, it is over the large amounts of carbon emissions when it is burnt. With technology that mitigates pollution from fracking, and improvements in carbon capture technology, we expect to see a migration towards these cheaper energy sources. Singapore is already exploring importing shale gas from the United States.

The third development is the trend towards a more cooperative world as Singapore's neighbours become prosperous. As the region grows from greater trade and investment links, friendlier ties will enable the full implementation of a smart energy grid with every ASEAN nation plugged in.

This will allow for more stability in electricity supply as energy deficits in one country can be made up for by surpluses of another, and more energy efficiency as more will be produced by the one with the lowest marginal cost. For Singapore, this also means a general shift in energy generation from internal to external sources.

Policy-wise, we expect a broadening of markets where the economic principle of taxing negative externalities (costs to third parties that are unaccounted for) are applied. A number of these taxes are already in place - cigarettes are taxed for the health cost imposed on passive smokers; road usage is taxed (via electronic road pricing) for the congestion caused; and car emissions are taxed for the pollution created.

For some existing markets, the taxes will be expanded to include the whole market. For example, to deal with congestion, every road will be priced. "Smart" gantries will adopt dynamic pricing - the greater the congestion, the higher the price for using it, adjusted instantly.

For other markets, taxes will be increased or introduced to correct for other externalities, such as those related to waste generation and noise creation. Carbon taxes will be introduced.

In the case of climate change, while carbon taxes will help reduce carbon emissions, adaptations will be made to accommodate the reality of an already warmer world.

Existing policies, such as higher building bases to prevent flooding and regulation on coastline development, will be expanded. Buildings will be built further inland in response to higher expected sea levels and land reclamation may be curtailed until it becomes clear that it does not contribute to flooding. Similarly, for waste management, policies will be developed to complement taxes. Closer relations with Singapore's neighbours will enable it to lease land from Malaysia and Indonesia for landfills for non-toxic waste.

A holistic approach

There will be a fundamental paradigm shift that will influence Singapore's population size, in that policy will be guided by the concept of an optimal population that can maximise the quality of life.

Systems will be established to elicit the public's preference for environmental goods. One part of this would be requiring all proposed public projects to be accompanied by environmental impact analyses (EIA). Perhaps even as early as 10 years from now, the combination of increasingly developed valuation techniques and the shift towards more holistic welfare will promote the use of EIAs.

Singapore's environmental landscape in the far future will be a dynamic changing one that utilises modern technology, pragmatism as cost-benefit analysis and efficiency-based decision-making.

stopinion@sph.com.sg

Euston Quah is professor of environmental economics and head of economics at Nanyang Technological University. Christabelle Soh is a former teacher now working with the Ministry of Education.

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