SINGAPORE: Singapore faces cost, investment hurdles in hydrogen push

As published on: sbr.com.sg, Tuesday 2 January, 2024.

Significant technological development will enable Singapore to generate 50% of its power from low-carbon hydrogen by 2050.

Natural gas-reliant Singapore is putting a premium on low-carbon hydrogen for its energy transition as it faces land scarcity to accommodate other forms of renewable energy. However, the hydrogen sector is still nascent, posing significant challenges in achieving the Lion City’s target due to cost and investment woes.

Under the country’s National Hydrogen Strategy, Singapore sees various use cases for hydrogen across industrial, maritime, and aviation sectors. For the power sector, which comprises 39.8% of the primary emissions in 2020, hydrogen is expected to supply half of Singapore’s power needs by 2050.

“Singapore’s National Hydrogen Strategy is a laudable start, but it is too early to conclude whether meeting its target is feasible or not. The target is a sort of conditional target depending on the technological development and international effort levels,” Kim Jeong Won, senior research fellow at the Energy Studies Institute of the National University of Singapore, told Asian Power.

“However, the pace of technological development and diffusion and the level of international commitment in the relatively long term (by 2050) face considerable uncertainty,” she added, noting that hydrogen still accounts for less than 0.2% of the power generation globally.

Kim said one of the greatest challenges Singapore needs to address is the high cost of low-carbon hydrogen.

Low-carbon hydrogen production costs $3.4 to $12 per kilogram, much higher than the levelised cost of hydrogen from fossil fuels which is around $1 to $3 per kilogram in 2021, according to data from the International Energy Agency.

Won added that deploying large-scale hydrogen will entail infrastructure upgrades or new construction of hydrogen storage and utilisation, requiring huge investments. Add to that the fact that Singapore may not be able to produce green hydrogen domestically due to challenges in deploying renewable energy.

“It will lead Singapore to be a net importer of low-carbon hydrogen, which could be impacted by production and market volatility in exporting countries,” she said.

For the infrastructure development, Are Kaspersen, Associate Partner at Bain & Company Singapore, said the country would have to establish a pipeline network, import terminals, and hydrogen turbines for power generation, amongst others.

It should also ensure that it is “gradually phased” to replace existing infrastructure.

“There will be transition costs associated with the shift to hydrogen. While costs will come down over time, hydrogen for power generation comes at a cost premium over gas and renewables. Infrastructure investments will also have a material cost impact. Minimising the transition cost, and having a clear plan for who bears the cost will be critical,” Kaspersen said.


Despite these challenges, Singapore has made significant progress in developing its hydrogen sector.

The Energy Market Authority (EMA) said that following the launch of the National Hydrogen Strategy, it launched a joint expression of interest exercise with the Maritime and Port Authority for proposals to develop end-to-end solutions for low-carbon ammonia, the most established hydrogen carrier.

Aside from this, the EMA also tapped the private sector through the launch of a request for proposal to build and operate a new generation, hydrogen-ready capacity of 600 megawatts that is targeted to start operations by the end of 2027.

It also partnered with the academe through the Low-Carbon Energy Research Funding Initiative to drive its research and development to explore cost-effective import and hydrogen use in Singapore, as well as its carriers.

The EMA added that it is collaborating with other markets through government-to-government deals to accelerate the development of hydrogen as a decarbonisation pathway in various areas including hydrogen supply chains, and Guarantee of Origin certification schemes.

Under the strategy, Singapore recognises the need for new infrastructure such as import and storage facilities, and distribution networks, amongst others. However, it does not expect to build significant infrastructure in the near term as this would require careful planning.

The country will also implement upskilling and reskilling of its workforce to allow them to adapt to a hydrogen-read economy, the strategy read.

Private sector contribution

Furthermore, the EMA has also appointed Meranti Power to develop two new open cycle gas turbines (OCGT) with 340 megawatts capacity each that are ready to take up 30% hydrogen and eventually fully switch to hydrogen. These new plants are expected to start operations by June 2025, replacing the retiring OCGTs.

Attaurrahman Ojindaram Saibasan, power analyst at GlobalData, noted that the private sector is also contributing to driving the green hydrogen sector in Singapore.

At present, the only operational green hydrogen production plant is the REIDS-SPORE Hydrogen Plant by ENGIE SA. The power plant, which started in 2020, is composed of a 100-kilowatt wind turbine.

Meanwhile, Keppel Corp is collaborating with Mitsubishi Heavy Industries and IHI to develop a hydrogen-compatible power plant in Jurong Island with a total capacity of 600 megawatts. The power plant, which will use natural gas for the majority of production when it starts in 2026, is also set to increase the share of hydrogen gradually.

Accelerating hydrogen adoption

Hydrogen and its derivatives such as ammonia can provide various benefits to Singapore, according to Kaspersen. First, it is a dispatchable power source that will provide balancing and peaking power to the grid system.

This can also be sourced from various markets such as Australia or the Middle East and be stored in Singapore which can provide supply security. This will also be a required low-carbon feedstock for the decarbonisation of hard-to-abate sectors.

One of the ways Singapore can support hydrogen development is by supporting the industry in “de-risking” early investments through backing pilot tests for critical technologies, as well as partnering with the production side as an offtaker, he said.

Saibasan said Singapore should create “a supportive environment and lucrative incentives, [and] tax breaks” to encourage investors to support the development of the hydrogen sector.

Some of the policies the government could implement to ramp up low-carbon hydrogen include imposing quotas for its use, as well as financial incentives, Kim said.

Kim cited the EU which launched quotas for green hydrogen for the industry and transport sectors, whilst the US and other European countries such as France and Denmark have introduced subsidies and tax credits for the production and use of low-carbon hydrogen.

Whilst Singapore has announced its commitment to ramp up its renewables capacity, achieving at least two gigawatt-peak of installed solar by 2030 and importing up to four GW of low-carbon electricity by 2025, this will still not suffice to meet the net-zero goal by 2050.

“The land constraints make additional large-scale solar deployments challenging, and electricity imports may raise concerns about energy security. In this regard, low-carbon hydrogen has the potential to contribute greatly to Singapore’s net-zero journey,” she said.


Singapore Hydrogen Low-carbon hydrogen Energy transition Investment

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