BMI View : We believe that the Singapore Housing Development Board's participation in the residential solar sector can be attributed to the improving cost competitiveness of solar energy. We note that private sector involvement in the rooftop solar sector has also ticked up considerably over the last few years as a result of solar energy cost competitiveness. We highlight that the development of alternative energy resources is fundamental to energy security in Singapore, which could be another reason for the HDB's push for solar energy.
On September 25, the Straits Times reported that the Singapore Housing Development Board (HDB) was working on its largest solar-leasing tender to date. The board had called for a tender for the project in August, which included the development and operation of 5MW of solar panels on 125 residential blocks in central and north-eastern Singapore. Under the contract, the HDB will offset up to 30% of the start-up costs and purchase the electricity for 20 years at a 5% (or more) discount off the prevailing market price. The electricity generated would power lights in corridors, common areas, lifts and water pumps etc. The board is also looking into households being able to buy excess solar energy generated.
This project is part of the Housing Board's SGD31mn, five-year scheme to test solar energy in 30 precincts around the island. Prior to the 5MW tender launched in August, the government had held a tender in May for 2MW of power for 40 blocks in Jurong East. Both projects are scheduled to start next year and be completed in 2015.
We believe that the HDB's participation in the residential solar sector can be attributed to the improving cost competitiveness of solar energy. Electricity prices in Singapore are one of the highest in the region as the country has no domestic hydrocarbon reserves, and has to rely on fuel imports for thermal generation. For instance, the average electricity tariff for a household in Singapore is SGD0.26/kWh (US$0.21), while the tariff in Malaysia ranges from US$0.06-0.14/kWh. Meanwhile, a sharp decline in solar panel prices over the last decade has drastically driven down solar energy generation costs, making it extremely cost competitive to the current levelised cost of energy generation in Singapore. This gap could further narrow should panel prices head lower, and we could see solar energy achieve grid parity in Singapore.
|Decreasing Panel Prices Improves Solar Cost Competitiveness|
|Average Silicon Solar Module Spot Price, US$/watt|
We note that private sector involvement in the rooftop solar sector has also ticked up considerably over the last few years as a result of solar energy cost competitiveness. A number of solar leasing companies have emerged to develop and operate rooftop solar projects in Singapore. These companies would then sell the electricity generated to HDB and the national grid. For instance, solar leasing company Sunseap has installed panels on HDB rooftops in Punggol which provides enough electricity to fully power common area services - such as lifts and lights - in the day; the extra electricity is sold to the grid. Besides solar residential projects, we note that supermarket chain Sheng Siong has installed a 1.2MW array on top of its distribution centre, and the Ulu Pandan Newater (water treatment) plant relies on a 1MW array for its electricity needs.
We highlight that the development of alternative energy resources is fundamental to energy security in Singapore, which could be another reason for the HDB's push for solar energy. This is because Singapore imports natural gas - accounting for 80% of total electricity generation - from Malaysia and Indonesia via four offshore pipelines, making the country extremely vulnerable to supply disruptions via any of these pipelines ( see 'Biomass Plant Reveals Potential For Renewables', April 26 2012). This also exposes the country to severe pricing risks - electricity prices in Singapore were increased by 4.3% in March 2012 due to rising gas prices in Asia - and the development of other electricity alternatives could hedge again this exposure. We note that the country has completed development of its first LNG terminal. The import of LNG could help to reduce the risks of supply shocks, but we highlight that the costs of LNG are generally higher than piped gas.
|Source Country / Location||Importer / Retailer||Purpose|
|Source: Energy Market Authority Of Singapore|
|Malaysia||Senoko Energy Ltd (Importer)||Power generation|
|Malaysia||Keppel Gas Pte Ltd (Importer)||Mainly for power generation|
|Indonesia, West Natuna||Sembcorp Gas Pte Ltd (Importer and Retailer)||Power generation and industrial use.|
|Indonesia, South Sumatra||Gas Supply Pte Ltd (Importer)||Power generation and industrial use.|
|Gas Supply Pte Ltd & City Gas Pte Ltd (Retailers)|
Besides rooftop solar energy, we also see significant potential for other applications of solar energy. In particular, we highlight solar thermal heating as an attractive option. This is because water heating in Singapore is currently gas-fired, and the installation of solar thermal water heaters on rooftops could greatly reduce gas consumption for this usage. These measures could provide energy savings that translate into cost savings, and we believe that industries and consumers could benefit from adopting these measures.