Sarawak-Singapore power deal: Worth it?

THE 720km Sarawak-Singapore subsea power cable project is in the news again but details remain scarce.

The only update about the 1GW project is that the construction method is set to be finalised before end-March.

A conditional agreement will then be signed between Malaysia and Singapore, Sarawak Premier Tan Sri Abang Johari Tun Openg said recently.

Progress on the project seems to be slow although it is understandable given the technical complexities.

There is also the geographical and maritime border challenge, considering that 80% of the cable will pass through Indonesia’s Muri-Midai corridor.

The project is costly, with Abang Johari previously saying that it could be S$8bil (RM26bil), more than half of Sarawak’s reserves of about RM40bil.

However, Sarawak has made it clear that Singapore will bear the cost. “We are only selling the electricity,” local paper Dayak Daily quoted state Minister of Utility and Telecommunication Datuk Seri Julaihi Narawi as saying last May.

Julaihi added then that any buyer of Sarawak’s electricity, including Peninsular Malaysia, will have to pay for the infrastructure.

It is unclear whether Singapore has agreed to foot the entire bill, in addition to paying for the electricity.

In the past, under Tun Dr Mahathir Mohamad’s first stint as the prime minister, there was a plan to export 90% of the electricity generated by Sarawak’s Bakun Dam to Tanjung Lemang, Johor, via a 700km underwater cable. The plan was, however, shelved due to cost issues.

When the Bakun dam idea was conceived, Sarawak did not have domestic demand for hydropower. Today, however, it is home to some energy-intensive industries such as steel, aluminium, glass, as well as oil and gas, including those in Bintulu’s Samalaju Industrial Park (SIP).

In fact, the bulk of Sarawak’s power demand comes from SIP and it continues to increase.

In 2023, Sarawak’s power generation capacity was reported at 5.75GW, enough to fulfil power demand of 4.63GW domestically and for export to West Kalimantan, as well as to leave a healthy reserve margin.

The reserve margin for planned and unplanned power outages recommended by the International Energy Agency is 20% to 35%.

Sarawak’s power generation capacity is 5.75GW, with 62% coming from three dams – Bakun (2.52GW), Murum (944MW) and Batang Ai (94MW).

By 2032, Sarawak’s power generation capacity is projected to increase to 9.53GW, of which 88% will be for local use. Only 1.13GW will be exported to Singapore and Sabah. Sarawak will still have a reserve margin of 22%-25%.

The subsea power cable project bets on this projected increase in power generation capacity. The 1GW of energy to be sold to Singapore will come mainly from Sarawak hydropower.

The 1.29GW Baleh hydroelectric project in Sarawak is under construction and is expected to be commissioned by end-2030.

Singapore aims to import 6GW of low-carbon electricity, including renewable energy, by 2035 to meet about one-third of its power needs then.

Sarawak is just one of the low-carbon electricity sources for Singapore. Also, the state is not the only one selling electricity to Singapore via subsea cables.

Last year alone, Singapore granted conditional approvals to import 1.4GW of electricity from two solar power projects in Indonesia owned by the consortia of TotalEnergies-RGE and Shell-Vena.

The electricity from both projects is to be transmitted via a common subsea transmission cable system to the city-state.

The power deal comes on top of a previously agreed 2GW of solar power imports from Indonesia.

Singapore will also be importing electricity from Australia.

Last October, Singapore’s Energy Market Authority (EMA) gave conditional approval to Australian solar project developer Sun Cable to sell 1.75GW of solar power from Australia’s Northern Territory.

The power is to be transmitted to Singapore via new subsea cables over 4,300km.

As part of the US$24bil cost, Sun Cable will build a massive solar farm in Darwin, the state capital of Australia’s Northern Territory.

In 2023, Singapore granted a conditional licence to import 1.2GW of predominantly wind-generated electricity from Vietnam. The power will be transmitted via a new 1,000km submarine cable.

In the same year, EMA granted conditional approval to import 1GW of hydropower, solar and potentially wind power from Cambodia, also via subsea cables of over 1,000km.

In any case, the Sarawak-Singapore power cable will be shorter than those from Cambodia, Vietnam and Australia.

Interestingly, Abang Johari has said previously that only three undersea power cables similar to that of Sarawak-Singapore power cable exist worldwide.

Evan Ng, a senior consultant in power and low-carbon solutions at London-based Baringa Partners, however, has pointed out that there are plenty.

The United Kingdom alone has nine connecting the country to neighbouring markets.

“Maybe, the Sarawak premier was referring to a specific or unique design of the cable that is not common worldwide. I’m not sure,” Ng tells StarBiz 7.

He calls the Sarawak-Singapore project “a step in the right direction” towards achieving a decarbonised regional power system and unlocking economic benefits for both Sarawak and Singapore.

It is also an important step toward realising the long-discussed Asean power grid vision.

From a welfare economics standpoint, Ng says the power interconnector presents a win-win situation for both Sarawak and Singapore.

“For Sarawak, it will enable the export of excess renewable power to Singapore, reducing the curtailment of renewable power generation (when hydropower generation exceeds demand) and providing a route to market.

“At the same time, Singaporean consumers’ higher willingness to pay for power, particularly from green sources, will allow power generators in Sarawak to capture greater value through exports.”

These considerations will become increasingly important as Sarawak progresses toward its 15GW renewable power generation capacity target by 2035 – a significant increase from its current capacity of 5.7GW.

Asked about funding models for the Sarawak-Singapore power deal, Ng highlights that interconnectors are already a mature technology for facilitating cross-border power trading in some regions such as Europe.

“Based on this experience, private sector financing is possible. However, given that the subsea interconnector is the first of its kind in Asean, some level of government involvement could be useful in boosting investor confidence,” he says.

A key point highlighted by Ng is that the interconnector allows Sarawak to not just earn via exports of electricity, but also through additional services such as capacity payments.

A capacity payment is a fee paid to a power asset, such as a power generator or an interconnector, in exchange for its commitment to increase power supply during times of high supply-demand discrepancies.

In this case, Singapore benefits from importing electricity from Sarawak from an energy security perspective.

If power plants in Singapore unexpectedly shut down or demand spikes due to unpredicted events, the interconnector and power generators in Sarawak can increase power generation for to export to Singapore.

This prevents potential blackouts and enhances Singapore’s energy security.

This arrangement is common in Europe.