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  Straits Times 30 Mar 07
The economics of eco power
 By Economics Correspondent, Erica Tay

ONCE upon a time, a group of eco-conscious engineers hatched an ambitious plan to install solar energy systems in thousands of remote Asian villages out of the reach of power lines. Villagers who had to rely on kerosene lamps would be able to flick a switch to get power from rooftop solar panels. And the engineers behind this endeavour would rake in millions of dollars.

Dream on, said the naysayers, who derided the vision of those like Dr Toh Peng Seng, director of renewable energy firm Grenzone. 'When we first started five years ago, people laughed at us,' recalled Dr Toh, an electrical engineer.

Fast-forward to today. Grenzone has already installed such solar power systems in villages from Indonesia to Papua New Guinea, complete with low-wattage lights it developed. It costs US$300 (S$455) to US$400 to power up each home, largely funded by each country's government and foreign aid.

'The village households that have benefited from our systems number in the thousands,' Dr Toh said, revealing that Grenzone racked up sales of between $7 million and $8 million last year.

Companies such as Grenzone are set to mushroom here in the next few years, given Singapore's decision to get behind clean energy as a growth industry.

If economic planners have their way, local eco-firms will be joined by some of the world's biggest clean-energy companies.

The Economic Development Board (EDB) this week unveiled a blueprint to develop the industry. It covers research, testing, manufacturing and marketing - the full range of activities from the moment an idea is hatched to the time the finished product is sold.

Funds amounting to $350 million have been set aside for the strategy, which the EDB says will be a 'full government effort' involving agencies including the Housing Board and research institutes, among others.

Besides solar power, Singapore also wants to attract players in other forms of clean energy - biofuels, fuel cells and wind power.

But all these raise a question: What makes Singapore, a latecomer to the game, think it can become one of the world's centres for clean energy?

In 1992, when Singapore launched its Green Plan to become an environmental tech hub, the idea of this sunny island plugging into solar power was raised, discussed and dismissed. Why? Too much cloud that disperses sunlight.

Yet there are strong reasons for the renewed fervour for clean and green fuels.

Global demand for clean energy is set to rise sharply in the next five to 10 years - a 'point of inflexion', said Mr Kenneth Tan, executive director of the EDB's division for emerging industries.

This sentiment appears to be shared by big business worldwide. The Economist magazine reported that global investment in clean energy is estimated to have more than doubled from US$30 billion in 2004 to US$63 billion last year.

If Singapore wants to catch the wave when the turning point comes, it must invest now, Mr Tan said.

A key driver of demand is the increasing need for energy security, as nations try to cut their dependency on oil-rich countries. Climate change and natural disasters also have heightened awareness of the damage 'dirty' fuel can cause to the environment.

Most important, however, is economics. The reason the market for alternative fuels has not taken off in a big way yet is that oil, gas and coal are still cheaper than clean fuels. But with the trend for fossil fuel prices rising, and technological advances driving down the cost of clean energy, the two could converge in five years, said Mr Tan.

Solar power still costs 2.5 times more than fossil fuel electricity, but this number is coming down. The price of solar power is falling by 5 per cent a year, and this is what will cause demand to explode, he said.

Nevertheless, sceptics of Singapore's clean energy push point out that Germany and Japan, two of the world's leading users of solar power, are a long way ahead in the game. Through strong government subsidies, the two nations have the highest number of solar installations worldwide.

How then will Singapore compete? For one thing, when the cost of solar power falls to a point where it can compete with fossil fuel energy without subsidies, urban demand is expected to balloon globally. Consequently, the pie will grow big enough for old and new players alike.

In addition, Singapore is eyeing the part of the rural Asian population not served by grid electricity - the kind of consumers Dr Toh's Grenzone is serving. There are an estimated one billion people in the Asian sun belt for whom clean energy is not exactly an alternative but their only hope of reliable, affordable power. Many live in places so isolated it is too costly to install power lines.

This so-called 'off-grid' market is a largely untapped goldmine that Singapore is well-placed to serve by customising technology to local needs. This market needs different products and solutions from those required by consumers in affluent, temperate countries such as Germany, said Dr Toh.

An added bonus for Singapore if this demand materialises would be the fresh lease of life given to the semiconductor manufacturing sector, as the materials and technology for making silicon solar panels are similar to those used in electronic chips.

The EDB is now in talks to bring here some global big-hitters in clean energy. Mr Tan said: 'If we bet right and the point of inflexion is the next 10 years, if all the gates are aligned, then Singapore will be well-positioned to ride this whole industry. It will be like the Internet 10 years ago.'

The day the economics of eco-power makes sense is the day believers in clean energy are vindicated. To local pioneers such as Dr Toh, that this day will come is as certain as tomorrow's sunrise.
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