Power generation firms face high hydrogen costs in Singapore

Singapore is moving ahead with plans to decarbonize its power generation sector, exploring hydrogen co-generation with natural gas as a feasible option, though power generation companies face high costs associated with hydrogen.

Earlier, Singapore's Energy Market Authority (EMA) awarded the right to build, own, and operate a 600 MW hydrogen-ready Combined Cycle Gas Turbine (CCGT) facility on Jurong Island to PacificLight Power, while YTL PowerSeraya has commenced construction of a 600 MW hydrogen-ready CCGT on Jurong Island.

Singapore's Energy Market Authority has shortlisted two consortia of companies as part of a Contract for Difference (CfD) scheme to promote the use of ammonia or hydrogen for co-generation in Singapore's power generation sector.

Nevertheless, despite the construction of hydrogen-ready plants, the overwhelming concern among power generation companies regarding the deployment of hydrogen is the cost and availability.

"The current high cost of producing green hydrogen coupled with the lack of infrastructure to support large-scale adoption pose significant challenges to its adoption. However, once these commercial and logistical hurdles are addressed, PacificLight is well-positioned to implement the transition to hydrogen or other alternative green fuels," said Yu Tat Ming, chief executive officer of PacificLight.

Indicative offers for low-carbon hydrogen for delivery were at $10/kg FOB Malaysia on May 5. These costs exclude the expenses of transporting hydrogen into Singapore, which could add another premium depending on the transportation methods adopted. By comparison, the willingness to pay for low-carbon hydrogen in Singapore is at $3/kg.

"There are multiple pathways for hydrogen adoption, including ammonia cracking and direct hydrogen supply. The supply method will depend on factors such as infrastructure readiness, cost-effectiveness, and regulatory framework developments in Singapore. We are closely monitoring the advancements in hydrogen technology with the aim of finding a commercially and technically viable and sustainable approach for integrating hydrogen into our energy mix," said Yu Tat Ming.

Sources in Malaysia reported high costs involved in producing hydrogen as they are charged the same electricity prices as other businesses. According to them, some support is necessary to enable cheaper production of hydrogen. "Even if we produce hydrogen by hydropower in Malaysia, it will not be cheap because we have to pay what the grid charges us," said a market participant.

In light of such obstacles, market sources reported increased interest in using Bio-LNG in power generation as it is cheaper than hydrogen and offers another pathway to decarbonization. The Platts JKM LNG marker closed at $11.427/MMBtu or $594.20/mt ($0.59/kg) on May 6, which was cheaper than low-carbon hydrogen.