Solar investments saved Singapore $123.8m in higher fossil fuel import costs: Report

SINGAPORE – Investments in solar energy saved Singapore an estimated US$97 million (S$123.8 million) in power-related fossil fuel imports over five months earlier in 2026, after energy prices spiked because of the crisis in the Strait of Hormuz, a recent report has found.

Nearly all the savings came from avoided gas imports, according to the Finland-based Centre for Research on Energy and Clean Air (CREA) report published in late August.

Of this, about US$40 million were savings from avoiding the additional premium imposed by the Hormuz crisis for natural gas, said a CREA analyst.

CREA’s Europe-Russia policy and energy analysis team lead Isaac Levi told The Straits Times in an e-mail interview: “(The savings) demonstrate the benefits of Singapore’s solar expansion programme.”

These figures were modelled wholesale-price estimates, he said.

Despite the savings, the report by the independent research organisation found that Singapore’s reliance on imported fossil fuels still caused it to incur US$8.1 billion in additional gross fossil fuel costs in the six months following the outbreak of the US-Iran war.

This placed Singapore 13th among 171 territories for extra fossil fuel import costs during the period, said Levi, with China, India and the US bearing the heaviest financial burdens.

The report, co-authored by CREA’s Luke Wickenden and Lauri Myllyvirta, had wanted to examine the financial fallout for fossil fuel importers.

They drew on a range of data sources, such as analytics platform Kpler’s tracking data of global commodity shipments at ports, and monthly non-fossil fuel power generation data from non-profit energy think-tank Ember.

Economic benefits from renewables

Singapore imports fossil fuels for power generation, and for its industrial sector.

Levi said the savings came from Singapore’s reduced need to import fossil fuels for power generation due to the country’s solar drive since 2020.

More than 95 per cent of the country’s power is generated from imported natural gas, prices of which spiked owing to the US-Iran war.

Strikes during the conflict hampered shipments through the Strait of Hormuz, a critical maritime chokepoint that once carried about 20 per cent of the world’s oil and liquefied natural gas (LNG).

According to the report, during the US-Iran conflict’s first six months, Asian LNG prices averaged 75 per cent above what pre-war futures markets had expected to pay then. European LNG prices were 60 per cent higher for the same period.

Singapore has been ramping up efforts to tap solar energy, the most viable form of renewable energy.

In February, the Republic raised its solar deployment target from 2 gigawatt-peak (GWp) to 3 GWp by 2030, after achieving its initial goal in 2025 through the roll-out of solar panels on rooftops, reservoirs and other surfaces.

Still, Levi noted that solar still makes up a relatively small share of Singapore’s power mix. Solar energy currently contributes only about 2 per cent of the country’s electricity needs.

Even if the Republic achieves its current target to generate 3 GWp of energy via solar, the amount will comprise only about 4 per cent of the country’s total electricity demand by 2030.

Levi said Singapore could reduce its exposure to volatile global fuel prices through further investments in non-fossil fuel-based sources.

These include rooftop and floating solar, offshore wind where feasible, battery storage, energy efficiency and renewable electricity imports supported by stronger regional grid connections.

“Regional power trading could give Singapore access to lower-cost renewable electricity from neighbouring countries when global LNG prices spike,” Levi said. “This would diversify its energy supply, reduce reliance on gas-fired power, and help shield consumers and businesses from sudden increases in international fuel prices.”

The report found that South-east Asia as a region bore a heavy financial toll from the crisis, incurring US$13.9 billion in net costs, based on additional import costs and export earnings. This ranked the region fourth among 11 regions in terms of total net costs incurred.

Said Levi: “South-east Asia has spent six months paying for a war it had no part in starting. Asian LNG prices ran 75 per cent above what markets expected before the strikes, the sharpest regional gap we measured.

“Regional cooperation on storage and grids helps at the margins, but the only real hedge against a shock like this is importing less fossil fuel in the first place.”

EMA looking into geothermal energy

Asked for its response to the CREA report, an Energy Market Authority (EMA) spokeswoman said South-east Asia can reduce exposure to the volatility of global oil and gas prices by tapping and developing its abundant renewable energy resources, including hydropower, solar and wind.

“Under the ASEAN Power Grid vision, regional interconnections help catalyse such projects to develop ASEAN’s renewable energy resources by connecting them to demand centres and improving their bankability,” she said.

She noted that the ongoing Middle East conflict has translated to higher local electricity prices, as Singapore’s natural gas prices are largely tied to oil prices under commercial contracts.

The regulated electricity tariff is determined quarterly based on natural gas prices in the first 2½ months of the preceding quarter.

EMA said it is also looking to develop other ways to strengthen Singapore’s energy security and cut the carbon footprint of its power sector. “This includes looking into geothermal energy, advanced nuclear energy technologies, as well as hydrogen and ammonia,” the spokeswoman added.

Singapore as a refining and transhipment hub

Singapore also imports fossil fuels for its industrial sector.

Its status as a refining and transhipment hub became an economic buffer for the country, Levi said, allowing the island-state to record a net gain of about US$500 million in the six months following the Strait of Hormuz disruption.

He added: “Singapore is a refining and transhipment hub, not simply an importer.”

He said that the country paid roughly US$3.5 billion more for the crude oil and LNG it brought in for its own account, and US$4.6 billion more for the diesel, petrol and jet fuel it imports as feedstock or for blending.

“But it also re-exports a large share and refines crude into products exporting diesel and petrol, and those outbound cargoes get revalued at the same crisis-inflated benchmark prices when they leave the country,” he added.

Diesel and petrol exports alone earned it about US$7.7 billion more than they would have at pre-war prices, according to the report’s data. This was enough to offset the inflated cost of imports and tip the Republic into a small net gain.

This made Singapore the 26th-largest net gainer among 32 territories worldwide, trailing the largest gainers, which were major oil producers US, Russia, Saudi Arabia and the United Arab Emirates.

Levi noted that Singapore’s massive bunkering throughput (fuel pumped directly into ships and aircraft) was not priced into their model as an export, which suggests that there could be even higher volumes of resold fuel unaccounted for.