Singapore businesses face a steep premium for renewable energy certificates (RECs). For example, while Malaysian solar RECs trade at US$5 per MWh, Singapore companies pay up to US$65 per MWh for equivalent solar certificates – a thirteenfold difference. This price gap is unlikely to go away, as demand outstrips the limited local supply.
The current $25 per tonne CO2 equivalent jumps to $45 by 2026, then climbs toward $80 by 2030. Crucially, Renewable Energy 100 (RE100) commitments and investor ESG requirements mean you need credible renewable certificates, not expensive local alternatives that strain budgets without delivering better environmental outcomes.
The main problem, of course, is one of simple geography. Singapore lacks wind resources, hydroelectric potential, and space for utility-scale solar. In essence, Singapore does not have the land to support the much-needed infrastructure. Meanwhile, Johor State sits 1 kilometre away with abundant renewable capacity, including the massive 450 MW Sultan Ibrahim Solar PV Park and substantial biomass infrastructure from palm oil processing.
The Johor-Singapore Special Economic Zone (JS-SEZ) bridges this gap. Malaysia lifted its renewable energy export ban in May 2023, opening cross-border electricity trading. Singapore, on the other hand, targets 6 GW of low-carbon electricity imports by 2035. The JS-SEZ’s 3,500 square kilometres offer a special corporate tax rate as low as 5% for qualifying companies, and access to competitively priced renewable energy.
Read on to discover how your business can cut renewable energy costs, meet international sustainability standards, and potentially secure both tax advantages and supply certainty through this emerging cross-border framework. The next 5 minutes could save your company thousands in carbon compliance costs while positioning you ahead of competitors still paying premium rates for limited local certificates.
Key Takeaways
- Singapore businesses face a steep premium for RECs, paying up to US$65 per MWh, compared to US$5 per MWh in Malaysia.
- The price gap is driven by limited local renewable energy supply and high demand, which is unlikely to change due to Singapore’s geographical constraints.
- The Johor-Singapore Special Economic Zone (JS-SEZ) offers access to abundant renewable energy resources, including the 450 MW Sultan Ibrahim Solar PV Park and biomass infrastructure.
- Singapore and Malaysia are collaborating on a credible cross-border REC framework, with successful pilots like the Sembcorp-TNB 50 MW renewable electricity import.
- Early movers can secure cost advantages, regulatory compliance, and competitive positioning by engaging with the JS-SEZ framework.
The Business Case: Why Singapore Companies Need Cross-Border RECs
Beyond the carbon tax pressure mentioned earlier, Singapore businesses face mounting ESG scrutiny from multiple directions. A Singapore Business Federation (SBF) survey found electricity costs were a key component of rising business expenses, with 56% of firms citing it as a major factor.
Corporate sustainability reporting frameworks like the Carbon Disclosure Project (CDP) provide platforms for companies to disclose environmental impact, with REC purchases being a key metric for demonstrating decarbonisation progress. This creates reputational and competitive pressure beyond regulatory compliance.
The supply-demand imbalance grows each year. Singapore’s corporate procurement appetite significantly outstrips generation capacity from its rooftop and reservoir solar installations. In essence, local projects simply cannot scale to meet business demand given land constraints.
Meanwhile, Vietnam’s oversupplied market offers solar RECs as low as US$0.70 per MWh, highlighting the regional price disparities. Singapore companies are watching competitors in other markets access affordable renewable certificates while remaining trapped in an expensive, supply-constrained domestic system.
Related Read: Renewable Energy Certificates (RECs) and Carbon Credits: How Do They Compare?
The regulatory barrier stems from specific reporting framework rules. For CDP reporting, market boundaries generally align with geographical borders, meaning Singapore-based companies cannot claim unbundled RECs from Malaysian solar farms.
International reporting frameworks only accept cross-border REC transactions within highly integrated markets with harmonised rules, such as the European Union and parts of North America, where they are considered intra-market trades. ASEAN currently lacks such a recognised framework, leaving Singapore businesses unable to access the region’s abundant renewable resources for compliance purposes.
Johor’s Renewable Energy Advantage Within JS-SEZ
Johor holds what Singapore desperately needs: space and abundant renewable resources. The JS-SEZ spans more than 3,500 square kilometres, providing room for utility-scale projects that Singapore’s 736 square kilometres simply cannot accommodate.
To give an idea of scale, the Sultan Ibrahim Solar PV Park in Pengerang will cost RM1.4 billion and generate 450 MW with integrated energy storage. To put this in perspective, this single project exceeds the combined output of the top 3 largest existing solar farms in Southeast Asia. That is exactly the kind of capacity Singapore needs for its 6 GW import target.
Corporate investment validates this potential. Johor attracted RM164.45 billion across 42 data centre projects by end-2024. These energy-hungry facilities create immediate demand for the renewable capacity being built around them. Microsoft Azure, Equinix, and Princeton PDG are not speculating in their recent investments in Johor – they are betting real money on Johor’s energy future.
The renewable mix extends beyond solar. Johor’s palm oil industry produces 3,233 tonnes of empty fruit bunches daily, creating consistent biomass feedstock. Research shows that optimal hybrid solar-biomass systems can reliably meet significant energy demand, solving the intermittency problems that plague solar-only portfolios.
Building a Credible Cross-Border REC Framework
Understanding Bundled vs Unbundled RECs
The difference between bundled and unbundled RECs shapes the entire credibility debate. An unbundled REC is a certificate sold separately from the physical electricity it represents. Your company could theoretically buy electricity from Singapore’s grid while purchasing unbundled RECs from a Malaysian solar farm to claim renewable energy usage.
A bundled REC, in contrast, is sold together with the physical delivery of the corresponding megawatt-hour of electricity, often through a Power Purchase Agreement. This creates a clear, traceable link between the renewable generation and your electricity consumption.
Why Bundling Matters for Cross-Border Trade
Creating a trusted cross-border REC market requires more than good intentions – it demands bundling renewable certificates with physical electricity delivery. Global sustainability frameworks and corporate buyers increasingly question unbundled RECs traded across different grid markets, viewing them as potentially dubious environmental claims.
The scepticism centres on “additionality”, whether purchasing a REC actually drives new renewable generation. When certificates are sold separately from electricity across borders, the environmental benefit becomes murky. Critics argue this amounts to double-counting, since the green power already reduces emissions in its home grid.
Singapore and Malaysia recognise this challenge. On January 7, 2025, both nations signed agreements to formally collaborate on a credible framework that officially recognises RECs associated with cross-border electricity trade. Their joint study aims to create a system that attracts private investment by providing certainty around REC credibility.
Real-world pilots prove the concept works. Sembcorp Power began importing 50 MW of renewable electricity from Malaysia’s Tenaga Nasional Berhad in December 2024, with RECs explicitly bundled with the physical power. By January 2025, nearly 28,000 MWh had been successfully traded under this programme, demonstrating technical feasibility.
Europe’s Guarantees of Origin system offers a proven blueprint. The Association of Issuing Bodies manages common rules that standardise technical attributes and trading procedures across countries, creating seamless cross-border recognition. The JS-SEZ framework should ideally leverage existing I-REC Standard and TIGR registry infrastructure rather than reinventing systems from scratch.
Related Read: Carbon Conscious: How Can Companies Leverage Carbon Assets?
Strategic Implementation for Singapore Businesses
Smart Singapore companies are already positioning themselves for this shift. Energy-intensive businesses face a clear choice: pay premium rates for limited local certificates or relocate operations to capture both the JS-SEZ’s 5% corporate tax rate for qualifying activities and future access to competitively priced renewable energy.
The data centre exodus to Johor makes perfect sense when you consider the economics. Companies like Microsoft Azure and Equinix are not just chasing cheaper land – they are betting on long-term energy cost advantages. The Energy Exchange Malaysia (ENEGEM) platform enables direct engagement with Malaysian power producers for bundled Power Purchase Agreements, locking in dedicated renewable supply from projects like the Sultan Ibrahim Solar Park.
For companies unable to relocate, the emerging bilateral framework could transform your procurement strategy once it gains recognition from global standards like RE100 and CDP. Your sustainability team should model the potential cost savings now to inform future budgets.
The business community cannot afford to remain passive observers. Industry associations need to engage with government agencies during framework development. A system that fails to meet international recognition standards will waste everyone’s time and money.
Where to Next With InCorp
The mathematics is simple: Singapore companies currently pay up to thirteenfold more for solar RECs than their Malaysian counterparts. The JS-SEZ cross-border framework could flip this disadvantage into a competitive advantage, giving your business access to the same relatively inexpensive per MWh certificates that remain out of reach today.
This is not a distant possibility. Real electricity already flows through the Sembcorp-TNB pilot, proving the technical framework works. The January 2025 bilateral agreements show both governments are committed to scaling this up. Your competitors who position themselves early will capture the benefits while others scramble to catch up.
The regulatory complexity, of course, demands specialist expertise. InCorp’s experts understand how cross-border investments work within the JS-SEZ structure. Our team provides the ground-level insights and advice that generic consultants cannot. Contact InCorp today to find out how we can help!
FAQs about JS-SEZ Power Trade
What are the main benefits of JS-SEZ cross-border RECs for Singapore businesses?
- JS-SEZ cross-border RECs offer significant cost savings, access to larger renewable energy supply, and the opportunity to meet international sustainability standards like RE100 and CDP reporting requirements while maintaining credibility.
How do bundled RECs differ from unbundled RECs in cross-border trade?
- Bundled RECs are sold together with physical electricity delivery through power purchase agreements, creating traceable links between generation and consumption. Unbundled RECs are certificates sold separately from electricity, which global sustainability frameworks increasingly view as less credible for cross-border transactions.
Which Singapore companies can benefit most from JS-SEZ renewable energy opportunities?
- Energy-intensive industries including data centres, manufacturing facilities, and logistics operations gain the most benefit through potential relocation to access 5% corporate tax rates and renewable energy. However, all Singapore companies with ESG reporting requirements could benefit from future cost-effective REC procurement.
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