Second Reading Speech by 2M Tan See Leng on the Energy Transition Measures and Other Amendments Bill

1. Mr Speaker, I beg to move, "That the Bill be now read a Second time."

Context

2. Mr Speaker, Singapore is a low-lying, small island-state. We are disproportionately impacted by climate change, which threatens our health, our livelihoods and our security. This is why Singapore has committed to achieving net-zero by 2050. Decarbonising our energy mix is central to this.

3. Energy is the existential resource challenge for our generation. Singapore imports almost all our energy needs and is alternative energy disadvantaged. We do not have the land for large solar farms, rivers for hydropower, nor sufficient wind speeds for wind turbines.

4. This is not just an energy transition for us, but a transformation. Undertaking this transformation while maintaining energy security and ensuring cost-competitiveness will not be an easy feat. But we must take on this responsibility for the sake of future generations of Singaporeans. That is why we are studying all possible decarbonisation pathways. Let me share more.

a. First, solar. We have sought to maximise solar deployment and have now surpassed 1 gigawatt-peak of installed capacity. This makes Singapore one of the most solar-dense cities in the world.

b. Second, regional electricity imports. Last week, I announced that EMA has granted Conditional Approvals to two new projects to import 1.4 GW of low-carbon electricity from Indonesia to Singapore. Projects to import a total of 2 GW of low-carbon electricity from Indonesia have also progressed to an advanced stage of development and were granted Conditional Licenses. In total, we have announced plans to import up to 5.6 GW of low-carbon electricity from Cambodia, Indonesia and Vietnam. We are on track to meeting our ambition of 6 GW of imported electricity, or around one-third of our energy supply, by 2035.

c. Third, low-carbon energy sources. Our focus is on building capabilities to understand and handle new technologies, should any emerge as viable decarbonisation pathways. For example, next year, we will appoint a lead developer for our pathfinder project for ammonia power generation and bunkering. More recently, we also signed a civil nuclear cooperation agreement with the United States. While we have not made any decision on nuclear energy deployment, this will help us better understand the potential applicability of advanced nuclear energy technologies in Singapore's unique context.

d. Beyond new energy sources, we can capture and store our carbon emissions. We are working with S Hub, an industry consortium comprising ExxonMobil and Shell, to study the viability of a cross-border carbon capture and storage (CCS) project. We have also signed a Letter of Intent with Indonesia to further discuss CCS cooperation.

e. Lastly, high-quality carbon credits can also support our decarbonisation journey. We are establishing bilateral frameworks for credits transfers. We have signed two legally binding Implementation Agreements with Papua New Guinea and Ghana, as well as signed more than 15 MOUs with partners to work towards future Implementation Agreements.

5. We will press on with these efforts to decarbonise. But let me add that until these new low-carbon energy sources are integrated into our system, we will continue to rely on natural gas to underpin our energy security and reliability.

6. Today, we are proposing amendments to the Energy Market Authority of Singapore Act 2001 or EMA Act, Electricity Act 2001 and Gas Act 2001. The Bill introduces six key proposals that will strengthen our ability to plan for and develop a decarbonised, secure, and cost-competitive energy system, despite the many geopolitical, commercial and technological uncertainties in our journey towards net-zero.

7. Let me elaborate.

Support Decarbonisation Efforts

8. The first three proposals support our infrastructure planning and development for the energy transition. As we integrate different energy sources into our grid, our infrastructure will become more diverse. There will be new terminals, cables, pipelines, and substations. Many of these projects will be first-of-a-kind for Singapore.

Establish the Future Energy Fund

9. Clean energy investments may involve high upfront costs and significant commercial, technological, and geopolitical risks. These factors could delay early-stage private investments. Our first proposal establishes the Future Energy Fund (FEF) to provide catalytic funding to improve the commercial viability of strategic projects undertaken by private sector players, statutory bodies and other entities.

10. For instance, should we need to utilise hydrogen, we may have to provide financial support to mitigate commercial risks associated with developing Singapore's first-ever hydrogen terminal. In this instance, the Future Energy Fund may be used to support the terminal's development.

11. We have begun saving up now for these infrastructure investments, to reduce the burden on future generations. This prudent approach has also been adopted in other areas, such as via the Coastal and Flood Protection Fund which protects Singapore against rising sea levels.

12. Hence, Clause 6 of the Bill amends the EMA Act to establish the Future Energy Fund as a statutory fund under EMA. With an initial injection of $5 billion in FY2024, this puts us in a stronger position to make critical investments to secure our multi-decade energy transition. The Government will make further top-ups to the FEF when our fiscal space allows.

13. The FEF will focus on supporting capital expenditures and will not be used to subsidise fuel costs and recurrent expenditures.

Facilitate Shared Access to Critical Energy Infrastructure

14. Beyond financial support, we will also need to optimise how new energy infrastructure is developed. Given Singapore's land constraints, there may be situations where electricity and gas licensees need to access critical energy infrastructure owned or occupied by others. Examples of such infrastructure include waterfront jetties and transmission cables. Such facilities may be needed to support power generation units or for cross-border electricity imports.

15. Our second proposal thus empowers EMA to direct owners and occupiers of critical energy infrastructure to allow licensees to access critical energy infrastructure, and to enter into agreements with licensees for the same purpose. Today, EMA possesses similar powers under Section 20A of the Electricity Act, but these are specific to electrical connections between transmission licensees and electricity licensees.

16. Licensees should first seek to privately negotiate access with the owners or occupiers of the required critical energy infrastructure. EMA will facilitate these discussions where possible. However, there could be instances where both parties fail to reach a commercial agreement.

17. Hence, clauses 8 and 34 of the Bill amend the Electricity Act and Gas Act to empower EMA to direct owners or occupiers of critical energy infrastructure to allow licensees access to their infrastructure. Both parties will be provided with 30 days to agree on the terms of access to the critical energy infrastructure, including reasonable compensation for the owners or occupiers.

18. Issuing such a direction will be a last resort, when EMA deems that such access is necessary and in the public interest or to ensure energy security and reliability.

19. Furthermore, an owner or occupier who disagrees with EMA's direction can appeal to the Minister of Trade and Industry for a review. In cases where both parties fail to agree on the terms of access to the critical energy infrastructure within 30 days, either party may also request for the Minister for Trade and Industry to establish an Appeal Panel, which will determine the reasonable terms of the agreement.

Approval Obligations for Repurposing of Electricity and Gas Assets

20. Our third proposal introduces approval obligations if persons owning, managing or controlling key electricity and gas assets intend to repurpose such assets. Such repurposing, if not coordinated, could potentially compromise Singapore's energy supply.

21. For instance, repurposing gas pipelines to export carbon for overseas sequestration could compromise our electricity supplies, if these pipelines are still needed to supply gas to Singapore.

22. Clauses 16 and 35 of the Bill amend the Electricity Act and Gas Act to require persons owning, managing or controlling key electricity and gas assets to obtain approval from EMA before repurposing such infrastructure away from their original use.

23. In evaluating these requests, EMA will consider such persons' commercial interests, while ensuring that Singapore's energy security and system reliability is not compromised.

24. Any such person who disagrees with EMA's decision may appeal to the Minister for Trade and Industry for a review.

Enhance System Functions

25. Aside from infrastructure planning and development, we will also need new market mechanisms to facilitate an orderly energy transition.

Recover Costs for Initiatives

26. Currently, the Electricity Act and Gas Act allow EMA to recover the costs of regulating electricity and gas licensees and operating Singapore's power system.

27. To prepare for the energy transition, EMA will need to undertake new initiatives for energy security, market development and decarbonisation. For instance, the Standby LNG facility, or SLF, bolstered our energy security during the energy crisis by providing generation companies with the assurance of continued supplies of gas. This reduced volatility in the wholesale electricity market and gave retailers the assurance to offer electricity contracts to more consumers. However, EMA is unable to legally recover the operating costs of such a critical facility despite the benefits conferred to all electricity users.

28. Therefore, clause 6(2) of the Bill amends the EMA Act to allow EMA to recover costs associated with energy security, market development and decarbonisation-related initiatives, which ensure the proper functioning of our energy system. EMA will only recover the costs for such initiatives and will not seek to make any profit.

29. Furthermore, EMA will seek to be targeted in implementing cost recovery for these initiatives, in line with the "user-pays" principle. This principle is not new. Consumers currently pay for the energy-related services they use, such as the billing and meter reading services provided by SP Services.

30. Households and businesses are understandably concerned about whether this proposal will increase electricity prices. I would like to assure consumers that EMA will only introduce new initiatives when necessary. EMA will first consult and provide reasonable notice to affected consumers before introducing new rates.

31. The Minister for Trade and Industry must approve any new rates that EMA may propose. We will also set up a Cost Recovery Advisory Committee that will comprise non-Government representatives, to provide the Minister with independent advice on EMA's proposals.

Safeguard Energy Security

32. Lastly, let me elaborate on the two proposals to safeguard energy security.

Centralise Gas Procurement

33. The global energy crisis in 2021 highlighted the vulnerabilities of our current gas procurement framework. First, insufficient gas may be contracted under the current framework, particularly during a crisis when market conditions are uncertain. Second, generation companies tend to make similar contracting decisions in response to movements in the gas market. This leads to bunching of contracts, which magnifies Singapore's risk exposure especially when markets are volatile.

34. We can learn from the approaches in other jurisdictions. Japan's Energy for a New Era (JERA) and the Korea Gas Corporation (KOGAS) are responsible for procuring a significant portion of Japan's and South Korea's gas supplies. These entities' diversified gas portfolios mitigated risks associated with market volatility, and helped Japan and Korea avoid severe gas disruptions during the energy crisis.

35. This is why we announced in 2023 that we would establish a central gas entity, or a Gasco for short, to centralise the procurement and supply of gas to the power sector. This will create greater economies of scale which will allow us to negotiate more favourable gas contracting terms, enter into longer-term gas contracts for more stable prices and supply, and procure gas from diverse sources.

36. Clause 18 of the Bill amends the Electricity Act to require prescribed power generation companies to procure gas solely from Gasco, unless otherwise allowed by EMA. Clause 25 of the Bill enables EMA to specify the minimum volume of gas that prescribed power generation companies must procure from Gasco. Clauses 26(a), (b) and (e), 27 to 29 and 37 of the Bill amend relevant sections of the Gas Act to, among other things, provide for centralised gas procurement as a licensable activity and grant EMA regulatory authority over Gasco. In particular, clause 29 enables EMA to specify the volume of gas that Gasco must procure to ensure sufficient gas supplies for Singapore.

Empower EMA to Implement Power Rationing

37. Notwithstanding our efforts on Gasco, we ultimately still depend on imports of natural gas to generate electricity. What if we encounter a severe and protracted disruption to our gas imports?

38. For instance, there was a risk of gas supply disruptions during the energy crisis in 2021, before EMA took proactive steps to secure our fuel supply and stabilise the electricity market.

39. Today, we have a comprehensive suite of contingency measures, including system buffers, fuel reserves, voluntary power conservation, along with other pre-emptive responses - to ensure reliable and stable electricity supply.

40. But we should still be prepared for the unexpected, when we might need to adopt power rationing to maintain power system stability in a crisis. Other jurisdictions like the UK have also incorporated power rationing as part of their energy resilience strategy.

41. Clause 17 of the Bill amends the Electricity Act to empower EMA to implement power rationing, with the approval of the Minister of Trade and Industry. Let me assure members that this is a measure of last resort that will not be activated lightly.

42. What will happen when power rationing becomes necessary? First, as much advance notice will be provided as possible, so that households and businesses can take actions to minimise disruptions to their activities.

43. Second, we will give priority to services that are critical to Singapore's security, economic, and social needs, such as medical and telecommunications services. We will also ensure that residents continue to have access to power for their daily needs even as we prioritise other critical facilities such as hospitals.

44. Third, power rationing will be lifted once these measures are no longer required for system stability.

45. Businesses are understandably concerned about the impact of power rationing. Clause 17 of the Bill amends the Electricity Act to provide businesses with protection from liability if compliance with EMA's directions on power rationing results in a breach of their contracted obligations to take or provide electricity or fuel.

46. Let me say again - Power rationing is only a last resort. It is part of Singapore's preparation for an increasingly uncertain world, and I hope we will never have to use it.

Miscellaneous Amendments

47. Lastly, the Bill also includes various miscellaneous amendments to the Electricity Act, Gas Act, and EMA Act. These amendments involve aligning ownership controls imposed on designated licensees with those imposed on critical firms from other sectors. Other amendments update key provisions and definitions in the Acts to support EMA's functions.

48. Mr Speaker, in Mandarin please. (In Mandarin) 我们需要向清洁能源转型，同时保障能源安全并维持成本竞争力。我国在减排脱碳的过程中，必定会面对种种未知数，也难免会遇到无法预知的难题和挑战。

49. 我们向国会提呈《能源转型措施及其他修正法案》是为了确保我国能源市场和相关基础设施的监管框架，能够符合未来的需求。法案中的各项条款将确保我国的能源系统在充满不确定性和不断演变的环境中，能够灵活变通，保持强韧。

50. 政府将继续致力于帮助家庭应付水电费用，并支持企业提高能源使用效率。

Conclusion

51. Mr Speaker, to conclude, this Bill strengthens our regulatory framework for energy markets and infrastructure, so that our energy system remains resilient, adaptable and aligned with our decarbonisation plans amidst an evolving and uncertain global energy landscape.

52. Even with the energy transition, our mission remains unchanged. We will always seek to strike an optimal balance between energy security, sustainability, and cost-competitiveness. We welcome all Singaporeans and businesses to join us in the journey of advancing Singapore's energy story.

53. Sir, I beg to move.

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