Wrap-Up Speech by 2M Tan See Leng on the Energy Transition Measures and Other Amendments Bill

A. INTRODUCTIONA1. Mr Speaker, I thank Members for their strong support for the Energy Transition Measures and Other Amendments Bill. Their speeches centred around three key issues:

a. First, electricity costs and how we will invest in our energy future;

b. Second, safeguards to EMA's powers; and

c. Third, the implementation approach for power rationing.

Singapore's Energy Transition

A2. Before addressing these questions, let me reiterate the purpose of this Bill. As Mr Yip Hong Weng, Mr Mark Lee, Ms Carrie Tanhave noted, we need to continually review our legislation, our market structures, to ensure they keep up with the changing landscape.

This Bill is the result of our most recent round of reviews.

A3. To Ms He Ting Ru's question, the Ministry of Trade and Industry and the Energy Market Authority work on efforts to decarbonise our energy mix and transition our power sector to Net Zero. And EMA will also manage the Future Energy Fund. A4. Mr Saktiandi Supaat asked how our Energy Mix will change by 2050. a. I updated Members earlier on this.

Our energy mix in 2050 and beyond will depend on a combination of commercial, technological and geopolitical developments.

b. Mr Yip suggested focusing hydrogen research efforts on domestic production of hydrogen.

Producing hydrogen domestically is unlikely to be feasible or commercially viable for now, given the need for significant amounts of domestic renewable energy resources, which we do not have.

Our focus is therefore on technologies to transport and to use hydrogen or its carriers safely and cost-effectively.

c. As forMr Yip's query on phasing out diesel, we may still need fuels like diesel during an emergency.

Our natural gas power plants can switch to using diesel if natural gas supply is disrupted.

I think all of you know the chemistry. Diesel can be stockpiled more easily, is denser and is more cost effective than natural gas.

In addition, our critical services such as hospitals and airport have diesel generators on standby in case there are disruptions to power supplies.

B. MANAGING THE COST OF ELECTRICITYB1. Members have asked how our decarbonisation plans will affect the cost of electricity.B2. We have a liberalised energy market. a. Our approach is to harness market forces and foster competition to drive efficiency. b. For example, power generation companies, or "gencos", are incentivised to invest in more efficient gas turbines.

This will bring down costs and thus lower electricity prices through the competitive bidding process in our wholesale market.

c. Nonetheless, the cost of fuel accounts for the majority of our gencos' costs and is hence the fundamental driver of electricity prices today.B3. Mr Supaatalso asked about the trajectory of electricity prices in the near and medium term.

This depends on which direction fuel prices move, as well as on technological developments.

a. In the near term, natural gas will remain the primary source of energy for power generation.

Hence, electricity tariffs will continue to be driven by gas prices, which generally track global oil prices.

Geopolitical uncertainties arising from the ongoing Russia-Ukraine and Middle Eastern conflicts continue to pose risks to gas markets.

b. In the medium term, the share of low-carbon energy sources in our energy mix will grow.

Our electricity prices will increasingly depend on the cost of these low-carbon energy sources, including those we import from regional countries.

It is thus difficult to predict the trajectory of these costs.

For example, while solar PV panel costs have fallen by 82% between 2010 and 2022, high-voltage subsea cable costs (the HVDC that is needed to transmit electricity over long distances) have risen significantly, with factories now facing production constraints.

What will the Government do to help with Electricity Costs?

B4. The Government has always been and will always be mindful of the impact of electricity prices on Singaporeans and on businesses. a. Many Members have encouraged the Government to continue supporting our lower- and middle-income households on utilitiesto ensure that no group is left behind in this energy transition.

And this is what we have been doing.

For example:

i. Eligible households will receive 2.5 times the amount of regular U-Save, or up to $950, in this financial year.

More than 950,000 Singaporean HDB households are expected to benefit from this.

ii. All HDB households are also eligible for $300 in vouchers through the Climate Friendly Households Programme to lower the upfront cost of purchasing energy-efficient appliances, and in turn allow households to achieve savings on utility bills in the long run.

b. In addition to support for utilities expenses, the Government provides cost of living support through the Assurance Package, which includes Community Development Council (or CDC) vouchers for all Singaporean households.

The Government understands Singaporeans' cost of living concerns and we will regularly review our support measures.

B5. Ms Carrie Tan and Ms He Ting Ruemphasised the need to manage demand, even as we decarbonise our energy supplies.

I fully agree.

a. Advanced electricity meters will be rolled out to all HDB households by 2026.

This helps our consumers track and make more informed decisions about their energy consumption.

b. We will also continue to help our businesses improve energy efficiency, and in turn, lower their energy costs.

And in doing so, we will continue to pay special attention to supporting SMEs, which is something that Mr Neil Parekhhighlighted.

c. But as Ms Tan and Ms He said, it is not just about energy efficiency, it is also about energy conservation, it's about using less. And I hope we can make this a shared goal among all of us Singaporeans.

Are there other ways to recover costs or keep prices low?

B6. Members including Mr Liang Eng Hwa, Mr Don Wee, Mr Yip Hon Weng, Mr Mark Lee, andMr Louis Ng have asked whether the new initiatives for energy security, market development, and decarbonisation services will raise business costs, as well as affect the lower-income.B7. Let me assure Members of this House that we closely monitor such costs and we have safeguards to ensure cost recovery measures are justified.

a. First, the Minister for Trade and Industry must approve cost recovery rates.

To Ms Jessica Tan'squery on what will trigger this decision, new initiatives related to energy security, market development and decarbonisation will only be introduced if necessary for the power system.

We will seek to be targeted in the implementation of these initiatives.

For example, as some members suggested, entities that benefit more from an initiative could pay a higher rate so that the costs are allocated fairly.

b. Second, a Cost Recovery Advisory Committee of non-Government representatives will provide the Minister with independent advice on EMA'sproposed rates.

As Mr Mark Leesuggested, the Committee could include members who can advise on the impact of EMA's proposed rates on businesses.

c. Third, EMA will consult stakeholders and give reasonable notice before introducing cost recovery measures.

Where possible, EMA will implement such measures gradually, to allow time for adjustment.

B8. Mr Louis Ngasked about the operational flexibility EMA has in imposing cost recovery rates.

The provisions allow EMA to recover costs based on "reasonable estimates" of costs payable, in addition to costs that have been paid.

This is so that EMA can smoothen out the costs collected over time.

EMA will seek to be as measured, sensitive, and practical as it can in its cost recovery measures, so as to minimise the likelihood and the magnitude of over- or under-collection.

Establish the Future Energy Fund

B9. Mr Speaker, let me now move on from costs to investment.

Many Membershave highlighted the importance of the Future Energy Fund.

And I explained earlier how the Fund would be used.

B10. Ms He Ting Ru asked about how we would measure the success of the Fund. Ultimately, the Fund's success is determined by whether we can achieve the energy transition in a cost-effective manner while ensuring energy security.

B11. Ms He also noted that the Fund can be used on energy security measures and asked whether that included fossil fuel plants. Members of the House, even as we decarbonise, we have to ensure that Singapore's energy security is not compromised. Therefore, we should be prepared to consider all options to support a secure and sustainable energy transition. And this is also how we mitigate various risks from renewable electricity imports.

B12. Mr Louis Ng asked how the $5 billion amount was decided and how long would it last.

The energy transition will be costly and is expected to cost far more than the $5 billion.

That is why precisely we need to start setting aside monies for it, as and when we are able to.

B13. But MrLiang Eng Hwa asked if the Future Energy Fund can fund EMA's initiatives instead of recovering costs from consumers.

a. In Singapore, electricity prices are not subsidised.

This is to encourage efficient electricity use and prevent wastage.

Subsidising electricity is not sustainable in the long run.

b. Electricity prices should continue to reflect the cost of producing and supplying electricity.

The Future Energy Fund is not meant to fund such costs, but rather is meant to catalyse and seed support in strategic infrastructural investments for a low-carbon future.

c. MrLiang also asked if the Fund could support nuclear energy projects.

It is too early to say, because no decision has been made to deploy nuclear energy in Singapore. d. Ms Jessica Tan, Mr Neil Parekhasked if we have identified potential projects that are aligned with our larger energy masterplan. e. Potential projects include undersea cables to import low-carbon electricity as well as hydrogen terminals and pipelines, if we decide to adopt and scale up the use of hydrogen.

B14. The Future Energy Fund complements, but it does not replace, existing funding initiatives for energy efficiency and R&D.

These are worthwhile areas that Government is already supporting.

The Future Energy Fund's mandate and I want to reiterate, is to catalyse, catalyse the deployment of low-carbon energy infrastructure, including some which would otherwise have taken a very long time to commission.

So I hope that this addresses Mr Saktiandi Supaat's, Mr Yip Hon Weng'sand Ms He Ting Ru's questions.B15. I would also like to assure Mr Yip, Mr Louis Ng, and Ms Carrie Tanthat there will be strict oversight over the Fund's use. a. First, we will ring-fence the use of funds to infrastructure development needed to decarbonise the power sector. b. Second, qualifying projects will undergo the same stringent evaluation and approval processes as any other Government infrastructure project, involving a careful evaluation of technological and commercial risks, and the eventual cost of electricity generated through such low-carbon sources. c. Third, the Government will employ competitive processes where possible, such as tenders and price discovery mechanisms, to ensure that energy transition projects are value-for-money. d. And fourth, we will establish milestones to ensure that project timelines remain on track and that we have the flexibility to reduce abortive costs if circumstances change. e. And fifth, top-ups to the Fund, balances and annual outlays will be included in the EMA's financial statements, which are presented to Parliament annually.

B16. This Bill therefore reflects our careful and calibrated approach towards managing the costs of the energy transition, while supporting the investments needed to making it a reality.

a. The Government will continue to plan and build infrastructure to meet our energy needs, and save up for these investments through the Future Energy Fund to reduce the burden on future generations. b. Mr Yip pointed out the risks and costs of new low-carbon technologies.

This Future Energy Fund will enable us to moderate the steep costs that arise from investing in nascent technologies that are strategic for Singapore's needs.

These are costs that consumers would otherwise have to bear.

c. We will maintain fiscal sustainability by avoiding blanket subsidies, while continuing to help households manage electricity costs in a targeted and responsible manner.C. EXCERCISING POWERS WITH PRUDENCEC1. Let me now address Members' comments on shared access to critical energy infrastructure, on the repurposing of assets, and centralised gas procurement.C2. Mr Yip raised concerns about whether expanding EMA's powers could distort competition or create an uneven playing field.C3. Allow me to explain why these powers are necessary and what safeguards are in place.

Strengthening EMA's Ability to Regulate the Power Sector

C4. To manage the uncertainties of the energy transition, we must empower EMA to plan for a net-zero energy future. a. Each energy source has specific requirements and limitations. b. Our amendments to facilitate shared access to critical energy infrastructure and introduce approval obligations forrepurposing key electricity and gas assets will enable EMA to optimise the use of infrastructure in land-scarce Singapore.C5. EMA's powers will be exercised sensitively and carefully. a. First,EMA will consult relevant stakeholders to understand their considerations before exercising its powers. b. Second, specific criteria must be met before EMA can exercise those powers. c. Third, parties can appeal EMA's decisions to the Minister of Trade and Industry.C6. Mr Saktiandi Supaat, Mr Mark Lee, Mr Louis Ng, and Mr Don Wee asked how EMA's powers to facilitate shared access to critical energy infrastructure will be exercised. a. Shared access allows licensees to access or connect to critical energy infrastructure owned by others to carry out their functions.

For example, electricity importers may require access to electricity infrastructure owned by others to bring imported electricity into our domestic grid.

And yes, as Mr Mark Lee has asked, battery energy storage systems are also included as critical energy infrastructure.

b. So infrastructure owners and licensees should first seek to reach mutual agreement on the terms of shared access, including fair compensation.

EMA will facilitate these discussions.

c. If access is deemed critical to system's needs, and no agreement is reached, EMA will issue a directive for the shared access and give both parties a 30-day period to agree. This is to prevent prolonged negotiations.

d. If agreement is still not reached, an Appeal Panel will independently determine the terms on a case-by-case basis, considering industry practices, prevailing market conditions, the nature of the infrastructure, and case-specific circumstances.

e. The Minister will appoint members with relevant expertise to the Appeal Panel.

As far as possible, the Minister will appoint members that are accepted by both partiesto the shared access agreement.

f. So to Mr Louis Ng'squery, the shared access agreements entered into by both parties are legally binding contracts.

These should include provisions for compensation in case of losses that are mutually agreed to by both parties, or determined by an Appeal Panel.

C7. Mr Don Wee asked if EMA's powers to approve the repurposing of electricity and gas assets might limit companies' agility in responding to market changes. a. EMA will only reject requests if repurposing undermines energy security and reliability. b. EMA will strike a balance between the commercial needs for the potential repurposing, while ensuring that energy security and system reliability in land-scarce Singapore will not be compromised. c. Specific approval timelines are not set in legislation, due to the different circumstances for each case.

And companies should engage EMA early on any potential repurposing, and EMA will assess the cases promptly.

d. To Mr Saktiandi's questions, the approval obligation for repurposing of key electricity and gas assets applies to relevant facilities and installations which are specified in legislation.

No particular incident sparked concern about repurposing key energy assets, but we have to plan for such a possibility, especially due to Singapore's land constraints.

Centralised Gas Procurement

C8. Next, Membersasked about the need to centralise gas procurement under a central gas entity, which we will call "Gasco" for now. a. During the 2021 and 2022 global energy crisis, governments struggled to secure fuel supplies and manage price spikes.

Beyond crisis measures, EMA subsequently strengthened our market structure by centralising the process for new generation investments, enhancing regulatory protections for consumers, and implementing a Temporary Price Cap to curb wholesale market volatility.

b. Gasco builds on these efforts.C9. Now allow me to reiterate what we seek to accomplish by establishing the Gasco.

First, Gasco enhances our gas supply security.

a. Our current market-based gas procurement system does not provide sufficient assurance of adequate gas supply to meet our needs at the national level, especially during volatile market conditions. b. During the energy crisis, gencos were unwilling to contract more gas because of the highly volatile prices.

We were therefore at risk of being short of gas. In October 2021, when a whole confluence of factors caused the prices of natural gas to spike, we quickly set up a Standby LNG Facility.

Members of the House, that proved prescient especially when the Russian-Ukraine war broke out in February 2022 and it threw the global gas market into turmoil.

c. To Mr Louis Ng'squestion, around 75% of Singapore's gas consumption is by the power sector and will be procured by Gasco in the steady state. d. While gencos are well-contracted for the immediate future, EMA will impose a standardised minimum gas contracting level under this framework, to ensure they continue to contract sufficient fuel from Gasco.

C10.Second, Gasco will support supply diversification.

a. Our gencos currently import most of our gas from neighbouring countries such as Indonesia, Malaysia and Australia.

With Gasco, we will seek to further broaden our sources of supply.

b. To Mr Saktiandi's question, instead of capping the amount from any single source, we seek to have a well-diversified gas portfolio.

c. This diversity in terms of sources and contract length increases our protection against supply chain disruptions, and mitigates the risks of over-centralisation and a single point of failure, something which Mr Don Wee spoke about.

C11.Third, Gasco allows us to enter into long-term contracts that provide more stable prices and certainty of supply.

a. Our current market-based approach does not sufficiently reward gencos that commit to long-term contracts.

For example, let's say genco signs a 20-year contract for gas. If gas prices come down, other gencos can undercut Genco A by using cheaper gas.

Genco A will be at risk of making large losses.

So you can appreciate why our gencos are reluctant to enter into such long-term contracts.

b. Moving forward, because our gencos can only buy gas from Gasco and will be required to buy sufficient amounts of gas, this reduces the risks of any genco being undercut by other gencos as a result of long-term contracts. c. Singapore's power sector currently needs around six to seven million tonnes of natural gas annually, but with six main gencos each contracting on the average for only one million tonne, they do not have the economies of scale.

Centralisation and scale therefore give Gasco room to negotiate for more favourable gas contracting terms, as well as to explore co-procurement with other major gas procurement entities, such as JERA of Japan and Korea Gas Corporation.

C12.So Mr Saktiandi asked who the Gasco will be and how it will be run.

Mr Liang Eng Hwa, Mr Louis Ng, Mr Yip Hon Weng asked how gas prices for gencos will be determined.

a. We expect to set up Gasco as a fully Government-owned company by the end of this financial year. b. Gasco's primary objective is to procure and supply gas to meet Singapore's power generation needs, not to maximise profits.

c. Gasco will be staffed by professionals who will take a long-term, systems view to guide the gas procurement.

It will also align its gas portfolio to national needs, accounting for our electricity demand growth and decarbonisation plans.

d. Gasco will price gas on a cost-plus basis, with gencos charged for the gas they purchase, plus a regulated fee to cover Gasco's operating costs.

To Mr Liang'squestion, this regulated fee will be approved and transparently published by EMA.

e. EMA will regulate Gasco to ensure that the gas procurement framework improves the security and the resilience of Singapore's natural gas supply to the power sector, while keeping prices competitive. f. This will be a delicate balance and it will require Gasco to be structured, to be resourced, incentivised, and assessed accordingly.

And I hope this addresses Ms Jessica Tan'squestion.

g. We appreciate Mr Saktiandi's suggestion to give gencos the flexibility to source for gas supplies.

In fact, EMA is working with gencos to develop a mechanism that incentivises them to refer competitively priced gas supplies to Gasco for evaluation and potential incorporation into its portfolio.

D. POWER RATIONING

Planning For an Extreme Scenario

D1. Lastly, members raised concerns on power rationing. a. Singaporeans and businesses are understandably concerned about the prospect of power rationing, even though most recognise the need for doing so during emergencies. b. This is understandable, since electricity is crucial for our daily routines and for the economy.D2. I want to reassure members that power rationing will only be as a last resort.

a. We have existing measures to mitigate the impact of gas supply disruptions.

i. Our LNG terminal can support our natural gas demand even if piped natural gas is disrupted. ii. We also maintain a Standby LNG Facility. b. We have sufficient generation capacity, including a 27% reserve margin which provides for planned and unplanned outages. c. These measures, combined with voluntary power conservation,can meet all our demand in most potential disruption scenarios.D3. However, we cannot afford to be complacent. Singapore must prepare for worst-case scenarios. a. The disruptions to the Nordstream gas pipelines connecting Russia and Europe in September 2022 highlight the vulnerability of energy infrastructure to geopolitical tensions and how quickly energy supplies can be disrupted.b. These amendments for power rationing are therefore necessary for the worst-case scenario, as a matter of national security.

Power Rationing Directions

D4. Mr Don Wee, Mr Mark Lee, Mr Neil Parekh asked what constitutes an emergency that justifies power rationing. a. An emergency is defined in the Bill as a situation where an electricity shortage has occurred, or where EMA assesses that a shortage is likely or if no measures are taken, the secure operation of our power transmission system will be threatened. b. For example, a severe fuel shortage could trigger such an emergency.D5. Mr Mark Leeand Mr Neil Parekh asked for timely communication with companies about the initiation, duration and cessation of these measures. a. EMA will strive to notify affected parties through various channels before implementing power rationing, so that they have time to safely reduce or power down operations.

However, our priority during an emergency would be to implement power rationing expeditiously to ensure system stability.

b. The duration may not be known upfront, as it will depend on the nature of the emergency.

But EMA will lift power rationing once it is no longer required.

D6. Mr Don Weealso asked how EMA will ensure that rationing measures are proportionate and do not unduly disrupt economic activities. a. MTI and EMA intend to establish a prioritisation framework outlining clear guidelines for EMA's intended order of load reductions.

We have started preliminary consultations with some stakeholders on this and further consultations will follow.

b. The intent of the prioritisation framework is to minimise the impact of power rationing on society. c. As I mentioned earlier, 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 give priority for residents to have access to power for daily needs.

D7. Now we appreciate Ms Carrie Tan'sand Mr Neil Parekh'ssuggestions to run power rationing simulations.

Earlier this year, organisations across Singapore simulated power, water or food supply disruptions as part of Total Defence Day activities.

We will continue to find new ways to engage the public on our energy story, as well as support business continuity planning.

E. CONCLUSIONE1. Let me now conclude.

Like every nation on this energy transition journey, Singapore is grappling with the "energy trilemma" - how to realise an energy future that is secure, that is cost-competitive, and sustainable.

For our beloved country Singapore, the stakes are even higher.

But then again the stakes for our Little Red Dot have always been higher.

a. Energy is an existential challenge that defines this generation. b. This Bill, Members of the House, takes us closer to securing our clean energy future by ensuring that our energy system is resilient, adaptable, and ready for the transition and transformation ahead.E2. This is not something the Government can do alone. So let us all work together. a. Let us all work together with businesses to innovate commercially viable low-carbon solutions; and b. With consumers to support our energy story, use their energy prudently, even as all of us in government seeks to keep costs in check.E3. We all know we have heard so many members of the House speak earlier on about our Water Story. We all know our Water Story well, and how Singapore turned scarcity into strength.

Now, I call upon all of us. Write the net-zero chapter of our Singapore Energy Story.

a. This is not just my story, it is your story, our children's, our grandchildren's stories. b. Let us innovate, let us adapt and work towards our clean energy future together.E4. Once again, I thank Members for your strong support of the Bill. Sir, I beg to move.

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