Energy Transition Measures and Other Amendments Bill

Order for Second Reading read.

1.36 pm

The Second Minister for Trade and Industry (Dr Tan See Leng): Mr Speaker, I beg to move, "That the Bill be now read a Second time."

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.

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.

This is not just an energy transition for us, but it is 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.

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

Second, regional electricity imports. Last week, I announced that the Energy Market Authority (EMA) has granted Conditional Approvals to two new projects to import 1.4 gigawatts of low-carbon electricity from Indonesia to Singapore. Projects to import a total of two gigawatts 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 gigawatts of low-carbon electricity from Cambodia, Indonesia and Vietnam. We are on track to meeting our ambition of six gigawatts of imported electricity, or around one-third of our energy supply by, 2035.

Third, low-carbon energy sources. Our focus is on building capabilities to understand and to 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 (US). 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 very unique context.

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.

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 Memoranda of Understanding (MOUs) with partners to work towards future Implementation Agreements.

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.

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.

Let me elaborate. 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 in Singapore.

Clean energy investments may involve high upfront costs and significant commercial, technological and geopolitical risks. These factors could delay early-stage private investments. So, 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. 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 FEF may be used to support the terminal's development.

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.

Hence, clause 6 of the Bill amends the EMA Act to establish the FEF as a statutory fund under EMA. With an initial injection of S$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.

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

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 may need access to 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.

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.

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.

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.

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

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.

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. 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.

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. In evaluating these requests, EMA will consider such persons' commercial interests, while ensuring that Singapore's energy security and system reliability is not compromised. Any such person who disagrees with EMA's decision may appeal to the Minister for Trade and Industry for a review.

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

To prepare for the energy transition, EMA will need to undertake new initiatives for energy security, for market development and decarbonisation. For instance, the Standby Liquefied Natural Gas facility (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 it 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 security, the benefits it has conferred to all electricity users.

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, while ensuring the proper functioning of our energy system. EMA will only recover the costs for such initiatives and will not seek to make any profit.

Furthermore, EMA will seek to be targeted in implementing cost recovery for these initiatives, in line with the "user pays" principle. Members of the House, 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.

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 will provide reasonable notice to affected consumers before introducing new rates. 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.

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

Members of the House, if you recall, 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.

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 the risks associated with market volatilities and helped Japan and Korea avoid severe gas disruptions during the energy crisis.

This is why we announced, in 2023, that we would establish a central gas entity, or Gasco for short, to centralise the procurement and supply of gas to the power sector. This Gasco 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 allow us to procure gas from more diverse sources.

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.

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? 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 our electricity market.

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. 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 United Kingdom, have also incorporated power rationing as part of their energy resilience strategy.

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 all Members here that this is a measure of last resort and it will not be activated lightly. 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. 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. Third, power rationing will be lifted once these measures are no longer required for system stability.

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 direction on power rationing results in a breach of their contracted obligations to take or provide electricity or fuel.

I want to reiterate and reassure Members of the House: power rationing is only a last resort. It is one part of Singapore's preparation for an increasingly uncertain world and I hope we will never have to use it.

Lastly, the Bill also includes various miscellaneous amendments to the Electricity Act, the Gas Act and the 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. Mr Speaker, a few words in Mandarin, please.

(In Mandarin): [Please refer to Vernacular Speech.] We need to transition to clean energy whilst maintaining energy security and ensuring cost competitiveness. We cannot predict all the curveballs that may arise as we navigate the uncertainties in our decarbonisation journey.

We introduced the Energy Transition Measures and Other Amendments Bill to ensure that our regulatory framework for energy markets and infrastructure future-red. The provisions in the Bill will ensure that our energy system remains adaptable and resilient amid uncertainties and the evolving landscape. The Government remains committed to helping households with utility costs and supporting businesses in improving energy efficiency.

(In English): 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. 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 this journey of advancing Singapore's energy story. Sir, I beg to move.

Question proposed.

Mr Speaker: Mr Liang Eng Hwa.

2.00 pm

Mr Liang Eng Hwa (Bukit Panjang): Mr Speaker, having secured energy supply is existential to our economic development and, for that matter, our well-being and our survival. The task is made more arduous for a small island state with no natural resources and alternatives deprived. Even to tap solar power has its limits because of our land space and the frequent cloud cover.

Climate change, geopolitics, economic nationalism, among others, have added further challenges to this formidable task of achieving energy security and resilience. For Singapore, in a setting of a volatile world, our constant energy challenge is to, firstly, ensure reliable energy supply in the medium to longer term; secondly, meet Singapore's 2050 net zero ambition; and thirdly, achieving this at an affordable price.

This Bill looks to beef up the current regulatory regime and addresses the all-important issue of system resilience and our ability to respond to shocks and disruptions in the supply of energy and in the energy prices.

Some may have forgotten that we actually faced an energy crisis in 2021-2022, due to the rapid economic rebound as the world emerged from the pandemic. Of course, the crisis escalated dramatically in February 2022 when the Russian-Ukraine war broke out. Just to illustrate the volatility, the Asian spot gas price moved from a low of about US$2 per metric million British thermal unit (MMBtu) in June 2020, to a high of more than US$54 per MMBtu in around August 2022. It remains at an elevated level of around US$14 per MMBtu, which is still about seven times from the low in June 2020.

During that crisis in November 2021, the House passed a Bill to empower EMA to acquire, build, own and operate power infrastructure to safeguard our energy security and reliability. The Bill also additionally empowers EMA to impose energy and carbon efficiency on operators licensed under the Electricity Act. Obviously, those provisions in that Bill, then, were still insufficient. And hence, today's Bill on the Energy Transition Measures and Other Amendments.

Sir, one of the key provisions in the Energy Transition Bill is to institute the regulatory regime for centralised gas procurement, with the establishment of Gasco. I can see the rationale. If we leave it to individual generation companies (gencos) to purchase the gas purely based on their commercial consideration, we may not meet the overall gas needs of the country as well as the needed security, whether it is the security of supply or price stability.

To negotiate for more favourable contracting terms in the energy markets, where we are a price-taker, having considerable order size helps. To ensure energy resilience, we should also avoid a situation where the individual procurements by gencos primarily come from the same source and, hence, subject us to concentration risk.

Having a centralised aggregator that procure with the national interest in mind, can better achieve supply source diversification. With scale, it will also come with better risk warehousing capabilities, which would, in turn, help manage longer-term price and supply stability.

To better manage risk, the Gasco may need to enter into longer-tenure gas supply contracts and employ forward-hedging strategies to mitigate price volatility. We will have market situations where we lock in longer-term gas contracts, which will cost more than spot price or the short-tenure contracts. The point here is that, there will be cost implications for a more secure and resilient energy supply.

With the new framework and the new approach where we need to safeguard securities, the determination of the unit price of gas will become more complex and less transparent.

This Bill allows EMA to recover costs of energy security, infrastructure development and decarbonisation-related efforts. Here, I want to ask the Minister, how would EMA continue to ensure price transparency and how would the regulator determine the transfer price between the Gasco and the gencos?

When the Government caveats statements, such as on cost recovery, the concern, naturally, is that energy prices will be priced up and, hence, passed on to businesses and to the mass consumers. Can I also seek clarity or an indication from the Minister, how significant will the cost recovery be relative to its current baseline and what are the mitigating measures? Can the FEF, which helps to initially fund new infrastructure investments, be able to help mitigate and reduce cost recovery?

Sir, to strengthen EMA's ability to regulate supply of power, the Bill also allows EMA to direct owners of critical infrastructures to give access to licensees on a reasonable term basis. Owners of electricity and gas infrastructure assets will also be required to seek EMA's approval if they plan to repurpose their assets. This is to ensure that energy security and system reliability will not be compromised. I fully agree with that.

Sir, this Bill also equips EMA with the powers to direct licensees to ration power during an emergency. Power rationing is new in Singapore. I do not remember having one before. It will require wider engagement and education with the stakeholders and public on how this will be done and what are the likely prioritisation plans.

I believe businesses and the public can understand the need for power rationing in an exigency situation. They just need to know the format that it will be done so that they can be better prepared. Businesses also need to have some legal cover from potential liabilities as the power rationing may impact their ability to fulfil contractual obligations. So, I hope the Minister can also share more details on this.

Finally, on the $5 billion FEF to support investment to transit to net zero future. Energy infrastructure investments are massive capital expenditure items and come with considerable risks, especially when we invest in new sources of energy with nascent technologies. The investment horizons are usually much longer and the projects can cut across jurisdictions and, hence, also come with significant geopolitical risks.

On their own, private sectors will often not be able to undertake these investments and to underwrite its entire project risk. The FEF will come in useful and can help catalyse investments in innovative energy technologies and also put us in a better position to get the projects off the ground.

To achieve longer-term energy security and resilience requires massive investments in energy infrastructure and, therefore, do come at a cost. The initial $5 billion allocation of funding will give us the financial space to make some early decisive moves and be prepared for a more challenging, volatile and uncertain energy future landscape ahead.

Notwithstanding my support, can I ask the Minister to spell out the mandate, the terms and the investment criteria of this fund as well as its approval process and its governance. My final question to the Minister would be does the investment mandate of the FEF also cover investments in nuclear energy, should it become feasible? So, notwithstanding that, I support the Bill.

Mr Speaker: Ms He Ting Ru.

2.09 pm

Ms He Ting Ru (Sengkang): Mr Speaker, I will focus my speech today on the FEF. The fund is a key piece of our strategy in securing our energy future and meeting our 2050 Net Zero Objective and we support its creation. The fund is meant to catalyse the development of clean energy infrastructure in the region, through the development of infrastructure necessary for low-carbon projects that typically face high upfront capital expenditures and commercial or geopolitical risks.

My speech today would cover three areas: the mechanics of the fund, accountability and the energy environment.

Implementation refers to details about fund management, investment criteria and how the fund's mandate links to our broader energy and climate goals. Accountability refers to clarity on stakeholders who are responsible for the fund's performance and how to benchmark the effectiveness of the fund. Lastly, our energy environment refers to wider trends that affect the decarbonisation of our energy mix.

The fund will be established at the end of this year, with an initial injection of $5 billion. After taking into account due diligence time frames, the first investments through the fund should be made next year. This gives a 10-year time frame to achieve our 2035 goal for renewable energy to contribute 30% of our energy mix. Thirty percent is a significant ramp-up and will be predominantly driven by our target to add six gigawatts of low carbon imports, given that the current proportion stands at approximately 1.3%. Therefore, we would need an exponential increase in renewables between just 2030 and 2035 alone.

I have some clarifications relating to the implementation of the fund. As with most capital-intensive infrastructure projects, particularly for energy projects, commissioning times before such projects even begin yielding outcomes play a critical role. In a 2024 study on renewable energy project, globally-funded by the European Union's Horizon 2020 Research and Innovation Programme under the European Research Council, commissioning times across renewable technologies and regions have increased on average between 2015 and 2022.

The same paper called for more policy interventions to address this increase in times, ranging from insulating projects from fiscal shocks to standardising legal processes surrounding projects. Given also, that target projects supported by the fund can include nascent technologies, these being one of the factors that increases commissioning time, how does the Government plan to use the fund to address potentially lengthy commissioning times and how does it see the efficacy of using the fund to meet our 2035 targets?

Also on the mechanics of the fund, I note that the proposed new section 19A(1)(a) uses the wording "any low-carbon energy project or energy supply security project". Does this mean that the fund could, hypothetically, support a new built fossil fuel project in the name of energy security? Would any project qualify, as long as it meets the criteria of being necessitated by any low-carbon energy project as described in 19A(6)?

I note that power back-up is explicitly given as an example in 19A(6)(b), but could this also mean support for fossil fuel power stations providing baseload power? What are the scenarios where the fund would support fossil fuel power for non-back-up use? Would the Minister confirm that the fund will not be used to rely on fossil fuels as a crutch, especially if it means that we are stuck with using this crutch in the long term?

A query I have is, what happens if projects are terminated early? In the case of the 100-megawatt Lao DPR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP), it was reported that the deal is currently on pause over government-level disagreements. What happens if assets supported by the fund are stranded due to project failures or pauses?

Next, on accountability. As we work towards these national energy goals, accountability allows us to equip accountable stakeholders with commensurate mandates and authority to see through the successful implementation of these targets. We fall short of targets when lines of accountability are unclear or if our strategic approach is flawed.

We need to learn from our experiences in the arena of food insecurity, specifically, the difficulties faced in achieving our "30 by 30" goal, in working to achieve our goal for energy security in the coming decade and beyond.

We can also learn from the failures of investing in unproven technologies, as was the case in the US. The 2009 American Recovery and Reinvestment Act offered US$3.4 billion for the research and development of carbon capture and sequestration projects. A case study of 11 demonstration projects selected by the US Department of Energy, resulted in only two continuing to remain operational. A further five commercial projects saw only one reaching operational implementation, which eventually closed within four years.

In this example, the failure of capital deployed can be attributed to the lack of financial viability of a range of carbon capture technologies, a risk that cannot be overlooked when dealing with nascent technologies.

In view of this, I have some clarifications for the Minister. Funds typically appoint a designated fund manager or have a general partner responsible for evaluating projects, investment decisions and the overall management of fund operations. Which agency will be the fund manager for the FEF? On a broader level, which Ministry or agency holds ultimate accountability for our target energy mix and transition to 30% renewable sources by 2035?

On an explicit strategic approach and fund objectives, what does success for the fund look like? How will its efficacy be measured? Given that our country’s energy security and transition are fundamentally critical to our survival, how will this translate into the fund balancing between the need for financial returns versus the long-term strategic costs necessary for such a transition? Can the Minister clarify what are our key performance indicators (KPIs) for the fund?

Aside from supporting the 2035 target for six gigawatts target for low-carbon imports which will provide 30% of Singapore’s electricity supply, will the impact on the grid emission factor, which calculates the actual climate impact of the changes, be a KPI?

Moving on to more general points about our energy environment and maximising the climate impact of the fund. As we ramp up towards transitioning our energy mix, our energy demand has been growing consistently. Electricity consumption increased by 2.6% between 2021 and 2022, part of a long-term trend of consumption, having increased by nearly 25% over a 10-year period between 2012 and 2022. Our industrial sector currently contributes 55% of total energy demand. With industrial usage set for significant growth, especially from energy-intensive use cases, such as data centres, necessitated by the growth of artificial intelligence (AI) applications, it is likely that total energy demand will grow more.

While we may be able to achieve our target of 30% renewables, the wider challenge remains. We are already seeing power-hungry AI applications drive outsized demand for energy just to keep data centres running. Given our AI ambitions, we have been looking for “clean” sources in the region to meet demand, including solar farms in Australia and wind or hydropower sources from our ASEAN neighbours – Malaysia, Vietnam, Laos, for instance.

However, what happens when our ASEAN neighbours start requiring a significant amount of renewables to power their own transition and development? What, too, do we do if geopolitical conflict results in energy supply lines being cut, such as was the case with the Nord Stream natural gas pipelines?

Our regulations and policies are also important in boosting Singapore’s energy security which, in turn, will affect our geopolitical risk tolerance with electricity imports. For instance, EMA introduced rules requiring all new and repowered natural gas power plants to be at least 30% hydrogen-compatible from this year and the few power plants coming up in the next few years are hydrogen-compatible. But with an economic lifespan of around 25 years, is there a timeline for these power plants to run on green zero-emission hydrogen? If these fossil fuel plants are unable to meet net-zero power, will they be retired early to make way for low-carbon imports?

And in terms of domestic consumption, unlike electricity generated overseas, we have some control over our electricity consumption. Ultimately, the drive for successfully transitioning our energy sources and decarbonisation will require us to not just pay attention to supply, but also demand. We cannot neglect to continue to raise awareness of energy conservation and wider sustainability concerns, and both industry and households have to continue to work together, keeping our energy use in check. For this, we would like to repeat our calls made since 2016 for Singapore to work towards solar panels being mandatory on commercial and residential buildings except in special cases. This would not only cut emissions and electricity costs but will also provide some options in our energy security.

Mr Speaker: Mr Saktiandi Supaat.

2.19 pm

Mr Saktiandi Supaat (Bishan-Toa Payoh): Mr Speaker, Sir, the energy crunch in 2021-2022 still looms in many of our minds today. A confluence of factors, including the war in Ukraine, supply chain disruptions and gas production shortages, caused electricity prices to soar. And when electricity prices go up, business costs went up and our domestic food prices also went up.

This Bill focuses on one of our four supply “switches” – how we make our natural gas generators more efficient. As at end-2022, around 95% of Singapore’s electricity is generated using natural gas. I have some clarifications and comments on the Bill.

Seeing the Ministry of Trade and Industry's (MTI’s) stated objectives for the Bill, I cannot help but think of the usual saying about the “impossible trinity”: fast, cheap and good. You can usually only have two out of the three.

So, when we are seeking to decarbonise in line with our international commitments and our own green plans and to diversify so as to ensure our energy security, it would seem quite impossible to decrease prices and keep our costs competitive. Some increase in price seems to be inevitable. With the changes in this Bill, can the Minister share his thoughts whether Singaporeans and Singapore businesses should expect electricity prices to trend upwards in the near and medium term?

Mr Speaker, one of the key thrusts under this Bill is the creation of a single Central Gas Entity (CGE) to centralise gas procurement for the power sector. Power generation companies (gencos) would then have to buy natural gas from the CGE. This reminds me of the establishment of the predecessor of NTUC FairPrice amidst the oil crises of the 1970s. The consumer co-operative would buy essentials in bulk and pass the savings on to the consumers, combating profiteering at the same time. Is there already an idea of who this CGE is going to be and how it is going to be run and managed? Will it be part of an existing Government-linked company?

I suspect it cannot be a purely private commercial enterprise since it is going to be put in a monopolistic market position vis-à-vis the gencos. To achieve our aim of ensuring cost competitiveness, how will the Government be able to influence the CGE to pursue non-profit maximisation objectives?

In fact, this monopolistic structure has been raised as an issue during MTI and EMA’s public consultation earlier this year. Respondents flagged the potential loss of flexibility to procure gas from other market participants. This not only includes different upstream gas suppliers, but also horizontal gas companies which find that they have more gas than they need. Would this not deprive gencos of the ability to capitalise on opportunistic spot liquefied natural gas (LNG) contracts to bring down their overall cost of generating electricity, which they can pass on to electricity consumers? On a free market theory, would it not be more efficient if gencos were left to search for the most competitive gas supplier and arrangement?

I note from the Ministry’s consultation responses that legacy gas contracts will not be affected by the new regulatory regime. We know that our gencos generally rely on long-term gas contracts in order to keep electricity prices relatively stable. Do we have any idea what is the rundown period for these existing contracts, before they need to start to purchase from, or through, the CGE?

Next, is there also a contradiction when we seek to use the CGE to aggregate natural gas demands and achieve economies of scale in procurement and our other aim to enhance our energy security by procuring from multiple, diversified sources? How diversified are our gas supplies currently? How many different countries do our gencos import our gas from? What is the maximum percentage of our total gas imports that come from a single country?

Mr Speaker, this Bill will also create the FEF that was announced during Budget 2024. As announced by Prime Minister Lawrence Wong then, the FEF will have an initial injection of $5 billion and invest in critical infrastructure and enhance our security in clean energy.

Would the FEF subsume existing initiatives for the uptake of clean and efficient energy solutions? For example, would the $50 million Low-Carbon Energy Research Funding initiative, as announced by Minister Tan See Leng in this House in January 2021, now be parked under the FEF? Or the National Environment Agency’s Energy Efficiency Grant, which offers grants for manufacturing companies to adopt energy-efficient technologies, would that now be dealt under the FEF instead?

This Bill is also going to give EMA the power to recover the costs of providing new initiatives to strengthen energy security, develop a competitive market, and/or support the decarbonisation of the power sector. The official press release for the introduction of this Bill stated that the proposed amendments to the Electricity Act and the Gas Act will allow EMA to recover costs from entities and persons who benefit from these initiatives. It is quite unclear how these cost recovery powers are intended to be used. Can the Minister give examples of when and how these cost recovery powers might be used?

When it comes to energy assets and infrastructure, the first change is to require owners of key electricity and gas assets to obtain the EMA’s prior approval before repurposing such assets. May I ask how would such key assets be identified? Will it be a closed list? More fundamentally, has there be any particular incident in the past few years which has sparked this concern around repurposing?

The other material change is the EMA’s power to direct owners of critical energy infrastructure to enter an agreement with licensees for access to the critical energy infrastructure. This power may seem overreaching as it intrudes upon the infrastructure owner’s freedom to contract or not to contract with a particular party.

Before this, EMA was previously given power to direct gencos to generate electricity using gas from the SLF. May I ask if such a power was ever exercised by EMA? To date, how many times has EMA exercised the power to direct electricity market participants to take any action that would otherwise be in their own commercial decision-making domain?

If the licensee and the infrastructure owner cannot agree on the terms upon which the licensee would have access, either party may request the Minister for Trade and Industry to establish an Appeal Panel to determine the reasonable terms for the agreement. But 10 reasonable persons can come up with 10 different reasonable proposals. So, what are the factors that the Appeal Panel will consider and refer to in determining the “reasonable terms” of the forced agreement? Would subsidiary legislation be passed for this purpose?

In determining what terms would be “reasonable”, would the Appeal Panel be able to access the terms of other agreements entered into by the owner of the critical infrastructure giving access to other licensees? The problem is that most of these agreements and their terms would probably be commercially sensitive and subject to express confidentiality obligations.

Mr Speaker, I started by pointing out that this Bill focuses on one of our four supply “switches”. But it is difficult to think of our resilient and sustainable energy strategy without considering the other three supply “switches” as well.

Assuming we achieve our solar deployment target of at least two gigawatt-peak (GWp) by 2030, what percentage of our electricity needs will solar energy be able to supply? Is it realistic to set even more ambitious targets for our solar deployment?

Against our expectation of importing around 30% of our electricity from foreign countries by 2035, how many percent have we attained as of today? In addition, how many are already in the pipeline and in the midst of works? How much has already been spent on the planning and infrastructure, including for plans that have been abandoned due to subsequent developments?

Finally, in relation to low-carbon alternatives, is there any update on how the execution of our National Hydrogen Strategy is coming along? In order to hit our emissions targets by 2030 and 2050, how do we envisage the mix of electricity sources to change over time? On that note, Mr Speaker, Sir, notwithstanding the clarifications sought, I support the Bill.

Mr Speaker: Mr Mark Lee.

2.27 pm

Mr Mark Lee (Nominated Member): Mr Speaker, Sir, energy security is, without a doubt, a vital resource for Singapore, a country with limited natural energy resources. Our dependence on imports for almost all our energy makes us highly vulnerable to external shocks. In the face of these challenges, the measures proposed in this Bill are both timely and essential.

In recent years, we have witnessed unprecedented volatility in energy markets. In 2021, wholesale power prices averaged $115 per megawatt-hour from January to September. However, by October, these prices soared to $635 per megawatt-hour, a fivefold increase. Since then, such spikes have become more frequent, with surges as high as 3,000% in 2023, despite a sharp decline in LNG prices. This volatility underscores how vulnerable we are to global energy fluctuations, and it is essential that we take steps to mitigate these risks.

The spikes in electricity prices have had a significant impact on both households and businesses. In a tight labour market where wages are rising and supply chain pressures persist, the added uncertainty of fluctuating energy costs has become a major concern for businesses. According to Singapore Business Federation's Business Survey 2023/2024, rising business costs, particularly in the areas of wages, pass through from suppliers, and electricity costs, are among the top challenges that businesses face today. Therefore, this Bill offers much relief by addressing some of the systemic issues contributing to these rising costs.

Centralising gas procurement through the establishment of the CGE, as proposed, will enhance efficiency and provide stability in gas supply which, in turn, will help stabilise prices. Furthermore, the amendments that empower EMA to facilitate access to critical infrastructure, approve the repurposing of critical assets, and implement power rationing during emergencies are crucial to maintaining the reliability of our system.

This framework is welcomed by businesses as it ensures operational continuity and energy supply reliability, both of which are critical to our long-term success.

However, I would like to seek clarification regarding the establishment of the CGE. As it stands, we have licensed gas aggregators, including SembCorp, ExxonMobil, Shell, Pavilion and Keppel, which manage gas procurement and supply. These entities are already tasked with demand aggregation, diversifying energy sources and ensuring sufficient gas supply for our power needs.

Could the Minister clarify how the CGE will succeed in achieving these goals where the current aggregators may have faced challenges? What specific issues or gaps have been identified with the existing framework and how will the CGE address these challenges more effectively to ensure energy stability and security for Singapore?

Additionally, for Singapore to achieve its net-zero emissions target by 2050, we must prioritise decarbonisation. The creation of the FEF, with an initial investment of $5 billion, is a vital step in this direction. The FEF will support low-carbon energy technologies, which are necessary for our energy transition which the private sector may find it difficult to manage on its own.

It may consider supporting large-scale cross-border solar projects, such as the recently announced one gigawatt AC solar energy import from Indonesia, where grid charges and backup fees are already imposed by EMA to maintain grid stability. These projects require significant Battery Energy Storage Systems to store daytime energy for nighttime transmission, and collaboration with host countries is crucial for their success. If FEF supports these initiatives, its investments in subsea cables and cross-border infrastructure will be instrumental in realising their potential and accelerating Singapore's decarbonisation efforts.

While businesses understand the importance of enhancing energy security and supporting decarbonisation, I must emphasise that cost recovery measures outlined in the Bill should not exacerbate the cost pressures businesses are already facing. As we work towards energy resilience, it is crucial that the cost recovery mechanisms are implemented fairly, transparently and in a sustainable manner. Businesses are already navigating multiple financial pressures. Any additional cost burdens must be carefully considered to avoid undermining their competitiveness. In light of this, I would like to propose four key recommendations.

First, transparency is paramount in determining how costs are calculated and allocated to licensees and consumers. I am glad to hear from the Minister that EMA will form a cost recovery committee and recommend that this panel will have representation from businesses and industry players to assess how costs are allocated. This will ensure that the costs are distributed fairly, preventing any undue burden on businesses and consumers.

Second, I recommend a phased approach to cost recovery. Businesses need sufficient runway to adjust to any changes in cost structures, especially in today's economic climate. A gradual implementation of cost recovery measures will prevent sudden financial shocks. Additionally, to further support businesses and maintain their competitiveness, a cap on the maximum allowable cost recovery in any given year could be introduced to mitigate financial strain.

Third, while renewable energy is vital for decarbonisation, we must recognise the costs associated with its intermittency. The "user pays" principle has been a core part of Singapore's solar energy project planning for over a decade. Studies have shown that for every two GWp of solar energy, around 300-megawatt hour (MWhr) of Battery Energy Storage Systems is needed to mitigate these short-term disruptions.

Currently, Singapore has 1.5 GWp of solar capacity and a centralised 285-MWhr Battery Energy Storage System in Jurong Island. As we expand beyond two GWp, the intermittency costs will grow and renewable energy producers should share in the responsibility for maintaining grid stability. This principle ensures that we fairly distribute the costs across all stakeholders in the energy ecosystem.

Fourth, for a more holistic approach to energy security, I urge the Government to include renewable energy imports as part of our energy supply strategy. A centralised entity similar to the CGE could be established to manage the procurement of renewable energy. This would complement our broader energy diversification efforts and strengthen our overall energy security while also accelerating the transition to a cleaner energy future.

I have several further clarifications to seek from the Minister.

First, the facilitation of access to critical infrastructure involves directing owners of critical energy assets to allow licensees access, with reasonable compensation for the owner. I note that EMA has provided a list of critical energy infrastructure, but I would like to ask whether Battery Energy Storage Systems will be included. These systems are increasingly important for energy storage and ensuring efficiency in power usage.

Second, while facilitating access to critical infrastructure is important, we must ensure that it is done carefully. I would, therefore, like to seek clarifications on the conditions under which licensees may gain access to this infrastructure. Mandating that a business provide access to its competitors could risk eroding its value and competitiveness. It is essential that any such regulations balance the need for collaboration with the protection of business interests. Clear guidelines and criteria are essential to prevent disputes and ensure that compensation is fair. Moreover, in the event of a disagreement between parties, will there be a formal resolution process to ensure that the disputes are handled reasonably, efficiently and fairly?

Third, the Bill gives EMA the power to implement power rationing during emergencies, which is a necessary safeguard. However, it is critical that EMA provide clear definitions of what constitutes an emergency. Businesses need to understand to what extent their liabilities are limited due to power rationing and the protocols that will be in place to ensure that essential services remain operational and disruptions are minimised.

I also recommend that a robust communication mechanism be established so that affected businesses are promptly informed about the initiation, duration and cessation of power rationing measures.

As we move forward, it is crucial that Singapore not only meets its Green Plan 2030 targets but also positions itself as a global leader in sustainability. Embracing new energy technologies, such as solar, wind and hydrogen, will not only reduce our carbon footprint but also enhance our energy security and bolster our economy's resilience.

To expedite progress in these areas, we must ensure that our regulations are flexible enough to keep pace with the evolving energy landscape. For example, we are already more than halfway to achieving our solar power deployment target of 2,000 megawatt-peak by 2030, but we must minimise regulatory bottlenecks to facilitate businesses in rolling out their solar initiatives more swiftly. Aligning safety regulations with those of leading solar economies could be a key step in the right direction.

Furthermore, for businesses that have yet to start their green transition, the Government could consider introducing building-level incentives to encourage the adoption of sustainability infrastructure. This could involve clustering tenants in properties specifically designed to support green initiatives, which could lower barriers to adoption and spur greater investment in sustainable technologies.

Finally, I would also like to highlight the ongoing collaboration between MTI and the Singapore Business Federation through the Alliance for Action (AfA) on Business Competitiveness. This initiative is focused on helping businesses adapt to sustainability and decarbonisation efforts. AfA will soon release our recommendations aimed at enhancing business competitiveness while maintaining momentum towards decarbonisation. This work aligns closely with the objectives of this Bill, ensuring that businesses remain competitive and resilient as we advance towards our energy and sustainability goals.

In conclusion, the amendments in this Bill are critical to supporting decarbonisation, enhancing energy security and ensuring cost competitiveness in the power sector. However, execution is key. Businesses are looking forward to the establishment of the CGE and it is essential that it is implemented in a timely manner. Stabilising electricity costs will be crucial to maintaining Singapore's long-term competitiveness in a rapidly evolving global landscape.

Mr Speaker, Sir, notwithstanding my questions and recommendations, I express my support for this Bill.

Mr Speaker: Ms Jessica Tan.

2.40 pm

Ms Jessica Tan Soon Neo (East Coast): Mr Speaker, I rise in support of the proposed amendments in the Energy Transition Measures and Other Amendments Bill. The proposed amendments seek to enhance Singapore's regulatory regime for energy markets and related infrastructure.

Singapore imports most of our fuel, which makes us vulnerable to global supply and demand shifts and price fluctuations. While Singapore has worked hard to strengthen our energy resilience, the supply disruptions and volatility experienced during the 2021/2022 global energy crisis has highlighted the need for further safeguards to ensure Singapore's energy security.

With increasing digitalisation and economic growth, our energy needs will only further increase. The challenges brought about by climate change have driven our ambition to achieve net-zero by 2050. To do this, we need to transition, or as the Minister has said, to transform, to renewable energy.

While I am supportive of the proposed amendments in the Bill, I do wish to seek clarifications on three of the proposed amendments: first, the FEF; second, centralised gas procurement; and third, cost recovery.

Let me now touch on the FEF. The Bill proposes the establishment of the FEF under EMA with an initial amount of $5 billion to support Singapore's adoption of low-carbon energy sources. EMA and MTI have highlighted that such energy sources will likely involve nascent technologies, large-scale projects that require higher capital expenditures and exposure to significant commercial and geopolitical risks.

I support the setting up of the FEF as it is crucial that Singapore invests in, builds know-how and taps on new sources of low-carbon energy for the transition of our power sector and for our energy security.

While the set-up of the FEF is important, I would like to understand how the FEF will encourage and attract the right investments and what are the criteria on which projects will be selected for funding. While the Minister did say that there will be no limit on what we study and all the possible low-carbon energy projects and sources, and while the technology is also very nascent, I would ask if we have identified promising technologies that are aligned with our larger energy masterplan, given the fact that our runway is really quite short.

This transition will require investments, infrastructure upgrades and enhancements. This may lead to higher energy and electricity prices. This is a point I will discuss in my later clarification on cost recovery.

Let me touch on centralised gas procurement. About 95% of Singapore's electricity is generated by natural gas. The Bill proposes setting up the CGE, or referred to as "Gasco", to centralise gas procurement. The amendment will require power generation companies to procure gas solely from the Gasco and to empower EMA to regulate the Gasco.

As outlined by the Minister in his speech, with demand aggregation, the intent is to derive cost competitive benefits for our gas supply, diversify our energy sources and ensure sufficient supply of gas to meet our power needs.

The centralisation of gas procurement will reduce the flexibility of the power generation companies. Therefore, the success of the Gasco in achieving its mandate is critical for Singapore's energy security and price competitiveness. On that point, I would like to seek an understanding of how EMA will measure the Gasco's effectiveness in securing sufficient gas supply for our power needs and in providing competitive pricing to the power generation companies.

Let me touch on the point of cost recovery. The Bill proposes amendments to allow EMA to recover costs for introduction of initiatives and services that strengthen energy security, develop a competitive market or decarbonise the power sector. The cost recovery will be from entities and persons who benefit from the initiatives or services. This will increase cost for the entities and persons and, possibly, lead to higher energy and electricity prices.

Can the Minister share more information on what would trigger the decision for the need for such cost recovery, the framework for such cost recovery and the lead time that will be provided to both organisations and households that cost will be recovered from?

Mr Speaker, strengthening Singapore's energy security, ensuring our energy markets are cost-competitive and efficient and transitioning to decarbonise our power sector for energy sustainability, are existential priorities for a small country like Singapore. It requires strong commitment and action from all stakeholders and not just the Government. The efforts are not straightforward and will take time to achieve. The proposed amendments in the Bill are timely. But how we move forward and execute is equally important.

Mr Speaker: Mr Neil Parekh.

2.46 pm

Mr Neil Parekh Nimil Rajnikant (Nominated Member): Mr Speaker, Sir, thank you for allowing me to speak on the Energy Transition Measures and Other Amendments Bill.

As the world grapples with the challenges of climate change and the finite nature of fossil fuels, economies around the globe are increasingly transitioning towards more sustainable sources of energy. This shift is driven by a need to reduce greenhouse gas emissions, enhance energy security and future-proof economies against the volatility of traditional energy markets.

For us in Singapore, energy transition is not just an environmental imperative but an economic necessity, too. As a small, resource-constrained country with limited availability of renewable energy resources within, Singapore is highly dependent on imported energy, notably natural gas. The volatility of the global energy markets, as evidenced by the global energy crisis of 2021-2022, poses significant risks to the country's energy security and economic stability.

By transitioning towards more sustainable energy sources, such as solar power, low-carbon hydrogen and regional renewable energy imports, Singapore can reduce its reliance on fossil fuels, enhance its energy resilience and contribute to global efforts to combat climate change. Furthermore, embracing this transition offers Singapore the opportunity to position itself as a leader in clean energy innovation in Southeast Asia, potentially driving economic growth through new industries and technologies.

The provisions in this Bill bring about numerous opportunities for Singapore businesses and the Singapore economy as a whole. Allow me to highlight some of them.

Firstly, this Bill will promote low-carbon energy through measures, such as tapping of low-carbon hydrogen as a source of fuel. This positions Singapore as a leader in green energy and contributes to global climate goals. In turn, this will attract investment in renewable energy projects and related technologies into our economy. Additionally, focusing on low-carbon energy projects opens opportunities for businesses to venture into renewable energy, energy storage and related technologies and allows for companies that innovate in these areas to tap into new markets and revenue streams.

Secondly, this Bill aims to enhance energy security. Regions, like the European Union and the Americas, faced severe impacts from oil, gas and electricity shortages during the global energy crisis of 2021-2022. Thanks to the quick actions taken by MTI and EMA, Singapore avoided electricity supply disruptions during that period by leveraging on existing system buffers. Building on this experience, the Bill seeks to further enhance energy reliability, which is essential for economic stability and growth.

The FEF supports infrastructure investments for Singapore's carbon-neutral transition, backing projects with high costs and risks. It secures low-carbon energy supplies, advancing decarbonisation goals and ensures Singapore remains an attractive investment destination.

Sir, I now turn to some clarifications for the Minister.

One, one area of concern are the associated regulatory changes and the cost of implementation of these regulatory changes, particularly for businesses that rely heavily on energy as an input. SMEs, especially, may face significant costs during the transition, including investing in new technology, complying with the regulations and dealing with potential disruptions. Also, industries dependent on traditional energy sources will encounter higher expenses and operational challenges as they shift to low-carbon alternatives.

These costs could include investments in new technology, compliance with new regulations and potential disruptions during the transition. Perhaps the Minister can address if there will be any Government assistance or incentives to help these businesses adapt? Could the Minister please provide us with a comprehensive update on the support measures available for SMEs?

Second, what are the specific types of projects or initiatives that the FEF can invest in and how will the allocation of funds be prioritised among different projects?

Three, under what specific circumstances would EMA initiate electricity rationing? In case of rationing, how will affected businesses and consumers be notified and what measures are in place to minimise disruptions?

Fourth, are there any plans to conduct electricity rationing drills to familiarise industries with what to do when it happens, just like the regular fire drills that our buildings conduct?

Lastly, I seek the Minister's views on the legislation's impact on existing contracts. How will the Bill affect existing contracts between energy suppliers and consumers, especially if new regulations or rationing measures are introduced?

Mr Speaker, Sir, notwithstanding these clarifications, this Bill has my complete support.

Mr Speaker: Ms Carrie Tan.

2.52 pm

Ms Carrie Tan (Nee Soon): Mr Speaker, I would like to express my support for these measures to ensure Singapore's energy security into the future. I believe the Bill's proposals are absolutely necessary and are heartened that we are doing this now to improve Singapore's energy regulatory framework to safeguard our energy security.

However, I have some clarifications and a few suggestions. How do we ensure the logic, which underpins our energy strategy, remains sound? There is always a risk that well-intended improvements to an existing framework will be built on existing and, sometimes, entrenched mindsets, which may be less relevant for a changed context. The energy sector and the context that it exists in, is evolving rapidly with a very fast-changing technology landscape. For a huge endeavour like energy transition that invariably takes time, we need to constantly check if our mindsets and accompanying approaches remain appropriate each step of the way.

I would, therefore, like to clarify: how does the Government ensure that our energy security policies remain relevant with the ever-shifting and emerging contexts and technologies and that, we are not, as the saying goes, "training to fight the last war"?

For example, as its name suggests, the establishment of the FEF could be absolutely necessary to experiment with new approaches. It supports the development and trialling of emerging technology to make energy production and transmission more efficient. We also need evidence from these experiments to improve our strategy.

My question is: how do we also provide safeguards to prevent decision-makers from merely, so-called, "following the money"? How do we avoid getting caught up in areas where capital injections and investments are flowing and assume that it works simply because it is "high growth"? When, ultimately, it may be scientifically unsound or inappropriate?

One only needs to look at our experience with high-tech farming to see the possibility of this pitfall. Not that many years ago, many private as well as state investors began putting their money in high-tech farming in a bid to solve food security issues amidst global warming. But recent developments have shown that, a high growth area in terms of capital and investments do not necessarily provide the desired results.

We should also bear this in mind, in considering our energy investments strategy. Solar energy, for example, has been held up as a renewable, low-carbon and, therefore, a better source of electricity. At face value, this is broadly true. However, if we consider its full cost of generation, transmission and storage, solar energy wins in some areas, but fails in many others. Solar energy still faces the same transmission inefficiencies as other sources. Large solar panels and high-capacity storage batteries required to generate and store at a commercially-viable scale, require huge quantities of rare resources that require us to further excavate and exploit the Earth. The overall infrastructure required is also energy-intensive and we cannot exclude these costs from our calculations.

The fact is, until a technological breakthrough dawns upon humanity to unlock viable alternative sources of affordable energy, it will remain expensive, unless global demand somehow does a cliff drop drastically. Looking at the emergence of AI and the number of data centres required and the amount of electricity and energy consumed by these data centres, I do not see this cliff drop happening anytime soon.

Given Singapore’s land constraints that make existing renewable energy sources unimplementable for us, we will continue to depend on deals with other countries for our electricity supply. This makes us vulnerable to conditions that affect their willingness to supply to us. We can infer that if they can get a better deal out of us, they will! So, electricity prices for Singapore will only go up and that is the harsh reality.

Hence, despite our Government’s best efforts to forge energy deals and partnerships with diverse countries and this is a really important effort, we will still be hard pressed to reach energy sufficiency without making drastic changes to our lifestyle and the way we organise our economic activity.

Achieving energy security, therefore, necessitates that we do not look only at “supply side” solutions, but also at “demand side” solutions. To ensure Singaporeans are resilient in a worst case scenario, we must shift from focusing on energy efficiency and expecting cheaper energy to simply getting used to using less and, potentially, having less.

Although this Bill focuses on ensuring energy security in supply, its proposal to empower EMA to implement power rationing during emergencies could be helpful for public education towards becoming a reduced-demand nation.

Minister Tan See Leng took pains earlier to stress that power rationing will be a last resort measure and I can imagine he is very concerned about the implications on business and economic activity. I understand the anxiety that people naturally would feel about such a prospect. However, the way to reduce this anxiety is not to avoid the issue altogether, but to build up our people's confidence that things will be okay and can be okay even if we find ourselves having to have one day, a nationwide power rationing exercise.

I like Mr Neil Parekh's suggestions of electricity rationing drills like fire drills and I suggest that the Government undertake intentional public education and begin small-scale electricity rationing exercises for short windows of time in limited geographical areas to make it a part of every Singaporean’s awareness that electricity shortage could be a very real possibility in the coming decades, given the current climate, technological and geopolitical realities.

Categories of “essential activities” and “non-essential activities” could be created to educate the public about the amount of electricity they consume. This can be a nationwide exercise and take in the comments, feedback and inputs from all citizens. The effort could even be gamified, the same way that the Health Promotion Board did with the National Steps Challenge, to help us develop a habit of moving more for better health and now we can do “Using Less for Better Resilience”.

Such campaigns will help citizens develop a perspective on what are energy essentials and what are non-essential in their lives, paving the way to, possibly, setting electricity budgets for different categories of activities in future. In the past, Singapore had to deal with water supply being an existential threat, so this is not new to us. We only managed to achieve water self-sufficiency in the mid-2010s, with more than four decades of efforts, after having had water crises in 1961 and 1963 that necessitated water rationing.

We need not wait for a crisis to happen to begin our efforts towards energy sufficiency and to develop a more accurate perspective of our collective reliance on electricity.

Attaining energy security in a highly urban and modernised state like Singapore is an urgent and monumental task, made even more challenging by the reliance on the numerous creature comforts like air-conditioning and constant wifi that many Singaporeans are used to and now take for granted. I will speak more about air-conditioning in the next debate on the Building Control (Amendment) Bill.

I do not envy the Ministries and all the personnel involved who are tasked to find solutions to our energy resilience. Nevertheless, I have faith that as a people, Singaporeans are adaptable and pragmatic. Even though I expect there will be many complaints and pushback from segments of society about just the idea of rationing electricity, I believe we have the creativity, gumption and cohesion at the end of the day, to do what is pragmatic and necessary.

And instead of offering just a doom-and-gloom picture, I would like to offer a nice vision to accompany what some people might viscerally reject as a first reaction towards electricity rationing.

Imagine the benefits of a nationwide "Unplug Day", where we take a collective digital detox from our gadgets. Stop wifi. Horrors! Create a window of time for families to get out to nature to play and to bond. Learn to get to destinations again without global positioning system which by the way helps us to train and develop the hippocampus part in our brains! Have an exploration and an adventure! Go to the beach and enjoy the sea breeze instead of the aircon! Or have heart-to-heart talks without digital distractions being available. Maybe husbands and wives can start looking into each other's eyes again over dinner. In the space created by non-access to digital and electronically enabled entertainment, maybe Singaporeans may make even more babies – I hope!

The path towards energy sufficiency does not and should not be on the shoulders of only the Ministries involved. I believe Singaporeans can be empowered to do our parts to preemptive education and sensitisation. With these suggestions, I support the Bill.

Mr Speaker: Mr Don Wee.

3.02 pm

Mr Don Wee (Chua Chu Kang): Mr Speaker, Sir, due to the structure of our highly developed economy, Singapore has one of the highest energy consumption per capita in the world. Singaporeans' livelihoods and well-being depend very much on the provision of reliable and affordable energy. As we work to decarbonise and reach net zero emissions by 2050, our energy profile will go through significant change.

It is important to recognise that the energy transition is not just about reducing emissions but is also central to ensuring long-term sustainability. By shifting towards cleaner energy sources, we can safeguard our environmental resources for future generations while enhancing energy resilience. This transition aligns with our broader sustainability goals by reducing the harmful impacts of fossil fuels, improving air quality and fostering the development of green technologies that will sustain both economic growth and ecological balance. In this way, energy security and environmental sustainability are inextricably linked, making it critical for us to act decisively in accelerating this transition.

One of the objectives of the Bill is to introduce guardrails for our electricity market. This is by: establishing regulations for centralised gas procurement and allowing EMA to recover costs for initiatives to boost our energy security, develop a competitive market and support the power sector’s decarbonisation.

While the gas procurement through the CGE is limited to gas users from the power sector, such as generation companies, the concerns over the potential risks and vulnerabilities from centralisation remain valid.

On one hand, the aggregate demand will give us more bargaining power, achieve better pricing and greater efficiencies.

On the other hand, how will the Government ensure that the CGE does not become a bottleneck or a single point of failure in our energy supply chain? What contingency plans are in place should the CGE encounter difficulties in securing adequate gas supplies? Would the Ministry consider establishing an independent oversight body to monitor the CGE’s performance, thereby mitigating the risks of centralisation?

I would also like to suggest that Government ensure the diversification of gas supply sources by setting limits on the proportion of gas bought from various suppliers. Mr Speaker, Sir, in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] EMA’s cost recovery framework can potentially lead to increased energy costs for consumers, which might disproportionately impact lower-income households or smaller businesses that are already operating on tight margins. What safeguards are in place to ensure that these cost recovery mechanisms do not unduly burden consumers, particularly those who are most vulnerable? How will transparency be maintained throughout this process? It is imperative that we protect those who are least able to absorb additional costs.

In addition, what is the expected impact of decarbonisation exercises on our energy costs, which must remain competitive enough to attract big multinational corporations to set up operations in Singapore?

I suggest that the Ministry consider introducing a sliding scale based on the size and financial capability of the entities involved. This approach would protect small and medium enterprises and lower-income consumers from disproportionate cost burdens, ensuring that the cost of decarbonisation is shared equitably.

(In English): To strengthen EMA’s regulation of the power sector, the Bill will empower EMA to: direct owners of critical energy infrastructure to allow access by licensees when necessary in the public interest; require owners of key energy assets to obtain approval before repurposing these infrastructure for other uses; and implement power rationing during emergencies.

I would like to ask, in the event of disputes between owners and licensees, especially concerning compensation and operational control, how will EMA mediate and resolve these disputes? Is there a standardised mechanism and framework being considered to ensure fair compensation and avoid prolonged disagreements? Prolonged disputes could result in service disruptions or increased costs that would ultimately trickle down to the end users, including our most vulnerable citizens.

Regarding the requirement for approval when repurposing existing energy infrastructure, I am concerned about the problem of bureaucratic delays. While oversight is necessary to ensure our energy security and reliability, we must also ensure that it does not hinder the agility of companies in responding to market changes.

As for the provision for power rationing during emergencies, I seek clarification from the Minister on the criteria to be used to define an emergency that justifies power rationing. What will be the thresholds and will the criteria be reviewed periodically? How will EMA ensure that rationing measures are proportionate and do not unduly disrupt our economic activities? We must ensure that any rationing is fair and does not disadvantage those already struggling to make ends meet. I would like to conclude with my support for the Bill.

Mr Speaker: Mr Louis Ng.

3.08 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, the Bill will strengthen our regulatory regime for energy markets. As part of Singapore’s strategy to achieve net-zero emissions by 2050, this Bill is a positive move that supports decarbonisation whilst ensuring energy security and keeping power costs competitive for Singapore. I would like to take this opportunity to also commend MTI and EMA for holding a public consultation on the proposed amendments.

I have four points for clarification to raise.

My first point is on the creation of the FEF and the initial injection of $5 billion. The FEF introduced during Budget 2024 is intended to support our transition towards low-carbon energy sources and provide important funding for a more sustainable energy infrastructure. Can the Minister share more details on how this sum of $5 billion was derived? Can the Minister also share the time frame for the utilisation of the initial $5 billion sum?

The cost of mitigation and adaptation is likely to rise steeply as the impact of climate change intensifies over the next century. The cost estimates vary. One estimate by the McKinsey Global Institute in 2022 suggested that $9.2 trillion in annual average spending on physical assets alone will be required to transform the global economy to achieve net-zero emissions by 2050.

When does the Government expect to have to make the next injection? Does the Government anticipate making smaller and more frequent future injections or relatively infrequent but large injections?

EMA also announced in its media release that the Government will ensure prudent use of the funds and oversight over projects. Can the Minister provide more details on the safeguards that will be put in place to ensure transparency and public accountability on the use of the funds in the future by the EMA?

My second point is on the establishment of the CGE. During the public consultation, EMA clarified that the centralised gas procurement regime will only apply to gas users from the power sector such as generation companies. EMA said that non-power sector consumers such as industrial gas users will be excluded. Legacy gas contracts will also be excluded.

Can Minister share what percentage of gas procurement will be covered under the centralised procurement regime after excluding non-power sector consumers and legacy gas contracts?

The rationale of stabilising gas supply through centralised gas procurement is undermined if the excluded non-power sector consumers and legacy gas contracts form a substantial portion of gas demand. Can the Minister also share more details on the CGE’s pricing framework and how the contracts between the CGE and generation companies will be negotiated?

MTI and EMA stated during the public consultation that the amendments will empower EMA to introduce gas procurement terms on generation companies such as minimum gas contracting obligations to ensure they contract sufficient fuel. Will these gas procurement terms be consistent across the board or will the CGE be imposing differentiated terms based on independently negotiated contracts with the generation companies?

EMA has also stated that one of its aims is to keep gas prices low and competitive. Can the Minister share how prices will be kept competitive when there is only one central gas supplier to generation companies and generation companies no longer have gas price competitiveness from varied suppliers?

My third point is on EMA’s power to make directions allowing access by licensees to electricity and gas supplies. These powers are set out under the amended section 20A of the Electricity Act and section 38B of the Gas Act.

The powers on the installation, use and access to key infrastructure are broad. EMA may even direct the licensee and any person to enter into an agreement with each other on the maintenance or use of the infrastructure. If parties are unable to agree on the terms and are unable to enter into an agreement, a party can request that the Minister for Trade and Industry establish an Appeal Panel to determine reasonable terms. This allows the Government very exceptional powers to determine the terms of a private agreement between two parties.

During the public consultation, respondents asked about the safeguards to minimise the impact on investor confidence, reduce the burden on property owners and moderate costs for consumers. Respondents also asked about mechanisms other than EMA directives to facilitate shared access.

EMA stated that it will only use directives if it considers such access necessary and in the public interest to ensure energy security and reliability. Can the Minister share whether it will consult with parties on the potential costs and commercial risks to the parties before making such directives? Even where access is necessary and in the public interest, will EMA consider using other less restrictive measures before making directives as a last resort?

In the event that loss is suffered by any party due to a term that was agreed under EMA's directive, can Minister clarify whether it is a defence or mitigating factor for the party to claim that the term was entered into because of EMA's direction or determined by an appeal panel.

My final point is on the cost recovery mechanism for energy initiatives in section 19B of the EMA Act. There is some uncertainty as to how this mechanism will operate given the flexibility afforded to EMA in imposing the rate recoverable.

Section 19B(3) of the EMA Act permits EMA to make a "reasonable estimation" of the amount of costs that will be incurred when imposing such a rate when such amounts are yet to be determined. Section 19B(8) allows EMA to retain any excess costs recovered and apply such excess to other energy initiatives. Further, costs can also be recovered from any consumer of energy utilities under section 19B(4)(iv).

Can the Minister clarify how the cost recovery mechanism will be implemented? How will EMA derive its "reasonable estimation" of the costs that will be incurred? In the event that the estimation is inaccurate, what are the mechanisms to correct the mis-estimation?

Finally, in recovering costs from any consumers of energy utilities, does EMA have the power to consider broader factors such as the cost burden on consumers and proportionality of cost recovery? Sir, notwithstanding these clarifications, I stand in support of the Bill.

Mr Speaker: Mr Yip Hon Weng.

3.15 pm

Mr Yip Hon Weng (Yio Chu Kang): Mr Speaker, Sir, I declare that I work in a global investment firm with interests and investments in energy-related businesses.

This Bill marks a pivotal moment for Singapore's energy future. Our reliance on imported natural gas – 95% of our energy mix – makes us vulnerable to global market shifts. This is not just an energy issue. It is a matter of national resilience. We must diversify our energy sources. The need is not just pressing. It is essential.

This Bill aims to reduce that reliance by shifting to cleaner energy. It is a step toward a future where Singapore controls its energy destiny. However, I have several clarifications on the Bill.

First, Mr Speaker, Sir, innovation is vital, but it must come with guardrails. The FEF is promising. But we must tread carefully with investments in untested technologies. Are we betting on the future with enough safeguards in place? What safeguards are in place to manage these risks? Could the Ministry also provide more details on how projects are selected for funding?

How will the FEF integrate with existing initiatives like the Emerging Technology Grant? Avoiding overlap is not just about efficiency. It is about ensuring every dollar drives real progress.

We also need to ensure that the research we fund is practical for Singapore. For example, the Directed Hydrogen Programme relies on hydrogen produced overseas. Does this align with our goal of energy independence? Should we not focus on solutions that we can scale right here at home?

On low-carbon hydrogen, it was reported that Singapore will have at least nine hydrogen-compatible power plants by 2030. Hydrogen is expected to meet 50% of our power needs by 2050. Are there updates on these plans? The clock is ticking. We need to see progress.

Second, Mr Speaker, Sir, transitioning to low-carbon energy should not come at the cost of social equity. We cannot let the burden of this transition fall on those least able to bear it. Has the Ministry fully assessed the impact on vulnerable groups? The Bill does not currently include measures to shield low-income households from energy cost increases. Many Singaporeans are already feeling the squeeze due to high cost of living. Will they bear even higher energy costs without seeing the benefits? Green hydrogen currently costs three to five times more than natural gas.

The long-term benefits of reducing reliance on imported fuels are clear. But we need to address the immediate impact on energy affordability. How will the Government ensure vulnerable groups are not left behind in this transition?

Microsoft is buying solar power from public buildings in Singapore. Why is this solar energy not used to subsidise energy costs for low-income households? When public buildings generate renewable energy, should the first priority not be the public?

Third, Mr Speaker, Sir, we must balance long-term sustainability with immediate needs. Supporting fast-response generators and energy storage systems is critical for grid stability. But relying too heavily on carbon-intensive systems like diesel generators could undermine our sustainability goals. Why are these generators part of our energy mix? How does this align with our low-carbon commitments? We need a clear roadmap to phase out these stopgap measures for more sustainable solutions.

Fourth, Mr Speaker, Sir, transparency and public accountability are the bedrock of public trust. The FEF, as proposed, gives the Minister significant control with some limited public oversight. This raises concerns about how the fund will be managed. Can the Minister share more details on the mechanisms to ensure transparency and public accountability in the fund's management? Singaporeans need to trust that our resources are being used wisely and effectively.

Fifth, Mr Speaker, Sir, the Bill's impact on energy market dynamics needs clarity. The provision allowing EMA to direct key facilities could affect market fairness. Oversight is necessary. However, we must be careful not to stifle innovation or discourage new entrants. What measures will prevent market distortions or monopolistic behaviour? How will the Ministry ensure EMA's expanded powers do not create an uneven playing field?

Several electricity suppliers have recently folded. How will this Bill support a truly open and competitive electricity market? We should encourage more low-carbon energy suppliers to enter the market, giving consumers more sustainable choices.

Some power plant generators are owned by foreign consortiums. How does EMA plan to work with these players to ensure fair and transparent centralised gas procurement? Will rates be standardised across all generators to ensure fairness?

Lastly, Mr Speaker, Sir, the energy sector is evolving rapidly. We must ensure our laws evolve with it. A static framework risks being outpaced by new innovations and market realities. What plans does the Ministry have for regular reviews or updates to this Bill? It is critical to ensure it stays relevant as technology advances.

In conclusion, Mr Speaker, Sir, I support the Energy Transition Measures and Other Amendments Bill because it is essential to Singapore's energy future. It strengthens our energy security, supports low-carbon projects and ensures a stable, reliable energy supply. These are key pillars for our economic stability and resilience.

This Bill is Singapore's declaration that we are serious about tackling the global climate crisis. It positions us as a leader in the global energy transition. It attracts investment, creates new jobs and enhances our competitiveness in the green economy.

However, for this Bill to truly succeed, we must address the potential challenges it poses. We need clear safeguards for managing the risks associated with the FEF. We must ensure social equity is not sacrificed and that vulnerable households are protected from rising energy costs. We need to prioritise long-term sustainability and phase out carbon-intensive stopgap measures.

Transparency, accountability, and market fairness are not just desirable, they are essential. The Minister should clarify how potential market distortions will be addressed. Greater transparency is needed in managing the FEF.

Finally, we must ensure that this legislation remains adaptable and relevant in the face of rapid technological change. Mr Speaker, Sir, as we consider this Bill, it is worth reflecting on Singapore's journey with water – a story of resilience, innovation and foresight. Not long ago, we imported all our water, just as we do with our energy today. That dependence made us vulnerable. But through bold initiatives, strategic investments and a relentless focus on sustainability, we turned that vulnerability into strength. We diversified our water supply, developed NEWater, invested in desalination and championed water conservation. Today, Singapore is a global model for water sustainability. The parallels with our current energy landscape are striking. We are heavily reliant on imported natural gas, just as we once were with water.

This Bill represents our opportunity to rewrite the energy story as we did with water. If we get it right, if we balance innovation with caution, protect our most vulnerable and remain steadfast in our commitment to sustainability, we can transform our energy landscape. We can reduce our dependence, diversify our sources and lead the world in the transition to low-carbon energy.

Just as Singapore became a global leader in water management, we have the potential to become a beacon of energy resilience and sustainability. The world is watching. Our success could inspire other nations to follow suit.

Mr Speaker, Sir, this Bill is not just about securing our energy future. It is about setting a standard – one that shows the world how a small, resource-scarce nation can rise to the challenge, innovate and lead by example. I support the Bill.

Mr Speaker: Minister Tan See Leng.

3.24 pm

Dr Tan See Leng: 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: first, electricity costs and how we will invest in our energy future; second, safeguards to EMA's powers; and third, the implementation approach for power rationing.

Before addressing these questions, let me reiterate the purpose of this Bill. As Mr Yip Hong Weng, Mr Mark Lee and Ms Carrie Tan have noted, we need to continually review our legislation and our market structures to ensure they keep up with the changing landscape. This Bill is the result of our most recent round of reviews.

To Ms He Ting Ru's question, MTI and EMA work on efforts to decarbonise our energy mix and transition our power sector to net-zero. EMA will also manage the FEF.

Mr Saktiandi Supaat asked how our energy mix will change by 2050. I updated Members earlier on this. Our energy mix in 2050 and beyond will depend on a combination of commercial, technological and geopolitical developments.

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.

As for Mr 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, it 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.

Members have asked how our decarbonisation plans will affect the cost of electricity. We have a liberalised energy market. Our approach is to harness market forces and foster competition to drive efficiency. 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.

Nonetheless, the cost of fuel accounts for the majority of our gencos' costs and is hence the fundamental driver of electricity prices today.

Mr Saktiandi also 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. 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.

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 costs 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 photovoltaics panel costs have fallen by 82% between 2010 and 2022, the costs of high-voltage subsea cables, or HVDC cables, that are needed to transmit electricity over long distances have risen significantly, with factories now facing production constraints.

The Government has always been and will always be mindful of the impact of electricity prices on Singaporeans and on businesses. Many Members have encouraged the Government to continue supporting our lower- and middle-income households on utilities to ensure that no group is left behind in this energy transition. That is what we have been doing. For example, 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 Housing and Development Board (HDB) households are expected to benefit from this. 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.

In addition to support for utilities expenses, the Government provides cost of living support for all Singaporean households through the Assurance Package, which includes Community Development Council vouchers for all Singaporean households. The Government understands Singaporeans' cost of living concerns and will regularly review our support measures.

Ms Tan and Ms He emphasised the need to manage demand, even as we decarbonise our energy supplies. I fully agree. 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.

We will also continue helping 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 Parekh highlighted. But as Ms Tan and Ms He said, it is not just about energy efficiency, it is also about energy conservation, it is about using less. And I hope that we can make this a shared goal among all of us, Singaporeans.

Members including Mr Liang Eng Hwa, Mr Don Wee, Mr Yip Hon Weng, Mr Mark Lee and Mr 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.

Let me assure Members of this House that we closely monitor such costs and we have safeguards to ensure cost recovery measures are justified.

First, the Minister for Trade and Industry must approve cost recovery rates. To Ms Jessica Tan's query 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 costs are allocated fairly.

Second, a Cost Recovery Advisory Committee of non-Government representatives will provide the Minister with independent advice on EMA's proposed rates. As Mr Mark Lee suggested, the committee could include Members who can advise on the impact of EMA's proposed rates on businesses.

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.

Mr Louis Ng asked 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.

Mr Speaker, let me move on from costs to investments. Many Members have highlighted the importance of the FEF. And I have explained earlier how the fund would be used.

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. 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. This is also how we mitigate various risks from renewable electricity imports.

Mr Louis Ng asked how the $5 billion amount was decided and how long it would last. The energy transition will be costly and is expected to cost far more than the $5 billion. This is precisely why we need to start setting aside monies for it, as and when we are able to.

Mr Liang Eng Hwa asked if the FEF can fund EMA's initiatives instead of recovering costs from consumers. 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. Electricity prices should continue to reflect the cost of producing and supplying electricity. The FEF is not meant to fund such costs, but rather, it is meant to catalyse and seed support in strategic infrastructural investments for a low-carbon future.

Mr Liang 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.

Ms Jessica Tan and Mr Neil Parekh asked if we have identified potential projects that are aligned with our larger energy masterplan. 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.

The FEF complements, but it does not replace, existing funding initiatives for energy efficiency and research and development. These are worthwhile areas that the Government is already supporting. The FEF's mandate, and I want to reiterate, is to 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, Mr Yip Hon Weng and Ms He Ting Ru's questions.

I would also like to assure Mr Yip Hon Weng, Mr Louis Ng and Ms Carrie Tan that there will be strict oversight over the fund's use.

First, we will ring-fence the use of funds to infrastructure development needed to decarbonise the power sector.

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 costs of electricity generated through such low-carbon sources.

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.

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.

Fifth, top-ups to the fund, balances and annual outlays will be included in EMA's financial statements, which are presented to Parliament annually.

This Bill therefore reflects our careful and calibrated approach towards managing the costs of the energy transition, while supporting their investments needed to making it a reality. The Government will continue to plan and build infrastructure to meet energy needs and save up for these investments through the FEF to reduce the burden on future generations.

Mr Yip Hon Weng pointed out the risks and costs of new low-carbon technologies. The FEF 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. We will maintain fiscal sustainability by avoiding blanket subsidies, while continuing to help households manage electricity costs in a targeted and responsible manner.

Let me now address Members' comments on shared access to critical energy infrastructure, on the repurposing of assets and centralised gas procurement. Mr Yip raised concerns about whether expanding EMA's powers could distort competition or create an uneven playing field.

Allow me to explain why these powers are necessary and what safeguards are in place. To manage the uncertainties of the energy transition, we must empower EMA to plan for a net-zero energy future. Each energy source has specific requirements and limitations. Our amendments to facilitate shared access to critical energy infrastructure and introduce approval obligations for repurposing key electricity and gas assets will enable EMA to optimise the use of infrastructure in land-scarce Singapore.

EMA's powers will be exercised sensitively and carefully. First, EMA will consult relevant stakeholders to understand their considerations before exercising its powers. Second, specific criteria that must be met before EMA can exercise those powers. Third, parties can appeal EMA's decisions to the Minister of Trade and Industry.

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.

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.

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. If access is deemed critical to system 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.

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. The Minister will appoint Members with relevant expertise to the Appeal Panel. As far as possible, the Minister will appoint Members who are accepted by both parties to the shared access agreement.

To Mr Louis Ng's query, 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.

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.

EMA will only reject requests if repurposing undermines energy security and reliability. 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. Specific approvals timelines are not set in legislation, due to the different circumstances for each case. Companies should engage EMA early, on any potential repurposing, and EMA will assess the cases promptly.

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.

Next, Members asked about the need to centralise gas procurement under a central gas entity, which we will call Gasco for now. 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. The Gasco builds on these efforts.

Allow me to reiterate what we seek to accomplish by establishing the Gasco. First, the Gasco enhances our gas supply security. 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.

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 SLF. 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.

To Mr Louis Ng’s question, around 75% of Singapore’s gas consumption is by the power sector and will be procured by the Gasco in the steady state. 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 the Gasco.

Second, the Gasco will support supply diversification. Our gencos, currently, import most of our gas from neighbouring countries, such as Indonesia, Malaysia and Australia. With the Gasco, we will seek to broaden our sources of supply.

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

Third, the Gasco allows us to enter into long-term contracts that provide more stable prices and certainty of supply. Our current market-based approach does not sufficiently reward gencos that commit to long-term contracts. For example, let us say Genco A 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.

Moving forward, because our gencos can only buy gas from the 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.

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 economies of scale. Centralisation and scale therefore give the 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 KOGAS of Korea.

Mr Saktiandi Supaat asked who the Gasco will be and how it will be run. Mr Liang Eng Hwa, Mr Louis Ng and Mr Yip Hon Weng asked how gas prices for gencos will be determined.

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

The Gasco will price gas on a cost-plus basis, with gencos charged for the gas they purchase, plus a regulated fee to cover the Gasco’s operating costs. To Mr Liang Eng Hwa's question, this regulated fee will be approved and transparently published by EMA.

EMA will regulate the 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. This will be a delicate balance and it will require the Gasco to be structured, to be resourced, incentivised and assessed accordingly. I hope this addresses Ms Jessica Tan’s question.

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 the Gasco for evaluation and potential incorporation into its portfolio.

Lastly, Members raised concerns on power rationing. Singaporeans and businesses are understandably concerned about the prospect of power rationing, even though most recognise the need for doing so during emergencies. This is understandable, since electricity is crucial for our daily routines and for the economy.

I want to reassure Members that power rationing will only be as a last resort. We have existing measures to mitigate the impact of gas supply disruptions. Our LNG terminal can support our natural gas demand even if piped natural gas is disrupted. We also maintain a SLF. We have sufficient generation capacity, including a 27% reserve margin which provides for planned and unplanned outages.

These measures, combined with voluntary power conservation, can meet all our demand in most potential disruption scenarios. However, we cannot afford to be complacent. Singapore must prepare for worst-case scenarios.

The disruptions to the Nord Stream 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. These amendments for power rationing are, therefore, necessary for the worst-case scenario as a matter of national security.

Mr Don Wee, Mr Mark Lee and Mr Neil Parekh asked what constitutes an emergency that justifies power rationing. 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. For example, a severe fuel shortage could trigger such an emergency.

Mr Mark Lee and Mr Neil Parekh asked for timely communication with companies about the initiation, duration and cessation of these measures. 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. 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.

Mr Don Wee also asked how EMA will ensure that rationing measures are proportionate and do not unduly disrupt economic activities. 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. The intent of the prioritisation framework is to minimise the impact of power rationing on society.

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.

We appreciate Ms Carrie Tan and Mr Neil Parekh's suggestion 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.

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.

Energy is an existential challenge that defines this generation. 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. This is not something that the Government can do alone. So, let us all work together. Let us all work together with businesses, to innovate commercially viable low-carbon solutions; and with our consumers to support our energy story, use energy prudently and even as all of us in Government seek to keep costs in check.

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. This is not just my story. It is your story, it is our children’s and grandchildren’s stories. Let us innovate, let us adapt and work towards our clean energy future together.

Once again, I thank Members for your strong support of the Bill. Sir, I beg to move. [Applause.]

4.00 pm

Mr Speaker: Are there any clarifications for Minister from any Member? Dr Tan, it looks like you did a very good wrapping-up speech. I do not see a single hand.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Dr Tan See Leng].

Bill considered in Committee; reported without amendment; read a Third time and passed.

Mr Speaker: Order. I propose to take a break now. I will suspend the Sitting and I will take the Chair at 4.25 pm.

Sitting accordingly suspended

at 4.03 pm until 4.25 pm.

Sitting resumed at 4.25 pm.

[Deputy Speaker (Mr Christopher de Souza) in the Chair]