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Speech by 2M Tan See Leng at the Second Reading of the Energy (Resilience Measures and Miscellaneous Amendments) Bill

Speech by 2M Tan See Leng at the Second Reading of the Energy (Resilience Measures and Miscellaneous Amendments) Bill

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

 

2. The Energy Market Authority of Singapore (EMA) Act, Electricity Act, and Gas Act underpin the energy market structure and regulatory framework we have today. The EMA Act charges EMA with the duty to create a market framework for electricity and gas, promote fair and efficient market conduct, protect the interests of consumers and the public in electricity and gas supply, and promote the efficient use of energy utilities. The Electricity and Gas Acts establish the regulatory regimes to ensure competitive, secure and reliable electricity and gas supply to the industry and the public.

 

3. Yesterday, I spoke about the pre-emptive measures that EMA will be taking to safeguard Singapore’s energy security in the near term, to address the recent supply crunch and volatility in global energy markets. However, energy security is not just about ensuring the robustness of our current energy supply. It is also about looking into our energy future.

 

4. With the power sector accounting for about 40% of Singapore’s carbon emissions, decarbonising the power sector is a key pillar of our efforts to combat climate change. MTI and EMA have embarked on a multi-decade programme to decarbonise our power sector. We will need to make a shift on many aspects – reducing greenhouse gas emissions from existing power plants, maximising solar deployment, working with our regional partners to develop renewable energy sources, and developing new low-carbon alternatives.

 

5. We should not under-estimate how challenging this journey will be. Some countries are experiencing an energy crunch because they have not provided sufficient safeguards and contingencies for their transition. This Bill will provide EMA with three important powers to secure our electricity supply over this transition.

 

6. We are proposing to update the relevant Acts in three key areas:

 

a. First, to empower EMA to acquire, to build, own and/or operate power infrastructure to safeguard our energy security and reliability;

 

b. Second, to enhance the protection of critical electricity and gas infrastructure; and

 

c. Third, to empower EMA to impose energy and carbon efficiency on parties licensed under the Electricity Act

 

7. Mr Speaker, Sir, let me now elaborate on the key amendments in this Bill.

 

Safeguard energy security and reliability

 

8. First, I will speak on our amendments to ensure that we have a safe, secure, and reliable, supply of electricity, which is critical to Singapore’s survival.

 

9. Today, we rely on the private sector to provide sufficient generation capacity and the critical infrastructure needed for energy security and system stability. This ensures market discipline and cost effectiveness. However, the global energy transition introduces various risks and uncertainties in energy markets. For example, it is unclear when new energy solutions such as hydrogen and carbon capture, utilisation and storage may become cost-viable for large-scale deployment. It is also unclear whether and how natural gas may feature in the future global energy mix.

 

10. These uncertainties may inhibit private investments. For example, generation companies may not be willing to invest in new generation capacity to replace older, retiring generation units. They may also not be willing to invest in new technologies that incorporate cleaner fuel. Banks may be increasingly reluctant to finance generation projects which are needed but are not based on renewable energy.

 

11. To safeguard energy reliability and security during the energy transition, we must give EMA the option to step in and provide the critical infrastructure and services needed to ensure the proper functioning of the energy sector.

 

12. The first key amendment therefore amends Section 3 of the Electricity Act and the Second Schedule of the EMA Act, to empower and to enable EMA to acquire, build, own and/or operate critical infrastructure. Examples of such infrastructure would be generating units, energy storage solutions and transmission infrastructure, including those that may be required for cross-border electricity trading.

 

13. This will allow EMA to provide the required critical infrastructure when there is a need to do so. One example is the Open Cycle Gas Turbines, or the OCGT. OCGTs are quick response units that can be brought online quickly to augment any shortfall in generation capacity, such as when there are unplanned outages among other generation units. These quick response units are necessary for the security and reliability of our electricity system. However, there is little private sector interest to build these units as they are less competitive compared to Combined Cycle Gas Turbines. The existing OCGTs in Singapore are more than 30 years old and they are long overdue for replacement. EMA could step in to build new OCGTs.

 

14. Where needed, EMA may directly operate the critical infrastructure or set up a subsidiary to do so. Should EMA or its subsidiary operate the critical infrastructure, operational KPIs, or key performance indicators, similar to the regulatory requirements that licensees are subjected to will be imposed, in lieu of licensing requirements. The Bill also expands EMA’s borrowing powers in the EMA Act to allow EMA to issue bonds, in addition to borrowing through commercial or Government loans, to finance the construction of these critical infrastructure.

 

15. Mr Speaker, in moving this amendment, I am mindful that the powers to acquire, to build, own and/or operate critical infrastructure are broad and can affect the commercial considerations of the stakeholders in the power sector. In EMA’s industry consultations, power generation companies were concerned that the units that would be owned and operated by EMA would compete with their units in the wholesale electricity market and depress wholesale electricity prices. There were also concerns that EMA would act as both regulator and owner/operator of the generation unit. These are valid considerations. Allow me to address them:

 

a. First, this amendment is worded broadly to provide EMA with the flexibility to react to the wide range of scenarios which may undermine the security, stability and reliability of our energy sector. Our preference is for the private sector to build, to own and to operate the electricity infrastructure. I would like to assure this House that, before exercising this power, EMA would have explored alternative solutions to provide the critical infrastructure needed.

 

b. Second, EMA will be putting in place safeguards to ensure that they do not compete unfairly against the private generation companies. For example, EMA may set up a separate subsidiary to own and operate a generating unit, and will put in place proper procedures and governance structures to mitigate any conflict of interests.

 

Enhance protection of critical electricity and gas infrastructure

 

16. The second key amendment updates the Electricity Act and the Gas Act to make it an offence to damage any infrastructure housing or intended to house any transmission electricity cables, gas transmission pipeline, or submarine gas pipeline in the territorial waters of Singapore. This is needed to enhance protection of critical electricity and gas infrastructure.

 

17. Currently, sections 80 and 85 of the Electricity Act, and sections 32, 32A and 32B of the Gas Act, only penalise offenders who damage the actual cables and pipelines. However, as the infrastructure housing these cables are an important part of the transmission network, EMA will be expanding the scope of the offences in these sections to cover such protective infrastructure as well. The offences carry the same penalties as those for damaging the actual cables and pipelines.

 

Enhance carbon efficiency of parties licensed under the Electricity Act

 

18. The third key amendment empowers EMA to enhance the carbon efficiency of parties licensed under the Electricity Act. Currently, around 95% of our electricity is generated using natural gas, which is the cleanest form of fossil fuel. Even as we ramp up various sources of low-carbon energy such as solar energy and tap on regional power grids for low-carbon energy, natural gas will remain an important source of energy for us over the next few decades. To reduce the carbon footprint of electricity generation, it is important that we gradually shift towards cleaner and more efficient modes of power generation.

 

19. The Bill expands EMA’s regulatory functions under the Electricity Act to include implementing policies and strategies connected with the reduction of greenhouse gas emissions in the import, export, generation, transmission, or supply of electricity. Under Clause 3(k), these policies and strategies may be imposed on licensees through Codes of Practices.

 

20. This move towards a reduction of greenhouse gas emissions is part of a larger effort to shape a more energy and carbon efficient power sector. Since 2018, EMA has rolled out incentive schemes such as the Energy Efficiency Grant for Power Generation Companies to encourage power generation companies to improve energy efficiency. To date, more than half of the larger generation companies have tapped on the grant to make improvements to their generation units. However, as low-carbon technology matures and becomes more cost-competitive, it is timely and necessary for the sector to move beyond incentives and grants, and to empower EMA to regulate on this front. EMA will work with the industry to develop reasonable standards and provide a transition period for existing generation units as needed.

 

21. This amendment will also complement ongoing economy-wide initiatives to lower carbon emissions, such as carbon taxes, to transition the power sector towards low-carbon generation sources.

 

Miscellaneous Amendments

 

22. The Bill also makes several miscellaneous amendments to the Electricity, Gas and EMA Acts, and related amendments to the District Cooling Act. These include streamlining the licence application and extension process for all electricity and gas licensees, clarifying the prudential obligations of specified licensees in the event of an insolvency situation, clarifying inspection obligations in connection with gas installations, and updating key terms and definitions in the Electricity Act.

 

Conclusion

 

23. Mr Speaker, Sir, the power sector is at an important point in its development. We have made ambitious commitments to reduce our carbon emissions and combat climate change, but the developments unfolding around the world also serve as a stark reminder of the complexity of this transition. As energy forms the bedrock of our economy and our society, it is especially important for Singapore to manage the transition well and seamlessly.

 

24. In finalising these amendments, MTI and EMA had sought feedback from industry stakeholders and members of the public through a public consultation exercise earlier this year. MTI and EMA have carefully considered all feedback received and incorporated them where relevant.

 

25. This Bill is necessary to ensure that EMA has the necessary levers to navigate the energy transition, while ensuring that our energy supply remains secure and reliable. My Ministry will also continue to monitor and study further enhancements to legislation to facilitate a smoother energy transition while safeguarding Singapore’s energy security, reliability, and affordability.

 

26. Sir, I beg to move.

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