Driving a Resilient and Sustainable Energy Future
1. A very good afternoon. To all the global energy leaders here, welcome to the 8th Asia LNG and Hydrogen Gas Markets Conference, and our overseas visitors, a big welcome to Singapore.
The Dual Crises – Energy and Climate
2. Today, we are gathered here amidst a perfect storm in the global energy markets. We had a good decade of calm seas with low fuel prices. However, a confluence of factors has led to significant turbulence in the global energy markets. The recent years of under-investments in energy, coupled with the post-Covid 19 pandemic economic rebound and rising geopolitical conflicts have pushed the world over the edge into a growing energy crisis.
3. In the span of a year - between August 2021 and August 2022, the average monthly Japan Korea Marker, or JKM in short, has more than tripled from US$17 per Million British Thermal Units (MMBTU) to over US$55 per MMBTU. Over the same period, dated Brent prices rose 41% from US$70 per barrel to US$100 per barrel. The dramatic spike in fuel prices has contributed to electricity price rises and supply shortfalls across the world.
4. As the global energy crisis unravels before us, we are faced with another unfolding storm - the growing climate emergency, which if left untamed, threatens humanity’s survival. The drastic impact of climate change is already being felt in many ways – the rise in sea levels, severe heat waves, storms and droughts, the loss of biological diversity and lives, increased health risks and disrupted food supply chains. The clarion call to push back climate change is clear and loud. It’s never been more urgent than before, for governments, citizens, businesses and organisations– everyone - to close ranks and act in concert to raise sustainability and save the earth from further disasters.
5. It has become imperative to accelerate our global energy transition. Even as the world deals with the spillover impact of the Ukraine war, higher prices and supply shortfalls, climate action is non-negotiable.
6. Yesterday, Deputy Prime Minister Lawrence Wong spoke about Singapore’s bold commitment to achieving our net-zero goals by 2050 despite limited alternative energy sources. We do not have any natural resources, but we are committed to fulfilling our net zero commitment. In particular, hydrogen will be the next frontier in our strategy for clean energy. Yesterday, Minister for Trade and Industry Gan Kim Yong explained how we are strengthening our market structure to steer Singapore’s power sector towards a clean, sustainable and resilient future.
7. Today, I will elaborate on:
a. One, the role that natural gas and hydrogen can play in fuelling the world’s energy transition;
b. Two, challenges facing the hydrogen and natural gas markets; and
c. Three, how Governments and market players can work together to ensure a smoother energy transition.
Role of Natural Gas in the Global Energy Transition
8. I will first touch on the role of natural gas as a transition fuel in the global switch to clean and renewable energy.
9. While the world continues to accelerate the deployment of renewable energy, there are many challenges to be overcome.
a. First, compared to fossil fuels which are dense and stable forms of energy storage, renewable energy like solar, wind, and hydroelectric power, generally have to be used once it is produced.
b. Second, renewable energy is faced with intermittency problems. Solar power drops when there is high cloud cover or a storm. Wind energy changes with wind speeds and droughts can reduce hydropower capacity.
c. Third, not all countries can access renewable energy due to land or geographical constraints. For example, in land-scarce Singapore, wind speed is limited, and neither do we have large rivers or dams to produce electricity.
d. To deal with these multiple challenges, advances in energy storage systems and clean energy trade are needed.
10. Hence, natural gas will continue to play an important role in ensuring a reliable supply of electricity even while low-carbon fuels are being pursued.
a. As the cleanest fossil fuel, natural gas contributes far lower emissions than other fuels. On average, the switch from coal to gas to generate electricity reduces carbon dioxide and methane emissions by about 50%.
b. Natural gas can also be more easily stored and transported as well-established supply chains and infrastructure allows it to be delivered through pipelines or liquefied and shipped.
c. In addition, gas-fired power plants can be turned on and off quickly. This makes it more responsive to short-term demand fluctuations and it can serve as a reliable backup for renewables.
11. Given the current limitations of renewables, natural gas provides a mainstay energy source for countries and companies looking to switch from coal and fuel oil, especially for those that either lack renewable energy potential or face significant challenges deploying them.
12. In Singapore, we believe that natural gas can play a vital role in the long-term energy mix. It can be used to produce hydrogen for instance, through the process of steam methane reforming. Together with carbon capture and storage technologies, carbon emissions can be reduced.
Role of Hydrogen in the Global Energy Transition
13. While natural gas continues to be a critical fuel for the global energy transition, hydrogen and its derivatives are widely seen as a high-potential low-carbon fuel for the future.
a. Besides emitting no greenhouse gases when combusted, the lifecycle of emissions from the use of hydrogen can also be close to zero if it is produced through sustainable methods. For example, through the electrolysis of water using renewable energy, or when paired with carbon capture, utilisation and storage solutions.
b. Major economies such as Germany and the UK, as well as the US, Canada, Japan and India, have stepped up efforts to develop and deploy hydrogen as a clean energy source.
c. In our strategy for the use of hydrogen, we envision that this fuel may well contribute up to 50% of Singapore’s power mix by 2050.
14. However, it will take some time before hydrogen becomes widely deployable on a large scale.
a. Firstly, hydrogen production has to be scaled up to meet committed production targets. To date, countries around the world have committed to about 90 to 130 GW of green hydrogen electrolyser capacity by 2030. If we aggregate the pipeline of green hydrogen electrolyser projects that have been announced, this number will be even higher at around 200 GW by 2030. The total hydrogen electrolyser capacity that is operational today is a mere 0.5 GW. It will take time to build the new electrolyser capacity.
b. Secondly, the global low-carbon hydrogen market is still nascent. Cross-border supply chains will need to be scaled up significantly for hydrogen to be deployed widely.
c. Thirdly, using hydrogen for power generation comes at a price premium today. Additional equipment and energy-intensive processes are required to convert and liberalise hydrogen from its carrier form. These factors will inadvertently add to the eventual levelised cost of electricity produced.
Challenges facing the hydrogen and natural gas markets
15. Nonetheless, as technology and supply chains for hydrogen develop, the costs of using hydrogen as fuel will drop. It therefore has strong potential to be our future baseload fuel. Before that happens, natural gas will continue to be a critical player in the world’s energy transition. Both natural gas and hydrogen face similar challenges today.
a. First, investment risks. Gas and power infrastructure, including extraction facilities, gas pipelines, and power plants, are generally big-ticket expenses. The decision on investments to build infrastructure has to be taken many years in advance of anticipated demand.
i. In addition, the risks of asset stranding and reputational damage are very real. Pressure for climate action and regulatory moves to switch to lower carbon alternatives are threatening natural gas. Investors are keenly feeling these pressures and have reduced their investments in the natural gas supply chain. Annual capital spending on approved LNG liquefaction projects has fallen to its lowest, to US$14 billion in 2020. While LNG investments picked up in 2021 and 2022, this was driven mainly by the short-term increase in LNG prices due to geopolitical conflicts. There will need to be sustained investments to ensure there is sufficient supply to meet demand.
ii. In the case of hydrogen, the technologies across the value chain are still nascent and not deployed at scale. There also remain considerable uncertainties in the development of hydrogen as a fuel. Investors still face risks in developing new options and building related infrastructure as newer and better hydrogen technologies could well make earlier versions obsolete quickly.
b. Second, supply chain disruptions and early-stage developments threaten natural gas and the growing use of hydrogen.
i. For natural gas, while supply chains have matured over the last 20 years, we are seeing significant disruptions. The reduced supply of natural gas to Europe has led to more gas from Asia flowing to Europe, even though this is limited in the short term by the number of LNG land-based receiving terminals.
ii. Supply chains are still nascent for hydrogen and it will take considerable efforts to develop and strengthen them. For instance, the need for upstream investments into hydrogen production facilities, transport options like liquefied LNG tankers or ammonia tankers, and more downstream end-use technologies.
Actions to Take
16. So what can governments, organisations,businesses, individuals and citizens all come together to do to advance the transition to green energy while also ensuring the security of energy supplies?
17. First, governments play a vital role in guiding and facilitating their country’s energy switch. With clear directions and communications on policies and standards and information on market conditions and demand outlook, governments can help smoothen the transition to alternative energy. With greater clarity on these key factors, businesses are better informed to make timely and suitable investment decisions that can well support the natural gas and hydrogen value chains.
18. Governments and businesses need to work closely together to ensure that supply chains for natural gas are strong and well-maintained, even while we develop new value chains in low-carbon hydrogen. We would do well to maintain an inclusive and stable global trading environment. Let’s carry on expanding our trade connectivity as we seek to keep supply chains open and the goods flowing. This way, we can help alleviate and prevent supply shortages.
19. Second, even as the world continues to use natural gas, all of us must continue to work on reducing emissions from the natural gas supply chain. Supporting initiatives such as the Global Methane pledge can help reduce global anthropogenic methane emissions by at least 30 per cent below 2020 levels, by the year 2030.
20. Third, consumers are important to the success of our energy transition. Their purchasing power and choice to go green play a part in creating the demand for such fuels. These consumers, through their power purchase agreements, also provide certainty to generation companies and in turn fuel providers, on the fuel sources to develop and sell.
21. In Singapore, we are working hard to make all these right moves, in particular on these two fronts:
a. We are enhancing energy cooperation through partnerships with international partners and;
b. Continuing to enhance the efficiency of our power plants.
Let me elaborate.
Singapore-Japan Memorandum of Cooperation on LNG Cooperation and Energy Transitions
22. Singapore and Japan both rely on imported natural gas for power generation. We share common interests in advancing energy security and making the energy transition.
23. I am pleased to announce that Singapore and Japan have signed a new MOC on LNG Cooperation and Energy Transitions. This will be another significant milestone in our bilateral energy cooperation. The MOC will enhance our cooperation to promote investment across the LNG value chain, explore opportunities to support LNG procurement, and draw on our LNG connections to establish regional supply chains for low-emissions fuels.
24. This MOC builds on existing partnerships between our two countries, such as the MOC on Low-Emissions Solutions which coordinates the use and support of natural gas supply chains with low-emission technologies such as hydrogen, fuel ammonia and CCUS (carbon capture, utilisation and storage). The two MOCs will work in tandem to advance our countries’ energy interests and goals.
25. Yesterday, Deputy Prime Minister Lawrence Wong announced that Singapore will raise its climate target to achieve net zero by 2050. This is part of our nation’s long-term low-emissions development strategy and effort to fight climate change.
26. Furthermore, to cut emissions, Singapore will be increasing the carbon tax from $5 to $25 per tonne in 2024, $45 per tonne in 2026, and between $50 and $80 per tonne by 2030.
27. The carbon tax acts as a pricing signal to incentivise power generation companies and consumers to switch to lower-carbon alternatives. Beyond this, we will also enhance the efficiency of our power plants by requiring all new generation units to use the best-in-class technology available.
28. To do so, the EMA (Energy Market Authority) will be introducing new emissions standards for new and repowered fossil fuel-fired generation units in 2023. In the coming months, EMA will be consulting the industry on this and releasing details on the new standards thereafter.
29. To conclude, for the present and foreseeable future, natural gas will continue to play an important role as a transition fuel to help the world address the challenges of climate change. In the longer-term energy future, technological advancements will propel hydrogen into the next frontier for decarbonisation. Both LNG and hydrogen can co-exist as complementary partners in the global energy transition.
30. As we step up our investments in hydrogen, that will put us in a stronger position to ramp up our transition once the technology and economics for this fuel become more attractive and viable. At the same time, we need to support the investments and use of cleaner fossil fuels like natural gas as a transition fuel. This will enable a more calibrated and smooth energy transition and prevent supply crunches.
31. Singapore is committed to closely working with the energy sector, organisations and governments to chart a resilient and sustainable energy future. We will be relentless in our pursuit of a better and greener tomorrow for all. I hope that many partnerships will be forged during the conference. I wish you a fruitful and productive time ahead. Thank you.