2. Speeches
Speech by Min(EST) Tan See Leng at the Economic Society of Singapore’s 17th Singapore Economic Policy Forum
24 October 2025
Professor Euston Quah, President of the Economic Society of Singapore
Esteemed Members of the Society
Friends, colleagues
1. It is indeed my pleasure, honour and privilege to join you this morning as we discuss real and relevant issues facing not just Singapore, but the entire world.
2. I am really awed, standing in this room full of economists and practitioners, I don’t have to elaborate on the profound impact that a fragmenting world can and will have on a very small, open and trade-dependent country like Singapore. After many years of building multilateral global bridges rather than walls, it now seems like walls are sprouting up in many parts of the world. Bridges are now being very selectively and narrowly constructed bilaterally. The post-cold war global compact is wavering, and the 80 years of very liberal peace that Professor John Quah elaborated on earlier is indeed under significant scrutiny, as well as the role of global institutions such as the World Trade Organisation.
3. Significant challenges may lie ahead, but I still have the strong conviction that Singapore’s future is still ours to shape. In this year’s National Day Rally, Prime Minister Wong talked about charting the next bound of Singapore’s journey, how to be exceptional, and challenged all of us Singaporeans to dream even bigger and boldly push new frontiers and new boundaries.
4. Today, I would like to address the theme for this year’s Forum from the perspective of what I cover. As part of my energy portfolio, I would like to share how we are planning for our energy ecosystem’s next frontier, even amidst a fragmented and sometimes divergent world. Let me share some of my reflections from the past 5 years of steering our energy transformation, which I hope would be useful for you to carry forward and use it as a segue into the subsequent discussions you will have today.
Design objectives of the energy transformation
5. First, let me set the context. Our energy system seeks to strike the right balance between security, cost-competitiveness and sustainability. It is designed based on 3 “Es”.
6. The first “E” is existential. Energy is an existential resource for Singapore, just like water was in the 90s. Today, it is energy. It is not just about keeping the lights on and keeping the air-conditioning running here as it is this morning. Water desalination plants, data centres, wafer fabs, and our MRTs and critical infrastructure – all of them require significant amounts of energy to run. In Singapore and in countries all around the world, energy is an insatiable need and demand is growing rapidly in order to keep up with our higher standards of living.
7. Today, Singapore has one of the most reliable electricity systems in the world, which has helped us to attract valuable industries such as advanced manufacturing, pharmaceuticals, digital infrastructure and financial services. This is a hard-won blessing which was painstakingly secured by our predecessors through decades of careful forward planning and investments. But we cannot take for granted that our electricity systems will continue to remain reliable and stable as demand continues to increase. We must therefore continue to anticipate future needs and potential disruptions, and secure our energy systems accordingly.
8. The second “E” is efficiency. When managing scarce and strategic resources such as energy, we run up against the question of how to efficiently allocate it across multi-varied competing needs, as well as how to incentivise consumers to consume and conserve energy prudently.
9. The principle of right-pricing electricity is fundamental to how we have designed our energy markets. This supports independent price discovery. When markets function efficiently, consumers can enjoy cost-competitive energy while our suppliers are sufficiently compensated.
10. But, a market-led approach alone is not a guarantee of outcomes. We will still need Government intervention and targeted regulatory action from time to time, especially given the small size of our market. For example, natural monopolies such as the grid, our gas pipelines, and our gas terminal are regulated and earn a regulated return that the government reviews regularly.
11. The energy crisis also taught us valuable lessons on how markets may not always work as we intend, such as in the area of gas procurement. First, while companies contract an optimal amount of gas for their needs, the aggregate volumes of gas procured may not be optimal for the system, particularly during a crisis when market conditions are volatile and uncertain. Second, companies would have tendencies to make similar contracting decisions. This leads to bunching of contracts, which magnifies Singapore’s risk exposure when markets are volatile.
12. The government has since made three significant moves to reshape and strengthen Singapore’s gas system. First, before the crisis unfolded, the Government established a Standby LNG Facility to ensure that there would be more natural gas physically present in Singapore to cater to a wider range of contingencies. The planned move was prescient, because we managed to set up the standby LNG facility a few months before the Russia-Ukraine war broke out in February. Second, following the crisis, the Government created GasCo to centralise gas procurement for the power sector. Over time, GasCo will construct a gas portfolio for Singapore which is diversified and resilient in terms of price index, tenure, and source. Third, we are also building a second LNG terminal which will increase our LNG import capacity by 50% and meet our gas needs for the foreseeable future. Today, we have a combination of imports of natural gas, through piped natural gas pipelines and liquefied national gas through our LNG terminals. By 2028, we envisage that we would be able to procure more of our gas supplies from all over the world.
13. The third “E” is emissions. While energy provides Singapore with valuable social and economic benefits, we recognise the negative externalities that arise from the emissions linked to power generation. The power sector accounts for around 40% of Singapore’s emissions – all of it, in fact, comes from natural gas. Decarbonising the way we generate electricity is therefore central to Singapore’s net-zero ambition. But it is far from being straightforward, because Singapore is a small and alternative-energy disadvantaged island-state.
14. Our first approach therefore is to put a price to emissions, through our carbon tax. This ensures that businesses operating here internalise the costs of carbon emissions and creates incentives for them to decarbonise.
15. The challenge is, how do you set the right pricing? How do you set the right level for carbon tax? If it’s too low, then there are insufficient incentives to decarbonise in line with Singapore’s Nationally Determined Contributions. If it’s too high, we will inevitably hurt business competitiveness. Furthermore, Singapore’s carbon tax of $25/tonne of CO2 emitted is, by far, the highest in the region. If we are not careful, we could end up simply transferring economic activity as well as emissions from Singapore to another country.
Principles for navigating the energy transformation
16. This is where we are, in this very fine, delicate balance. I have explained how our goal for transforming our energy system is in terms of wanting to strike an optimal balance across all 3 “Es”. The journey to do so will not be straightforward or easy. It will require us to make difficult trade-offs.
17. The situation in today’s world echoes the turbulence depicted in “三国演义”, the Romance of the Three Kingdoms. As some context for my non-Chinese speaking friends, “三国演义” is one of China’s Four Great Classical Novels. It depicts the civil war amongst opposing factions during the end of the Han dynasty. I would like to share a quote used to describe Zhuge Liang, one of the most famous military leaders during that period – “识时务者为俊杰”.
18. To translate, the measure of true excellence is the skill to understand and navigate the shifting tides of our times. So it exalts us therefore that we have to be pragmatic and adaptable. We have to be prepared to adjust to changing circumstances, contemporaneously remaining steadfast in our convictions. It is the combination of adaptability and a very clear-eyed, firm purpose that will carry us through today’s uncertainty toward a stronger and more secure future. Let me explain this in greater detail.
19. First, we must remain adaptable and pragmatic in responding to the prevailing geopolitical zeitgeist. Decarbonisation must also be carefully balanced against our growth ambitions, energy security and affordability. Let me reiterate that decarbonisation must never come at the cost of our livelihoods and our system security. Decarbonisation will come with costs, but we will not pursue decarbonisation at all costs.
20. The world has changed also in many fundamental ways since we made our commitment to reach net-zero emissions in 2022. We must be prepared to take very clear and pragmatic views of our decarbonisation plans, and to distinguish what works and what is not currently feasible. Trump’s energy czar, US Secretary of Energy Chris Wright has openly stated in 14th July 2025’s edition of The Economist, that climate change is a byproduct of progress and argued that most green energy policies bring about only exclusion and scarcity. If major economies dilute or walk back on their climate commitments, and Singapore presses on regardless, our local industries will risk being outcompeted. Shrinking investments in low-carbon technologies may also disrupt our plans as promising technologies may take longer to become commercially viable and deployable in Singapore.
21. Therefore, as former Senior Minister Teo Chee Hean said previously, we must be “climate realists”, and tailor our climate commitments in line with global developments and associated trade-offs. We must similarly be clear-eyed as we strike the balance between decarbonisation, energy cost-competitiveness and security.
22. Let me illustrate this with low-carbon electricity imports. To date, we have awarded Conditional Approvals and Conditional Licences to projects with a combined capacity of more than 8 gigawatts. This is not a small feat. Actually, today, at a steady state, our combined consumption is about 8+ gigawatts. So it is a very new but very substantial energy source. Even as we actively seek to facilitate the development of these projects, we must also be sensitive to the price of imported green electrons, relative to electricity prices today and the potential electricity prices in the future. As a new energy source, we will also need to design a separate suite of backup assets for contingencies.
23. We are also exploring all possible pathways to decarbonise. No option is off the table. This is part of our plans to build a diversified and resilient energy portfolio for Singapore, which is currently weighted towards natural gas. We are actively building our capabilities to assess the potential of new energy technologies such as CCS (carbon capture & storage), hydrogen, advanced geothermal and nuclear technologies.
24. Nevertheless, if we merely bend to the winds of change, we will be like a leaf in the wind and lose the policy consistency and long-term planning principles that are key to governance in Singapore. While we remain responsive to change and pragmatic in balancing decarbonisation’s costs and benefits, our actions must continue to be guided by our principles and interests.
25. Being pragmatic about our climate commitments does not mean throwing these commitments out of the window. Singapore made these commitments because we believe in the existential threat of climate change. We will continue to play our part in carbon mitigation, and we will prepare our economy to seize new opportunities that will arise in a low-carbon world.
26. Relying on markets alone will not help us decarbonise at the required speed and scale. We are thus prepared to step up and steer Singapore’s energy transformation across three areas.
27. Firstly, the Government will step in to guide new generation planting decisions, which can help to ensure a smoother transition to a low-carbon future. Boom-bust cycles are a common phenomenon in many liberalised electricity markets. High electricity prices signal a tight supply. However, because it takes four to five years to build a power plant, this results in periods of insufficient generation capacity. There is also the risk of uncoordinated multiple plantings, which leads to excess capacity and depressed prices, and then it ends up in market failure.
28. Such volatilities can come at a deep cost to both consumers and our system security. Even as we are committed to a market-centric energy system, the Government has stepped in to coordinate the entry and exit of generation units. Since 2023, the Energy Market Authority, or EMA for short, has established a centralised generation planting process to plan for new capacity building at the system level. As part of this process, EMA forecasts electricity demand and available generation capacity on a rolling 10-year basis. This also accounts for the introduction of new energy sources, including solar energy to renewable energy imports, and electricity imports. If the projections indicate insufficient supply, EMA will launch an open call for the private sector to build, own and operate new generation capacity.
29. In some instances, the Government is also prepared to step in to plant new generation assets if there is insufficient industry interest. For example, we needed two new, fast-start generation units for system reliability, but there was no commercial interest to build these units because these are what we call OC GTs (Open-Cycle Gas Turbines). In most times of the year, this remains idle. It is only when there is an outage, this comes out of the backup. Most private sector generation companies will not be interested in doing this. Therefore, the Government established Meranti Power in 2022 to build, own and operate these assets so as to make sure our system continues to be consistent and reliable.
30. Secondly, the Government will play a key role in de-risking our energy transition. First-of-a-kind energy projects come with heightened geopolitical, technological, safety and commercial risks. Renewable energy infrastructure will also require much more upfront capital expenditure compared to conventional gas-fired power plants. These uncertainties make it challenging for the private sector to fully finance low-carbon energy projects in Singapore. Public funds can be a source of patient capital to catalyse new carbon energy projects and crowd in private sector investments. In 2024, we established the Future Energy Fund to support strategic low carbon and energy security projects, such as infrastructure for importing low-carbon fuels. We have also appointed Singapore Energy Interconnections to invest, develop, own and operate subsea interconnectors to transmit low-carbon electricity into Singapore.
31. Thirdly, the Government will lead in building capabilities to identify and develop promising technologies to decarbonise our power sector. Today, many low-carbon energy technologies remain highly nascent. If left to the market, we may not see sufficient investments to drive the development of these technologies to a commercially viable stage in a timely manner. We will address this gap in the next phase of our Research, Innovation and Enterprise (RIE) efforts, including exploring if we can establish a "Grand Challenge" to support a breadth of R&D and pilots projects in promising low-carbon solutions that we believe can help Singapore meet its decarbonisation goals.
Conclusion
32. I would like to conclude my address by going back to the story of “三国演义”. “三国演义” was set against a backdrop of chaos and change. States rose and fell, and only those with foresight and adaptability endured. Today, we also find ourselves at a crossroad. In transforming our energy system, we tread a delicate tightrope — navigating domestic ambitions and global uncertainties, while managing the trade-offs between decarbonisation, energy security, affordability, and maintaining that momentum of growth.
33. “识时务者为俊杰”. This saying provides a timely insight on how we will need to press on, not with blind faith and idealism, but with a clear-eyed focus and pragmatic awareness of our principles and priorities.
34. The journey ahead will not be easy. We have seen many countries falter and blown off-course amidst the brewing storms of a fragmenting world.
35. While our convictions for a better world continue to drive us forward, we must remain vigilant and responsive to global and regional developments, and decarbonisation’s global pace of change. In doing so, we will ensure our national policies are always grounded in pragmatism and practicality.
36. We will also need to remain united in our conviction to build a better future and world for subsequent generations of Singaporeans. To all the economists sitting here, we will need your expertise, modelling, equations and skills to develop bold and innovative solutions that will continue to see us through and to work for us here in Singapore.
37. And to all the Economics teachers here who are nurturing the next generation of Singaporeans to take us to SG100 – thank you all for your hard work.
38. Let me congratulate the two winners of the Outstanding Economics Teachers Award, Mr Melvin Lim from St Andrew’s Junior College and Ms Valerie Chua from Nanyang Junior College. I hope that you can bring the lessons from our energy transformation journey into your classrooms. We are eager to tap on your expertise in convincing many more bright and young minds to work on this mission to shape our energy future.
39. Ladies and gentlemen, if we can come together as a “We-First” community, I have every confidence that we will defy the odds. We can and must build a secure, cost-competitive, and sustainable energy system that will power Singapore beyond SG100.
40. Thank you very much.