Speech by Minister Tan See Leng: Energy Reset

Joint Segment On Sustainability at MSE's COS Debates 2021 – Speech By Second Minister for Trade and Industry Mr Tan See Leng: Energy Reset

1 Madam Chairperson, over the last 50 years, our energy sector has evolved tremendously.

2 As we face a rising need to tackle climate change, and at the same time, competing higher energy demand from our population and industry, we will have to transition gradually away from natural gas and find low-carbon energy sources to meet our needs progressively.

3 However, Singapore lacks alternative energy such as wind or tidal power, as Ms Yeo Wan Ling pointed out. Our main source of renewable energy is solar energy which has its limitations, due to its intermittency as well as the need for space.

4 Therein lies the challenge for Singapore – how can we obtain energy that is: (i) secure and reliable, (ii) affordable, and (iii) environmentally sustainable, for ourselves over the long haul. These three objectives constitute our "energy trilemma", as seeking to achieve each will entail trade-offs for the others.

5 With this context, let me explain further:

a. How we will forge ahead in our efforts to incorporate more renewable energy in our energy sources, and enhance the efficiency of our power systems; and

b. How we can continue to manage these trade-offs arising from our energy transition and the energy trilemma, including smoothening price volatility, as well as conserving energy together.

Energy Sources and Power Systems

6 Mr Saktiandi Supaat asked about the Government's efforts in decarbonising our electricity grid. We are greening our energy sources, by developing our four "supply switches" – natural gas, solar energy, regional grids, and low-carbon alternatives such as hydrogen.

Solar Energy

7 First, solar energy. We are accelerating our efforts to maximise and densify suitable solar deployment spaces, which Mr Liang Eng Hwa has also asked about. This includes scaling up the deployment of solar panels on rooftops and open spaces, such as reservoirs. Today, as we speak, we are already one of the most solar-dense cities in the world. Nonetheless, we will continue to explore even more innovative ways to deploy solar, and maximise solar deployment across all viable sites such as untapped spaces, including existing land, canals, and roads.

a. For example, Terrenus Energy, together with JTC, will be extending their Solar Land project on Jurong Island to include multiple renewable energy onsite – solar, tidal, wave and wind.

b. Once this project is completed, this will be Singapore's first four-in-one renewable energy site, and we could potentially have the highest renewable energy produced per square meter in the world.

8 As solar deployment increases, we will have to match this with Energy Storage Systems (ESS) deployment. Beyond 2025, we target to deploy 200 megawatts (MW) of ESS.

a. To enable this, EMA is test-bedding innovative solutions with the industry as well as the research community. For example, we are piloting Singapore's first floating ESS which can power over 600 4-room HDB flats, and this will enable us to study how batteries can be stacked vertically to reduce land use.

b. I am also happy to announce that we have awarded a grant to a consortium led by a local small and medium-sized enterprise, Eigen Energy, to pilot Singapore's first smart and clean-energy powered service stations at Tampines, Pasir Ris, and Lakeview. These stations will have a smart energy management system to integrate solar, energy storage, and electric vehicle (EV) chargers to help power their operations, and provide one of the fastest public EV charging, when ready in Q1 2022.

9 As we increase solar and ESS deployment, our power system will become more decentralised. To enhance our capabilities in grid planning, maintenance, and asset management, we are developing a digital twin of Singapore's physical electricity grid. We are working closely with the industry to progressively upgrade and refresh our physical grid.

Regional Grids

10 The second "switch" is developing regional grids.

a. The Energy Market Authority, or EMA, will issue a Request for Proposal for a two-year trial of 100MW of electricity imports from Malaysia in March 2021. It is also initiating cross-border power trade of up to 100MW under the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP). This will also allow us to tap on the abundance of hydropower and other renewable energies that some of our Southeast Asian neighbours have.

b. Mr Koh Lian Pin asked what the Government is doing to assess the carbon footprint of our electricity imports. For the upcoming trial with Malaysia, EMA will put in place steps to verify the cleanliness of our imports, including requiring importers to submit documentary proof of carbon output. Cleaner proposals will be scored favourably.

c. But these are just first steps towards a regional grid. In MTI, we have plans to import more electricity, and these trials will help us learn and build confidence in importing electricity over the longer-term, to diversify our energy sources while tapping on clean energy in the source countries.

Power Systems

11 Mr Saktiandi also asked about how we would help existing power systems become more efficient. Singapore, over the medium to long term, will need to rely on natural gas even as we transition towards cleaner energy. Hence, we are encouraging power generation companies, or gencos, to adopt more efficient technologies for their generation sets through two grant calls for the Genco Energy Efficiency Grant.

12 We will also facilitate the entry of advanced Combined Cycle Gas Turbines (CCGT), which is the most efficient gas-fired generation technology that is available today, for new generation needs or to replace retiring generation sets.

Managing Trade-Offs and Conserving Energy

13 These measures will make our economy more sustainable, but they will inevitably involve trade-offs. For instance, while we seek to accelerate solar deployment, our land constraints and the need for back-up storage adds to the costs.

14 Mr Dennis Tan asked during the Budget debate last week about our plan to step up electricity infrastructure for use by EVs in the coming years. MTI will work closely with MOT and LTA to enhance our electrical infrastructure to support the onboarding of EVs. This is why we call this prong of the Green Plan an "energy reset" strategy, because some upgrading of power generation and grid infrastructure will be required. We will pace the upgrading of the infrastructure along with the adoption of EVs.

15 Mr Saktiandi also asked whether the current low electricity prices would pose a challenge in encouraging consumers to adopt more energy efficient measures to cut down on their electricity usage. Mr Liang Eng Hwa also asked how importing electricity will impact electricity prices, and the considerations the Government has in managing any price volatility.

16 Indeed, wholesale electricity market prices are well-depressed today. Let me explain how we came to this situation, and what we will see going forward.

a. Singapore has an open and competitive electricity market where prices rise and fall depending on demand and supply.

b. Around ten years ago, generation companies made commercial decisions to build power plants and contract natural gas based on the bullish projections of demand growth. However, these projections did not materialise. This has led to the current glut in our electricity market.

c. Intense competition amongst the different gencos to sell electricity has led to electricity prices falling below the full cost of producing electricity. With your permission, Madam Chairperson, may I display one slide on the LCD screen please.

d. Please take a look at the slide. As you can see, in red it represents the long run marginal cost of producing electricity – that is the true cost of what it takes to produce electricity today. The black line shows the current market spot price that fluctuates over the last many years. This is the result of overcapacity.

e. The overcapacity situation will likely be alleviated in the near future. Wholesale electricity prices will also rise and normalise, with rising demand driven by the growth of sectors such as data centres, 5G networks, agri-tech, as well as the adoption of EVs; and the low electricity prices today are currently also dis-incentivising the generation companies from investing in new plants.

f. Over the medium to long run, electricity prices normalising is inevitable. No company that is commercially run will sell electricity below cost perpetually. What we need to do is to prevent a swing from a glut to a severe shortage of capacity. This will result in sharp price spikes and perhaps, even blackouts as we saw in Texas just last month.

g. Many electricity markets have encountered similar experiences. EMA has studied how these jurisdictions have managed their situations and we are also consulting the industry on the way forward. We will announce more details later this year. We are committed to smoothening these price surges and volatility.

h. Besides power generation capacity, electricity prices are also affected by the supply of energy. We are importing close to 100% of our energy needs today – mainly natural gas. In spite of our best efforts to deploy solar energy in Singapore, we will still need to rely on energy imports one way or another, and be subject to global prices going forward.

i. Fuel prices had dipped to their lowest levels in the last 20 years due to the COVID-19 pandemic last year, but they are expected to rise going forward, as global demand recovers. This will also likely cause electricity prices to increase as well.

17 The Government will do our best to manage our energy trilemma by introducing more renewable energy in our energy mix, by enhancing the efficiency of our power systems, and minimising the impact on prices. However, "right-pricing" of the energy prices is critical to encouraging prudent use of electricity. We must adopt energy conservation as a way of life for all of us here in Singapore.

18 Besides managing the amount of energy we use, consumers can also help us reduce our carbon footprint by electrification. Minister Ong has already spoken about our ambitious plan to electrify vehicles. Another example is how we can switch from using gas to electrical appliances for our cooking.It is also safer as the risks of gas leaks and fires are reduced. And I was told some of the newer electrical cooking appliances can also produce very good "wok hei".

19 Madam Chairperson, in Mandarin, please.

20 至今，新加坡的能源需求有近 100 % 是进口的，而大多数是天然气。即便我们尽最大的努力使用太阳能，我们还是会需要依靠进口能源。因此，我们在价格控制方面是很有限的。政府会尽力减低对国人的影响。关键是大家都应该节约能源，并相应地调整生活方式。节约能源必须成为我们所有国人的一种生活方式。

Conclusion

21 Madam Chairperson, the Government will continue taking a long-term approach in planning our energy needs, while balancing the need to be more environmentally sustainable, ensuring continued energy reliability and security; as well as managing price fluctuations and volatilities. Even when prices do go up, we will do our best to ensure that this gradient is gradual, and the Government will act where necessary to minimise excessive surges.

22 Most fundamentally, it is our exhortation to all of us, as fellow Singaporeans, that we must do our part to conserve energy, just like how we conserve water, and adjust our lifestyles accordingly. By working together, we can maintain a sustainable, secure, reliable, and resilient energy future for all of us.

23 Thank you.