Singapore passes law to ration power during emergencies, set up energy fund
MPs asked if Singapore’s decarbonisation plans would lead to an increase in electricity prices, with costs passed on to businesses and mass consumers.
HDB flats at night in Toa Payoh (Photo: CNA/Jeremy Long)
This audio is generated by an AI tool.
SINGAPORE: The Energy Market Authority (EMA) will be able to implement power rationing as a “last resort” during a crisis, with priority given to critical services, after a Bill to support the country’s energy transition was passed on Monday (Sep 9).
A Future Energy Fund, announced during this year’s Budget, will also be part of measures to spur Singapore’s transition towards clean energy.
Four other key proposals were introduced in the Energy Transition Measures and Other Amendments Bill aimed at securing and stabilising Singapore's energy supply.
The law was passed after 10 Members of Parliament (MPs) rose to seek clarifications.
In Parliament on Monday (Sep 9), Second Minister for Trade and Industry Tan See Leng responded to clarifications sought by members of the House on the Energy Transition Measures and Other Amendments Bill. The Bill was then passed.
WHAT IT IS ABOUT
The law introduced proposals to do with infrastructure planning and development, create new market mechanisms and safeguard energy security.
Second Minister for Trade and Industry Tan See Leng said that power rationing may be needed to maintain power system stability in the event of a severe and protracted disruption to all of Singapore’s gas imports.
Households and businesses will be given as much advance notice as possible and residents will have access to power for their daily needs, even as services such as medical and telecommunication are given priority.
Businesses will not be liable if they do not meet their obligations to take or provide electricity or fuel when complying with EMA’s directions on power rationing.
The rationing measures will be lifted once the situation improves.
“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,” said Dr Tan, who noted that the UK has also introduced power rationing as part of its energy resilience strategy.
Besides power rationing, the law also establishes the Future Energy Fund for investments in clean energy projects that may have high upfront costs, and significant commercial, technological and geopolitical risks.
The initial injection will be S$5 billion (US$3.8 billion) in FY2024, with further top-ups in the years to come.
Other proposals include:
- Allowing EMA to direct owners and occupiers of critical energy infrastructure to give electricity and gas licensees access to the infrastructure, which can include waterfront jetties and transmission cables
- Requiring approval from EMA when repurposing electricity and gas assets
- Allowing EMA to recover costs associated with initiatives it introduces for the sake of energy security, market development and decarbonisation. MTI said EMA will only introduce new initiatives when necessary and the ministry must approve new rates proposed, adding that EMA will not seek to make any profit
- Requiring prescribed power generation companies to procure gas solely from a central gas entity - known as Gasco for now - unless otherwise allowed. Gasco is expected to be set up as a government-owned company by the end of the financial year and will procure and supply gas to the power sector, creating greater economies of scale. Singapore had said it would establish Gasco to minimise electricity price volatility
WHY IT MATTERS
Dr Tan said that the proposals will strengthen Singapore's ability to "plan for and develop a decarbonised, secure, and cost-competitive energy system" against the backdrop of geopolitical, commercial and technological uncertainties which can threaten the country's energy security.
The proposals - in particular, centralising gas procurement and power rationing - are targeted at ensuring energy stability, given that Singapore still relies mainly on imported natural gas for its energy needs and has a lack of alternative energy.
In 2021, an energy crisis due to surging gas prices from global demand and supply factors spurred the exit of six electricity retailers within weeks. These retailers were unable to deal with the extreme volatility of surging prices in the wholesale electricity market.
The problem was exacerbated by the global energy crunch in 2022, when electricity prices rose multiple folds due to fossil fuel shortages worsened by the Ukraine war and other factors.
WHAT MPS SAID
MPs Liang Eng Hwa (PAP-Bukit Panjang), Saktiandi Supaat (PAP-Bishan-Toa Payoh) and Jessica Tan (PAP-East Coast) expressed concerns that the measures will lead to an increase in electricity prices, with costs passed on to businesses and mass consumers.
Mr Saktiandi noted that decarbonisation efforts would make it seem "quite impossible" to decrease prices and keep costs competitive, and asked if electricity prices would trend upwards in the near and medium term.
As Singapore seeks to decarbonise and also diversify to ensure its energy security, “it would seem quite impossible” to decrease prices and keep costs competitive, said MP Saktiandi Supaat in Parliament on Monday (Sep 9). He asked if Singaporeans and Singapore businesses should expect electricity prices to trend upwards in the near and medium term. Mr Saktiandi also asked about the proposed creation of a single entity to centralise gas procurement for the power sector. He asked who this entity will be and how it will be run and managed. As it will be “monopolistic” vis-a-vis power generation companies (gencos), how can the Government influence it to pursue non-profit maximising objectives? Citing free market theory, he questioned if it would be more efficient for gencos to seek the most competitive gas supplier and arrangement. He also suggested a possible contradiction in trying to aggregate demand and achieve economies of scale in procurement versus enhancing Singapore’s energy security by procuring from multiple diversified sources. Mr Saktiandi also wanted to know how the Energy Market Authority (EMA) will wield proposed new powers to recover the costs of providing new initiatives to strengthen energy security, develop a competitive market or support decarbonisation of the power sector. He also asked how key energy assets and infrastructure will be identified, in requiring their owners to obtain EMA’s approval before repurposing them.
In response, Dr Tan said the trajectory of electricity prices depends on which direction fuel prices move, as well as on technological developments.
He pointed out that geopolitical uncertainties from conflicts around the world will continue to pose risks to gas markets in the medium term.
Meanwhile, the share of low carbon energy sources in Singapore’s energy mix will grow, with electricity prices increasingly dependent on the cost of these sources, said Dr Tan, adding that it was difficult to predict the trajectory of these costs.
The government will be mindful of the impact of electricity prices on consumers and businesses, he said, referring to government schemes such as the Climate Friendly Households Programme and cost-of-living support to help Singaporeans with such costs.
MPs such as He Ting Ru (WP-Sengkang) and Yip Hon Weng (PAP-Yio Chu Kang) asked about the Future Energy Fund, including how it will be implemented, the qualifying criteria for projects, and how its effectiveness will be assessed.
The proposed Future Energy Fund is a key piece of Singapore’s strategy to secure its energy future and meet its 2050 net-zero objective, said MP He Ting Ru. It aims to catalyse the development of clean energy infrastructure in the region, to secure low-carbon energy supplies for Singapore. Such projects typically face high upfront capital expenditure and can be exposed to commercial or geopolitical risks. In Parliament on Monday (Sep 9), Ms He asked several questions about the fund. On implementation, she was concerned about potentially lengthy commissioning times, the failure or early termination of projects, and scenarios where the fund could end up supporting fossil fuel projects. On accountability, she wanted to know which Government agency will be the fund manager and how success will be measured. Ms He also noted that Singapore’s total energy demand is likely to keep rising - for example, in light of the country’s artificial intelligence ambitions. She repeated an earlier call for solar panels to be made mandatory on commercial and residential buildings with few exceptions, to not only cut emissions and electricity costs but also provide options in Singapore’s energy security.
Assuring members of “strict oversight” over the funds, Dr Tan said that the fund’s success would be determined by whether it can achieve the energy transition in a “cost effective manner, while ensuring energy security”.
“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 risk, and the eventual cost of electricity generated through such low-carbon sources,” said Dr Tan.
The government will employ competitive processes, such as tenders and price discovery mechanisms, to ensure that energy transition projects are value for money, and establish milestones to ensure that project timelines remain on track, as part of its regulatory measures, said Dr Tan.
