SPEECH BY LIM HNG KIANG, MINISTER FOR TRADE AND INDUSTRY, AT THE SINGAPORE ELECTRICITY ROUNDTABLE ON MONDAY, 12 NOVEMBER 2007, 9.20AM AT THE RAFFLESCITYCONVENTION CENTER

Mr Tan Soo Kiang, Chairman, Energy Market Company

Distinguished Guests, Ladies and Gentlemen

A very good morning to all of you. I am pleased to join you here at the Singapore Electricity Roundtable 2007.

This is the third Roundtable organized by the Energy Market Company. I am delighted that it has continued to attract many participants from various industries, including financial institutions, the legal services industry, energy consultants, and of course, the electricity industry itself.

Singapore’s electricity market has evolved over the years. About a decade ago, the electricity sector was vertically integrated and owned by the Public Utilities Board. We have since restructured and liberalized the industry. Temasek Holdings, which took over the energy assets from the Government, is now planning to divest the three power generation companies in its portfolio, starting with Tuas Power.

Our key motivation for creating a competitive electricity market is to bring down energy costs and improve service standards through efficiency gains and innovation. We are already enjoying the fruits of our labor. Competition has led to the introduction of more cost-competitive, energy efficient and cleaner natural gas into the market.

A Changing Global Energy Landscape

While the evolution of the Singapore electricity market continues, we are witnessing a sea change in the global energy landscape. First, energy security has re-emerged as a key priority in regional and national agenda. The price of oil is now more than US$90 a barrel. In January this year, it was only around US$53.This is about a 70 per cent jump in less than a year.

Many factors have contributed to the upward spiral in energy prices. Strong economic growth, particularly in Asia, has fuelled the demand for energy. On the other hand, underinvestment in production capacity, geopolitical conflicts and adverse weather conditions in energy producing countries, have held back supply.

For Singapore, we are almost fully dependent on imports to meet our energy needs. We are vulnerable to the risks of supply disruption and rising energy prices. Without energy, the economy will not be able to function, our normal daily lives will be disrupted, and the livelihood of Singaporeans will be affected. It is therefore critical that we manage our energy security as we continue to pursue economic growth.

Second, climate change has emerged as a major global environmental challenge. Global warming can lead to rising sea levels and more extreme weather events. There is strong scientific evidence that climate change is very likely due to the increase in greenhouse gases in the atmosphere, primarily carbon dioxide from the burning of fossil fuels.

Climate change is a global challenge. To overcome it, a concerted international effort is needed. However, due to the large differences between countries and different developmental pace of each country, it would not be easy to reach a consensus on the way forward.

For Singapore, we have placed ourselves on the path of sustainable development for many years. In the 1970s, we made the commitment to clean up our waterways and turn Singapore into a garden city. We have safeguarded our environment even while we built up a strong industrial sector. We have pioneered innovative and practical solutions to reduce our environmental footprint, improve our quality of life, and enhance our economic efficiency. Our efforts are evident in our land transport management policies, our strict controls on air pollution, and our waste management system.

But Singapore is a price taker for energy. We only account for about 0.15 per cent of the world’s carbon dioxide emissions. As a small country, our efforts alone will not have much impact on climate change. We cannot volunteer to reduce emissions on our own, at the expense of economic growth. Nevertheless, as a responsible international citizen, we will do our fair share as part of the global effort to mitigate greenhouse gas emissions.

A National Energy Policy Framework

What then should Singapore’s response be to the challenges of energy security and climate change? The Energy Policy Group (EPG)[1], which formulates and coordinates Singapore’s energy policies and strategies, has crystallized the approach which Singapore will take to meet the energy challenge.

The National Energy Policy Report presents a holistic national energy policy framework that balances between the three objectives of economic competitiveness, energy security and environmental sustainability. Inevitably, there will be trade-offs between the three objectives, and these will have to be carefully weighed and managed. However, there are also areas where the different objectives converge, such as energy efficiency and conservation, which we should exploit.

Moving forward, the fundamental role of energy remains unchanged. Energy is first and foremost an enabler of economic growth. We need energy to support our standards of living and our lifestyles.

As a small city state with limited indigenous resources, a strong and growing economy is the only means to provide us with the resources to meet the challenges of rising energy prices and climate change. The essence of our energy policy therefore boils down to securing Energy for Growth.

Our Energy Strategies

The national energy policy framework outlines six key strategies to bring together the Government, industries, businesses and households to adopt practical and effective measures to strengthen our competitiveness, enhance energy security, and protect the environment. Let me elaborate.

First, to promote competitive markets. Competitive markets will remain a cornerstone of our energy policy. We have reaped the benefits arising from a liberalized and competitive electricity market. With our consumers in mind, the Energy Market Authority is now piloting the Electricity Vending System, to enable full contestability in the electricity retail market. If successful, households and other small consumers will in future be able to choose their own electricity retailers and price plans, in the same way they can do so for telecommunications.

Second, to diversify our energy sources. A more diversified energy system will help protect us against supply disruptions, price increases and other threats to energy security. We are building a liquefied natural gas terminal to diversify our sources of natural gas. We are promoting further energy diversification by supporting R&D, test-bedding and demonstration of promising new energy technologies.

Due to our geographical constraints, we have very little alternative energy sources beyond oil and gas. But at this point, we should not write off other energy options. As technology improves, more energy options will become viable for Singapore.

The third strategy is to improve energy efficiency, which will not only save on energy costs, but also contribute to our environmental goals. Everyone has a role to play in saving energy. The Government has developed a comprehensive national energy efficiency plan to promote the adoption of energy efficiency measures, raise public awareness, and build capability in energy efficiency. For example, one new policy is that all new buildings and existing buildings undergoing major retrofitting work must meet a minimum green building standard, starting from next year.

Fourth, to develop the energy industry. There are tremendous opportunities in the energy sector. Besides growing our oil refining and energy trading sector, we are also pursuing growth opportunities in clean energy, including solar energy, biofuels and fuel cells. The Government has committed more than $300 million to build up our energy R&D capabilities. Overall, our goal is to increase the value-added of the energy industry from $20 billion to $34 billion by 2015, and to triple the employment in the industry from 5,700 to 15,300.

We have already achieved some early successes in the clean energy sector. Two weeks ago, Norway’s Renewable Energy Corporation announced that they will build a $6.3 billion solar manufacturing complex in Singapore. When completed, it will be the world’s largest solar manufacturing facility. We have attracted investments in biofuels production from Peter Cremer, Continental and Natural Fuels. Singapore will have a biodiesel production capacity of 650,000 tons per annum when these projects are completed.

The fifth strategy is to step up international cooperation. Due to Singapore’s small size and dependence on energy imports, we need to promote greater regional and international energy cooperation to further our energy interests. We are developing closer relations with key energy producers, and participating actively in energy and energy-related discussions in major fora such as ASEAN, the East Asia Summit, the Asia-Pacific Economic Cooperation, and the United Nations Framework Convention on Climate Change.

Strategy Six is to take a whole-of-Government approach. We need multiple Government agencies to put their heads together to deal with the complexities of energy. Apart from the Energy Policy Group, which was formed last year, several agencies have formed new units to manage the energy challenge. The Ministry of Trade and Industry now has an Energy Division. The Economic Development Board and the National Environment Agency have set up inter-agency programme offices for clean energy and energy efficiency respectively.

The Energy Market Authority has also expanded its role from energy market regulation to take on the task of energy policy and planning. EMA will take on a more developmental role for the energy sector, with the goal of enhancing Singapore’s energy security and competitiveness.

Launch of the Energy Studies Institute

The global energy environment is constantly evolving. To maintain our edge in the energy sector, we must keep our energy policies flexible and open, and be prepared to adjust them and formulate new strategies when needed.

To do so successfully, we need to have a good understanding of regional and global energy developments. With this in mind, we are setting up the Energy Studies Institute, or ESI, which is a multi-disciplinary, autonomous energy research institution under the auspices of the National University of Singapore. The ESI’s research will cover the three areas of energy economics, energy security and the environment. The ESI will also provide a platform to promote greater awareness and dialogue on energy issues within the region.

Conclusion

Governments around the world are experiencing very challenging times in the energy arena. Diversification of energy supplies, development of new sources of energy, energy efficiency and conservation, and international cooperation are needed to overcome these challenges.

Singapore is no exception. We have now taken the important first steps by formulating a holistic and robust national energy policy framework. Our energy policies will help to maintain our energy cost competitiveness, secure our energy supplies, protect the environment, and, above all, grow the economy and create jobs for Singaporeans. We will need to remain vigilant and anticipate future challenges, as we embark on this journey in the energy arena.

I wish all of you a fruitful Roundtable discussion. Thank you.