Views of S. Iswaran, Minister in the Prime Minister’s Office and Second Minister for Home Affairs and Trade and Industry, Government of Singapore, at the Singapore Energy Summit (SIEW) 2013
S. Iswaran, Minister in the Prime Minister’s Office and Second Minister for Home Affairs and Trade and Industry, Government of Singapore, believes that unconventional energy sources such as shale gas hold tremendous promise for meeting the energy needs of developing Asia, where demand is expected to double in the coming decades. Excerpts from his opening remarks at the recently concluded Singapore Energy Summit (SIEW) 2013 (October 28–November 1, 2013)…
This year’s theme of “New Horizons in Energy” reflects the transformation that is under way in the global energy landscape. Unconventional resources, unconventional gas, in particular, has emerged as a “game changer”, with the potential to drive economic growth and address environmental concerns at the same time.
On the promise of unconventional energy sources and new technology…
Hydraulic fracturing technology (or “fracking”) has led to a boom in unconventional gas production in the US. Consequently, the US is projected to be a net exporter of gas by 2020. The UK, China, and Australia, among others, are also actively exploring and developing their own unconventional gas resources. The US Energy Information Administration estimates that the amount of unconventional gas that is technically recoverable globally now stands at 7.3 trillion cubic feet. At current rates of global gas consumption, this quantity will last for about 80 years. The shale gas revolution has already exerted an impact on global gas trade flows, contracts, and prices by fostering increased competition. Further developments of unconventional gas will reinforce such trends, which is important to Asia as a major net importer of energy.
Smart grid applications and energy management systems have also evolved and gained traction globally. With these technological advances, consumers are now able to manage their energy consumption in a cost-effective and automated manner.
Further, the proliferation of renewable energy is transforming the way energy is harnessed, distributed, and consumed. The International Energy Agency (IEA) estimates that renewable energy is now the fastest growing sector of the global energy mix, accounting for around a fifth of all electricity produced worldwide.
Governments and policymakers must consider how these global developments can be harnessed to secure the energy future of their countries. I would like to share some of the strategies and initiatives that we are taking to diversify Singapore’s energy mix, foster competition in our energy markets, and help consumers make more informed choices about their energy use.
On Singapore’s attempts at diversifying its energy mix…
One key strategy is to diversify our energy sources. To this end, we have set up a liquefied natural gas (LNG) terminal that commenced operations in May 2013. Its initial throughput capacity of 3.5 million tonnes per annum (mtpa) will increase to 6 mtpa by the end of this year with the completion of a third tank. We have also announced plans to expand the terminal by adding a fourth tank, which will boost capacity to 9 mtpa by 2016.
The LNG terminal is a significant and critical addition to Singapore’s energy infrastructure. It allows us to procure competitively priced gas from around the world, enhances our energy security, and enables us to meet future energy demand. In addition, the terminal will allow Singapore to explore opportunities in LNG-related activities such as trading, break bulking, and bunkering.
The rest of Asia is also bullish on natural gas. According to the IEA, the Asian natural gas market is the fastest growing market in the world; in fact, it is expected to become the second largest market by 2015.
To further diversify our energy mix beyond natural gas, Singapore is exploring renewable energy options. The IEA forecasts that renewable energy will account for 47 per cent of worldwide growth in electricity generation between 2010 and 2035. This trend is driven by various factors, including falling costs, technological improvements, and the drive to meet renewable energy policy targets.
At present, solar energy is the most viable source of renewable energy for Singapore. Hence, the Singapore government has invested significantly in solar research and development (R&D) efforts. These include competitive research grant calls, test-bedding efforts, as well as support for research institutes, such as the Solar Energy Research Institute of Singapore, to study the technical aspects of adapting solar energy to Singapore’s context.
One example is the microgrid test-bed at Pulau Ubin, an offshore island to the northeast of Singapore. With the launch of the microgrid, test-bed participants will have access to cleaner, cheaper, and more reliable electricity generated from renewable sources such as biodiesel and solar photovoltaic (PV), instead of the diesel generators they had relied on previously. The test-bed will also allow our Energy Market Authority (EMA) to gain a better understanding of the management of intermittent generation sources for eventual application to the national grid on the mainland.
To complement these R&D and test-bedding initiatives, we are preparing our system to effectively incorporate solar energy as it becomes commercially viable. The EMA is enhancing its power system operations capabilities by building up solar forecasting competencies, developing an understanding of the diversity of solar output across Singapore, and studying how intermittent sources can be accommodated without affecting grid stability.
In order to facilitate greater deployment of renewable energy sources and enable their integration into the current electricity market, the EMA is reviewing its regulatory framework to better take into account the benefits and externalities of renewable sources. It has launched a public consultation on the regulatory framework for intermittent generation sources, such as solar energy.
One area of consultation is how the market registration procedures can be simplified to allow small consumers with intermittent generation sources to be paid for supplying their excess electricity to the grid. Another is the procurement of reserves to manage intermittency. Currently, the EMA imposes a hard cap of 350 MWp on the amount that intermittent generation sources can supply to the grid due to the amount of reserves required to back up intermittent sources and ensure system stability.
The EMA is reviewing this approach. Views are being sought on a framework that will facilitate greater entry of intermittent sources, while maintaining the stability of the power system. I urge all stakeholders to participate in this public consultation and contribute their ideas, which will help refine the eventual framework.
On fostering competition…
Another important energy policy goal for Singapore is to foster greater competition in the electricity market, which, in turn, will ensure that prices remain competitive.
In that regard, one initiative we are considering is the introduction of an electricity futures market to complement the spot market. A futures market will help large electricity consumers to better manage price volatility by allowing them to secure longer-term prices. A futures market will also provide an alternative avenue for independent retailers to enter the market by enabling them to purchase longer-term hedges. The entry of such independent players can in turn further spur retail competition that will benefit end-consumers.
A year ago, the EMA held a public consultation on the development of an electricity futures market in Singapore. Taking into consideration industry feedback, the EMA issued a Request-for-Interest Paper in May 2013, setting out the proposed design of the futures market and seeking indications that there is sufficient interest to proceed. I am pleased to note that six generation companies in Singapore have expressed their interest in collaborating with the Singapore Exchange (SGX) to develop the futures market. These companies are Keppel Merlimau Cogen, Sembcorp Cogen, Senoko Energy, Tuas Power Generation, Tuaspring, and YTL PowerSeraya.
Commercial discussions for the development of the futures market are in progress. An industry workgroup is in the process of developing the design of the electricity futures contracts. It is also in the midst of establishing a market and making arrangements to ensure sufficient liquidity for the trading of electricity futures. In addition, the SGX is working with the industry to launch a trial for the electricity futures market next year. This trial will allow generation companies to build up competencies and experience in trading and market making. We hope that the electricity futures market will be launched sometime in the second half of 2014.
On enabling more informed decisions on energy use…
On the demand side, the government is constantly helping end-consumers in Singapore to make more informed decisions and optimise their energy use.
Last year, I announced the launch of the consultation process on incorporating Demand Response as part of the Singapore electricity market. The Demand Response will allow consumers to participate more actively in the market by curtailing their demand in response to high prices. This can moderate price spikes, lower energy costs, and generate system-wide savings. These savings will then be passed on to consumers who curtail their demand.
The EMA has completed its consultation and has decided to proceed with the Demand Response scheme. It is finalising its review of the feedback obtained, and will be releasing more details of the scheme in a Determination paper. The scheme is expected to be implemented in 2015 after the required system changes have been put into effect. Interested industry players can use this time to attract and equip consumers with the technical requirements to participate in the Demand Response scheme. Eligible consumers will also be able to factor in Demand Response into their investment decisions on energy efficiency or sustainable energy management initiatives ahead of time.
On the importance of continuous exchange of views…
Energy is a pillar in every country’s economy. In Singapore, we have embarked on a range of initiatives to diversify our energy sources, foster greater competition in the electricity market, enable more informed decisions on energy use, and develop capabilities for a strong energy sector.
Many such ideas have emerged from the exchange of views among energy professionals, policymakers, and industry players. Singapore has learnt much from the experiences of others. I hope that we can continue to contribute to the global discourse on energy issues through the Singapore Energy Summit that brings together thought leaders from various fields and countries to share, interact, and debate with one another.
Remarks and picture courtesy: Singapore Energy Summit 2013; www.siew.sg
