Mr Speaker,
I will focus my speech today on the creation of the Future Energy Fund. The Future Energy Fund is a key piece of our strategy in securing our energy future and meeting our 2050 net zero objective, and we support its creation. The Fund is meant to catalyse the development of clean energy infrastructure in the region, through the development of infrastructure necessary for low-carbon projects that typically face high upfront capital expenditures and commercial or geopolitical risks. My speech today would cover three areas: (1) the mechanics of the fund, (2) Accountability and (3) the Energy Environment.
Implementation refers to details around fund management, investment criteria and how the Fund’s mandate links to our broader energy and climate goals. Accountability refers to clarity on stakeholders who are responsible for the Fund’s performance and how to benchmark the effectiveness of the Fund. Lastly, our Energy Environment refers to wider trends that affect the decarbonisation of our energy mix.
The Fund will be established at the end of this year with an initial injection of S$5 billion. After taking into account due diligence time frames, the first investments through the Fund should be made next year. This gives a 10-year time frame to achieve our 2035 goal for renewable energy to contribute 30% of our energy mix. 30% is a significant ramp up and will be predominantly driven by our target to add 6GW of low-carbon imports, given that the current proportion stands at approximately 1.3%. Therefore, we would need an exponential increase in renewables between just 2030 to 2035 alone.
Implementation
I have some clarifications relating to the implementation of the Fund. As with most capital-intensive infrastructure projects, – particularly for energy projects – commissioning times before such projects even begin yielding outcomes play a critical role. In a 2024 study on renewable energy project commissioning times globally funded by the European Union’s Horizon 2020 Research and Innovation Programme under the European Research Council, commissioning times across renewable technologies and regions have increased on average between 2015 and 2022. The same paper called for more policy interventions to address this increase in times, ranging from insulating projects from fiscal shocks to standardising legal processes surrounding projects.
Given also that target projects supported by the Fund can include nascent technologies – these being one of the factors that increases commissioning time – how does the Government plan to use the Fund to address potentially lengthy commissioning times, and how does it see the efficacy of using the Fund to meet our 2035 target?
Also on the mechanics of the Fund, I note that the proposed new section 19A(1a) uses the wording “any low-carbon energy project or energy supply security project”. Does this mean that the Fund could hypothetically support a new-build fossil fuel project in the name of energy security? Would any project qualify as long as it meets the criteria of being “necessitated by any low-carbon energy project” as described in s 19A(6). I note that “power back-up” is explicitly given as an example in s 19(6b), but could this also mean support for fossil fuel power stations providing baseload power? What are the scenarios where the Fund would support fossil fuel power for non-back-up use? Would the Minister confirm that the Fund will not be used to rely on fossil fuels as a crutch, especially if it means we are stuck with using this crutch in the long term.
A query I have is what happens if projects are terminated early. In the case of the 100MW Lao-Thailand-Malaysia-Singapore (LTMS) Project, it was reported that the deal is currently on pause over government-level disagreements. What happens if assets supported by the Fund are stranded due to project failures or pauses?
Accountability
Next, on accountability. As we work towards these national energy goals, accountability allows us to equip accountable stakeholders with commensurate mandates and authority to see through the successful implementation of these targets. We fall short of targets when lines of accountability are unclear or if our strategic approach is flawed.
We need to learn from our experiences in the arena of food security – specifically the difficulties faced in achieving our 30 by 30 goal – in working to achieve our goal for energy security in the coming decade and beyond.
We can also learn from the failures of investing in unproven technologies, as was the case in the United States. The 2009 American Recovery and Reinvestment Act (ARRA) offered US$3.4 billion for the research and development of Carbon Capture and Sequestration projects. A case study of 11 demonstration projects selected by the US Department of Energy resulted in only 2 continuing to remain operational. A further 5 commercial projects saw only 1 reaching operational implementation, which eventually closed within 4 years. In this example, the failure of capital deployed can be attributed to the lack of financial viability of a range of carbon capture technologies, a risk that cannot be overlooked when dealing with nascent technologies.
In view of this, I have some clarifications for the Minister.
Funds typically appoint a designated fund manager or have a general partner responsible for evaluating projects, investment decisions and the overall management of fund operations. Which agency will be the fund manager for the Future Energy Fund? On a broader level, which ministry or agency holds ultimate accountability for our target energy mix and transition to 30% renewable sources by 2035?
On an explicit strategic approach and fund objectives, what does success for the Fund look like? How will its efficacy be measured? Given that our country’s energy security and transition is fundamentally critical to our survival, how will this translate into the Fund balancing between the need for financial return versus the long-term strategic cost necessary for such a transition? Can the Minister clarify what are the KPIs for the fund? Aside from supporting the 2035 target for 6GW target for low-carbon imports which will provide 30% of Singapore’s electricity supply. Will the impact on the grid emission factor, which calculates the actual climate impact of the changes, be a KPI?
Energy Environment and Maximising the Fund’s Impact
Moving to more general points about our energy environment and maximising the climate impact of the Fund.
As we ramp up toward transitioning our energy mix, our energy demand has been growing consistently. Electricity consumption increased by 2.6% between 2021 and 2022, part of a long-term trend of consumption, having increased by nearly 25% over a ten-year period between 2012 to 2022. Our industrial sector currently contributes 55% of total energy demand. With industrial usage set for significant growth, especially from energy-intensive use cases such as data centres necessitated by the growth of artificial intelligence applications, it is likely that total energy demand will grow more.
While we may be able to achieve our target of 30% renewables, the wider challenge remains. We are already seeing power-hungry AI applications drive outsized demand for energy just to keep data centres running. Given our AI ambitions, we have been looking for “clean” sources in the region to meet demand, including solar farms in Australia and wind or hydropower sources from our ASEAN neighbours – Malaysia, Vietnam, Laos for instance.
However, what happens when our ASEAN neighbours start requiring a significant amount of renewables to power their own transition and development? What too, do we do if geopolitical conflict results in energy supply lines being cut – such as was the case with the Nord Stream natural gas pipelines?
Our regulations and policies are also important in boosting Singapore’s energy security, which in turn will affect our geopolitical risk tolerance with electricity imports. For instance, the Energy Market Authority introduced rules requiring all new and repowered natural gas power plants to be at least 30% hydrogen-compatible from this year and the few power plants coming up in the next few years are hydrogen-compatible. But with an economic lifespan of around 25 years, is there a timeline for these power plants to run on green zero-emission hydrogen? If these fossil fuel plants are unable to meet net-zero power, will they be retired early to make way for low-carbon imports?
And in terms of domestic consumption, unlike electricity generated overseas, we have physical control over our electricity consumption. Ultimately, the drive for successfully transitioning our energy sources and decarbonisation will require us to not just pay attention to supply, but also demand. We cannot neglect to continue to raise awareness of energy conservation and wider sustainability concerns, and both industry and households have to continue to work towards keeping our energy use in check. For this, we would like to repeat our calls made since 2016 for Singapore to work towards solar panels being mandatory on commercial and residential buildings except in special cases. This would not only cut emissions and electricity costs, but will also provide some options in our energy security.
Thank you.