Knowledge Highlights 25 November 2021
On 2 November 2021, the Energy (Resilience Measures and Miscellaneous Amendments) Bill (“Bill”) was passed in Parliament. This Bill seeks to amend the Energy Market Authority of Singapore Act (“EMA Act”), the Electricity Act and the Gas Act to:
- Safeguard energy security (in particular, the reliability, availability and continuity of the supply of electricity) by enabling the Energy Market Authority (“EMA”) to, among other things, construct, acquire and manage electricity infrastructure required for the generation, import or export of electricity;
- Enhance protection of critical electricity and gas infrastructure;
- Enable EMA to implement policies to reduce greenhouse gas emissions in the generation, transmission, import, export or supply of electricity; and
- Make various technical amendments.
The Bill also makes related amendments to the District Cooling Act.
The Ministry of Trade and Industry (“MTI”) and EMA released a summary of the key feedback received from the public consultation of the draft Bill and their responses thereto. The public consultation was conducted between 27 August 2021 and 20 September 2021.
The feedback received related mainly to the following key proposals in the Bill empowering EMA to:
- Acquire, build, own, and operate critical infrastructure; and
- Impose requirements on licensees to reduce greenhouse gas emissions.
An overview of the key amendments from the Bill as highlighted by Second Minister for Trade and Industry, Tan See Leng (“Minister”), at the Second Reading of the Bill, and the feedback received and MTI and EMA’s responses thereto are set out below.
Safeguard energy security and reliability
To ensure that Singapore has a safe, secure, and reliable supply of electricity, the first key amendment amends section 3 of the Electricity Act and the Second Schedule of the EMA Act, to empower EMA to acquire, build, own and/or operate critical infrastructure, e.g. generating units, energy storage solutions and transmission infrastructure, including those that may be required for cross-border electricity trading. The Bill also expands EMA’s borrowing powers in the EMA Act to allow EMA to issue bonds, in addition to borrowing through commercial or Government loans, to finance the construction of these critical infrastructure.
Currently, the private sector is relied on to provide sufficient generation capacity and the critical infrastructure needed for energy security and system stability. However, the global energy transition introduces various risks and uncertainties in energy markets. There is uncertainty as to when new energy solutions such as hydrogen and carbon capture, utilisation and storage may become cost-viable for large-scale deployment, and whether and how natural gas may feature in the future global energy mix.
As such uncertainties may inhibit private investments, the Bill gives EMA the option to step in and provide the critical infrastructure and services needed to ensure the proper functioning of the energy sector.
Some respondents to the public consultation supported giving EMA this option as this would allow EMA to safeguard the reliability of Singapore’s power system. However, other respondents were concerned that EMA would act as both regulator and owner/operator of the generation units, and these units would compete with existing units in the Singapore Wholesale Electricity Market and depress wholesale electricity prices.
In response, MTI and EMA explained that as part of the energy transition, enabling EMA to build, own and operate critical electricity infrastructure will become increasingly important in safeguarding the security and reliability of Singapore’s electricity supply, this being critical to Singapore’s survival. MTI and EMA also reiterated their commitment to ensuring a competitive wholesale electricity market and stated that proper governance structures will be put in place to ensure fair competition and mitigate any potential conflicts of interests.
The Minister also stated that the Government’s preference is for the private sector to build, own, and operate the electricity infrastructure and that EMA would explore alternative solutions to provide the critical infrastructure needed before exercising such a power.
EMA will be engaging the industry further on the details.
Enhance protection of critical electricity and gas infrastructure
To enhance protection of critical electricity and gas infrastructure, the second key amendment updates the Electricity Act and the Gas Act and makes it an offence to damage any infrastructure housing or intended to house any transmission electricity cables, gas transmission pipeline, or submarine gas pipeline in the territorial waters of Singapore.
Currently, the Electricity Act and the Gas Act only penalise offenders who damage actual cables and pipelines. As the infrastructure housing these cables are an important part of the transmission network, the Bill expands the scope of the offences in these sections to cover such protective infrastructure as well. The offences carry the same penalties as those for damaging the actual cables and pipelines.
Enhance carbon efficiency of parties licensed under Electricity Act
The third key amendment empowers EMA to enhance the carbon efficiency of parties licensed under the Electricity Act. The Bill expands EMA’s regulatory functions under the Electricity Act to include implementing policies and strategies connected with the reduction of greenhouse gas emissions in the import, export, generation, transmission, or supply of electricity. These policies and strategies may be imposed on licensees through Codes of Practices. This amendment will also complement ongoing economy-wide initiatives to lower carbon emissions, such as carbon taxes, to transition the power sector towards low-carbon generation sources.
While the majority of the respondents to the public consultation recognised the necessity to impose requirements on licensees to reduce greenhouse gas emissions to facilitate the decarbonisation of electricity generation, MTI and EMA received suggestions that the standards should only be imposed on new generation units. Some respondents also suggested that it was sufficient to rely on existing carbon taxes to incentivise the reduction of carbon emissions in the power sector.
While MTI and EMA recognise the role of carbon tax in incentivising emitters to lower emissions, it is explained that the proposed clause will allow EMA to develop further targeted measures to transition the sector to low-carbon generation sources and reduce the sector’s emissions.
As low-carbon technology matures and becomes more cost-competitive, Minister Tan stated that it is timely and necessary for the sector to move beyond incentives and grants, and to empower EMA to regulate on this front. EMA will work with the industry to develop reasonable standards and provide a transition period for existing generation units as needed.
The Bill also makes several miscellaneous amendments to the Electricity Act, the Gas Act, and the EMA Act, and related amendments to the District Cooling Act, including streamlining the licence application and extension process for all electricity and gas licensees, clarifying the prudential obligations of specified licensees in the event of an insolvency situation, clarifying inspection obligations in connection with gas installations, and updating key terms and definitions in the Electricity Act.
- Energy (Resilience Measures and Miscellaneous Amendments) Bill
- Feedback received for the Energy (Resilience Measures and Miscellaneous Amendments) Bill
- Speech by Second Minister for Trade and Industry, Tan See Leng, at the Second Reading of the Energy (Resilience Measures and Miscellaneous Amendments) Bill
- Round Up Speech by Second Minister for Trade and Industry, Tan See Leng at the Second Reading of the Energy (Resilience Measures and Miscellaneous Amendments) Bill