Opening Speech at 2nd Reading of the Energy Conservation (Amendment) Bill - Mr Baey Yam Keng

OPENING SPEECH BY MR BAEY YAM KENG, SENIOR PARLIAMENTARY SECRETARY FOR SUSTAINABILITY AND THE ENVIRONMENT, AT THE SECOND READING OF THE ENERGY CONSERVATION (AMENDMENT) BILL, ON 11 NOVEMBER 2024

1 Mr Speaker, I beg to move, “That the Bill be now read a Second time.”

2 The Energy Conservation (Amendment) Bill, or EC Bill in short, seeks to introduce minimum energy efficiency standards (MEES) for all existing energy systems in industrial facilities.

Singapore’s Energy Transition

3 Mr Speaker, the world is undergoing a major energy transition in the global effort to reach net zero, in order to avert the worst effects of climate change. At the first global stocktake at COP-28 last year, the international community collectively moved from setting broad-based net zero targets to taking definitive steps towards implementing decarbonisation solutions. Nearly 200 countries agreed on the need to transition away from fossil fuels in energy systems. Singapore contributed actively at the global stocktake. We supported the COP28 Presidency to achieve key outcomes such as accelerating the energy transition in this critical decade, including calling on Parties to recognise that energy efficiency improvement is a critical pathway to decarbonisation. One of the key initiatives was the Global Renewables and Energy Efficiency Pledge, which called on countries to collectively triple renewable energy capacity and double the global annual average rate of energy efficiency improvements by 2030.

4 Singapore is doing our part in this energy transition, as outlined in our “4 switches” approach, which comprises solar energy, power imports, low-carbon alternatives and natural gas. We have been accelerating green energy transition by scaling up the deployment of renewable energy projects, and achieved an installed solar capacity of 1.35 GWp – a fivefold increase from 2019. This puts us on track to meeting our solar deployment target of at least 2 GWp by 2030. Two months ago, we raised our low-carbon electricity imports target from 4 GW to around 6 GW by 2035. We are also investing in research and development activities in emerging low-carbon fuel technologies, such as hydrogen. Even as Singapore deploys more solar power, imports low-carbon electricity and develops alternative energy sources, natural gas will continue to play an important role in our energy mix. The recent launch of the Second LNG Terminal at Jurong Port will help Singapore meet the growing demand, diversify our sources and enhance our local infrastructure to support the importation of natural gas.

5 Besides these efforts, energy efficiency is also key to our drive towards sustainability, while safeguarding our energy security and ensuring cost competitiveness. As a small and open economy, Singapore imports almost all of our energy supply. This makes it doubly important that Singapore raises our energy efficiency and makes every watt of energy count. Singapore’s energy intensity is comparable to the 11th lowest among 38 OECD countries, according to the latest data from International Energy Agency. With higher energy efficiency, our companies do not have to compromise on their economic productivity even if they do not increase their energy demand. We must press on to do more with less, and to seize every opportunity to improve our energy efficiency.

Our Energy (Efficiency) Story

6 Today, Singapore drives energy efficiency through a combination of policy instruments and incentives:

7 First, the cost of electricity is not subsidised. Pricing energy correctly incentivises businesses and consumers to use electricity efficiently and avoid wasteful consumption.

8 Second, the carbon tax makes businesses internalise the cost of carbon emissions in their consumption and investment decisions. The pricing of carbon spurs companies to reduce their emissions and energy consumption in a way that makes the most economic sense to them. Carbon tax revenue is then used to support efforts to transition to a decarbonized green economy.

9 Third, incentive schemes, such as the Resource Efficiency Grant for Emissions (REG(E)) and Energy Efficiency Grant (EEG) are available to help big and small companies undertake energy efficiency improvement projects and implement energy efficient equipment, helping companies to reap energy savings and improve their bottom line.

10 Fourth, we put in place regulatory frameworks that promote energy efficiency in various sectors. For example, in the buildings sector, the Building Control Act was recently enhanced to introduce the new Mandatory Energy Improvement regime, where owners of energy-intensive buildings will be required to conduct an energy audit and implement energy efficiency improvement measures to reduce their energy consumption. To help our households become more energy efficient and reap energy cost savings, we implemented mandatory energy labels and minimum energy performance standards. Since introducing the labels and standards, the average energy efficiency of energy-intensive household equipment such as air-conditioners and refrigerators have improved by 59% and 42% respectively.

11 The Energy Conservation Act (ECA) is our regulatory tool to enhance industrial energy efficiency.

12 The ECA was enacted in 2012 to introduce mandatory energy management practices for energy-intensive industrial facilities. These are facilities with energy usage threshold exceeding 54 terajoules in 2 out of the 3 preceding calendar years. Presently, there are 237 of such facilities, covering about 80% of Singapore’s primary energy consumption.

13 The ECA was then enhanced in 2017 to strengthen energy management practices and introduce minimum energy efficiency standards (MEES) for industry systems.

14 Today, the ECA covers every stage of an industrial facility’s life, including design and initiation, operations and maintenance, as well as any subsequent expansion plans. Companies are required to review their energy performance from the onset, meet specific energy efficiency requirements for systems and equipment, report their energy performances, and continually explore opportunities to enhance energy efficiency.

15 Since the introduction of ECA in 2012, the industry has achieved an average energy savings of about 2,800 terajoules per year, which is enough to power approximately 175,000 HDB 4-room flats, equivalent to about $230 million of cost savings per year.

Intention of the Bill

16 Mr Speaker, the EC Bill will build on these efforts and help us push ahead to improve energy efficiency in the decades ahead. The EC Bill will require all existing industrial facilities to comply with stipulated MEES for energy-consuming industry systems.

Minimum Energy Efficiency Standards (MEES)

17 In enhancing the ECA in 2017, section 26B was introduced to stipulate MEES for energy-consuming industry systems. These MEES sought to target energy efficiency improvements at the system level, as opposed to the equipment-level. This encourages companies to take a holistic approach in optimising and improving the energy efficiency across their system as a whole, which will result in greater energy savings. To ensure that the standards prescribed are commercially sensible for businesses, NEA also considers the payback period of these energy efficient technologies, and provides industry with ample lead time before the MEES requirements kick in. The detailed MEES requirements for chilled water system were developed after close consultation with the industry in 2018.

18 NEA announced the MEES for chilled water systems in December 2019. Based on data reported by companies under the ECA, chilled water systems, which are commonly used by industrial facilities for process or space cooling, account for approximately 16% of electricity consumed in industrial facilities. This makes chilled water systems the highest electricity-consuming common system in the industry. Based on 2016 energy use reported by companies regulated under the ECA, over 70% of these systems were found to be operating at sub-optimal energy efficiency levels. The MEES for chilled water systems was then set as the energy efficiency benchmark for industry, and provides guidance for industrial facilities on how to optimise their systems to achieve higher energy efficiency and cost savings.

19 We implemented the first phase of MEES for chilled water systems, by requiring new industrial facilities operational on or after 1 December 2020 to conform to MEES. Incorporating energy-efficient chilled water systems from the outset reduces the environmental impact of operating a less efficient system throughout its lifespan. In addition, this allows facility owners to reap substantial cost savings. One example is Soitec Microelectronics Singapore, a wafer and semiconductor manufacturing company that has installed an energy efficient chilled water system in their new building in 2022. This has helped Soitec Microelectronics save about S$320,000 per year from lower energy use, and reduced its carbon emissions by 400 tonnes of CO2 equivalence annually. The requirement also helps new facilities avoid more expensive retrofitting and operational disruption, if they upgrade to more energy efficient models down the road.

20 We are now ready to implement the second phase of MEES for chilled water systems, by applying the requirements to existing energy-intensive industrial facilities, which account for about 80% of Singapore’s primary energy consumption. They will need to conform to MEES by 1 December 2025. All remaining industrial facilities, which are less energy-intensive and not currently regulated under the ECA, will have a longer runway to conform by 1 December 2029 under phase three. By then, the chilled water systems installed in existing industrial facilities prior to the announcement in 2019 would be at least 10 years old. It would make economic sense to switch to more energy efficient types since it will reach the system’s end of life in a few years’ time. It would be timely for the facility owners to carry out retrofit works to enhance their chilled water system to comply with MEES.

21 I am heartened that many of the existing facilities have seized the opportunity to meet MEES ahead of the compliance timeline of the second phase. Stats Chippac Pte Ltd, a semiconductor manufacturing company, is one such example. Stats Chippac saw the benefits that could be gained from the MEES requirements and has tapped on the REG(E) to upgrade its chilled water system. The upgrade has improved the energy performance of the chilled water system by 25%, resulting in cost savings of around S$1.5 million per year from lower energy use. The payback period for its investment was just 5 years, after factoring in the grant received, which is well within the 15 years lifespan of chilled water systems. That meant Stats Chippac stands to save over $15 million in total, by upgrading to a MEES-compliant chilled water system.

22 To help the industry offset the capital cost of retrofitting their chilled water system, companies can tap on existing Government schemes such as the REG(E) and the EEG, before the mandatory requirements kick in. Large manufacturing companies can apply for Economic Development Board (EDB)’s Resource Efficiency Grant for Emissions (REG(E)) to adopt energy efficient equipment or technologies including retrofitting their chilled water system. Small and Medium-sized Enterprises (SMEs) can tap on the EEG funds to offset the cost of complying with MEES for their chilled water system. They will receive a higher tier of support of up to 70%, capped at $350,000 under the EEG Advanced Tier.

23 Overall, the MEES for chilled water systems is estimated to help reduce energy consumption in industrial facilities by at least 245 GWh annually, equivalent to taking more than 21,000 cars off the road. The proposed amendments will also allow us to extend the MEES framework to existing ECA facilities for other energy-consuming systems, which are currently under review. NEA will continue to adopt the consultative approach that was used to develop MEES for chilled water systems. We look forward to continuing the partnership with the industry to jointly unlock more opportunities to improve energy efficiency, and reap energy and cost savings.

Other Amendments

24 The Bill will also introduce two other housekeeping amendments to the existing ECA requirements:

25 One, development works under the URA Plan Lodgment scheme will be required to meet our Energy Efficiency Opportunities Assessment (EEOA) requirements. This is to ensure that such development works are held to the same requirements as other new industrial facilities. Requiring Plan Lodgment cases to undergo EEOA at the planning stage helps to ensure that they are energy efficient from the onset. This allows them to enjoy more energy cost savings in the long run, and avoid costly retrofitting works in the future. To effect this, the requirement for development works to meet the EEOA in section 26A of the ECA will be expanded to include URA Plan Lodgment scheme cases.

26 Two, this Bill will lay the groundwork to require certified energy managers to endorse the Energy Management System and EEOA reports, to improve the overall quality of the reports.

Conclusion

27 Mr Speaker, to conclude, the EC Bill will ensure that our energy efficiency remains the cornerstone for the sustainable future of our industry. Enhancing industrial energy efficiency is a win-win solution for both businesses and Singapore. Using less energy to do more will go a long way to reduce business costs, power up Singapore’s energy security, and help us meet our climate ambitions.

28 With that, Sir, I beg to move.