The Economic Strategies Committee has put forth recommendations on Singapore being a Smart Energy Economy.
As electricity is a modern necessity, it is of paramount importance that it is reliable, pollution-free and affordable.
As regards reliability, the ESC recommends that in the medium term, Singapore consider importing coal and electricity to diversify our energy sources, so as to free up land in Singapore. I would like clarification on the pros and cons of relying on imports and thus becoming less self-reliant for our energy needs. Which are the countries we are likely to import electricity from? Will there be additional risks to our energy security?
What are the infrastructure investments we need to put in place to enable this? Will these investments lead to higher electricity prices? Are we expecting imported electricity to be more or less expensive than that generated in Singapore?
As regards coal, are we taking a step backwards on the environment when other countries are moving away from it due to such concerns?
As for pricing, the ESC notes that economic fundamentals will mean that electricity prices will trend upwards. It further recommends pricing energy to reflect real costs and constraints, with suggestions of a carbon pricing scheme.
From the point of view of consumers, such a scheme sounds ominous, even with the offsets to help ‘buffer the transition’ for the low income.
While offsets to low-income households will be useful while it lasts, an additional idea is to have a tiered system of pricing electricity in favour of small consumers. The fundamental idea is for a threshold level of power consumption by households to be determined. Households consuming less than the threshold level will enjoy a low tariff charge. With increasing consumption levels, the tariff escalates. The higher tariff collected in the upper tiers can be used for 2 purposes: to cross-subsidize the first tier tariff, and to encourage all households not to over-consume electricity.
Many countries, including New Zealand, Canada, Hong Kong and the U.S. implement variations of this idea to protect small consumers. Some governments require electricity retailers by law to provide a low tariff charge for small consumers.
I note that MTI’s plan is to open up the market for electricity supply to households among several retailers. The government can include a requirement for retailers to provide a low tariff charge option for small consumers.
(Note: this speech was delivered in Parliament on 8 Mar 2010.)
