My speech on the Energy Conservation Act on 9 April 2012 in Parliament.
As an industrialised economy which consumes its fair share of energy, Singapore must play its part to reduce its carbon footprint and combat climate change. One way of doing this is to be more efficient in the use of our limited energy resources. Doing so is not only environmentally friendly, but is also economically beneficial to our companies.
The introduction of the Energy Conservation Bill (or EC) is a welcome development to signal our nation’s commitment to improving energy efficiency.
The key objectives of the Bill are to give the practice of energy management greater focus within companies that are large energy consumers, and to build industry capability in energy management. This is expected to help reduce Singapore’s energy intensity by 35% by 2030, from 2005 levels. Improving the energy performance of companies will make them more competitive in the global economy. The Bill is also expected to complement existing schemes and capability building programmes which provide support for companies that invest in improving their energy efficiency.
Energy intensity targets
I would like to ask the Minister how the Government arrived at its 35% target for reduction in energy intensity. Is this meant to be a stretch target that will need measures like the EC in order to achieve, or is this likely to be achievable with the improvements in technology expected over the next 20 years, even without an EC?
South Korea aims to cut its energy intensity by 46% between 2007 and 2030. Both our countries are highly industrialised economies, that are dependent on external sources of energy. Both are large energy consumers. Why are we not being as ambitious as the South Koreans?
The Bill establishes the framework for the energy labelling of certain “registrable” goods. Energy labelling is currently targeted at only household electrical appliances. Only refrigerators, air-conditioners and clothes dryers now require energy labels to be affixed on them.
I would like to suggest that energy labelling would be a more effective tool to achieve energy conservation, if it were expanded beyond household appliances to equipment used by industry and businesses. This is because the industrial, commerce and services sectors consume 71.9% of all electricity in Singapore, while households consume only 16.7% .
Common business machines such as computers, monitors, printers and photocopiers should be gazetted as registrable goods. The energy efficiency rating of these machines could then be better integrated into the energy management systems of companies.
For example, as part of its energy efficiency improvement plan, a company could aim to increase its proportion of energy efficient computers by, say, 25% within 5 years.
Energy Efficiency Certification
The proposed regulations will require companies that consume more than 15 gigawatt hours (GWh) of energy annually to maintain an energy management system. These include keeping records and reporting on their energy use, submitting energy efficiency improvement plans to the Government, and appointing a qualified energy manager.
However, the vast majority of companies will not come under the radar of the EC, and hence will not be required to implement these energy management systems.
Could the Government consider drawing up an “Energy Efficiency Certification” scheme under which all Singapore companies can voluntarily apply to be assessed on their energy efficiency practices?
The Energy Efficiency Certification could complement the existing Energy Efficiency Improvement Assistance Scheme (or EASe) by providing an incentive for companies to follow through the energy services company’s suggestions for improvement. They will also have an added incentive to apply for EASe, as they can get rewarded if the appraisal is positive. I will explain more about possible tax incentives later.
This Energy Efficiency Certification scheme would be similar in structure to the People Developer (PD) Certification scheme, which is used to assess a company’s training management practices. Like the PD Certification, companies attaining the Energy Efficiency Certification could be given public recognition of their excellent energy management practices.
This could help create a culture of good energy management practices throughout companies in Singapore, and not just a few large energy consumers. Would the Minister agree that the more companies that implement programmes to improve their energy efficiency, the greater the cumulative benefits to the nation’s economy?
Tax incentives and tiered tariffs
Since improving energy efficiency will reduce companies’ electricity bills and hence improve their profitability, it should be in their business interest to improve energy efficiency. We need to make it even greater business sense for them to do so.
I would like to build on the Hon. Member Mr Yee Jenn Jong’s suggestion for tax incentives to be extended to companies which adopt good energy management practices.
The EC requires registrable corporations to submit their energy efficiency improvement plans and targets, but makes no requirement for them to achieve their targets.
Firstly, I would like to propose that tax rebates be extended to companies which achieve their energy efficiency improvement targets.
Secondly, if the Energy Efficiency Certification scheme, which I suggested earlier, is introduced, then companies which attain the Certification could also be given tax rebates as an incentive.
Thirdly, disincentives could be introduced for companies which use electricity inefficiently and hence consume more.
Currently, large energy consumers already enjoy several benefits which smaller consumers and households do not. These include contestability of their electricity suppliers, lower electricity tariffs and much lower off-peak period tariffs. In short, there are currently limited financial disincentives for them to reduce their electricity use.
I would like to add to a suggestion made in this House in 2008 by the Hon. Member, Ms Sylvia Lim, to introduce tiered electricity tariffs, such that those who consume more electricity pay for additional units at a higher rate. Ms Lim’s suggestion is even more relevant today, given the push for energy conservation.
Introducing tiered tariffs could result in large energy consumers paying a higher bill, and smaller consumers paying less, while remaining revenue-neutral overall.
This price mechanism will impact large energy consumers the most. It will therefore force them to innovate and improve their energy efficiency, in ways that an energy management framework alone cannot.
In summary Sir, I support the introduction of the energy management framework in the EC. I have proposed that this could be complemented by:
Firstly, tax incentives for companies which meet their energy efficiency improvement targets;
Secondly, disincentives for high usage of electricity, like a higher tariff for large users;
Thirdly, an Energy Efficiency Certification scheme that extends to all companies, not just the biggest energy consumers;
Fourthly, energy labelling of business equipment; and
Lastly, aligning energy labelling with companies’ energy management systems.
If these complementary measures are in place, I believe Singapore can aim for a more aggressive reduction in our energy intensity over the next 20 years.
More importantly, these measures will contribute towards creating a stronger culture of energy efficiency in Singapore and encourage companies large and small to innovate and invest in this area. This will improve these companies’ economic competitiveness, while at the same time preserving our environment for generations to come.