FUEL PRICE AND ALTERNATIVE FUEL SOURCE

FUEL PRICE AND ALTERNATIVE FUEL SOURCE

25.

Mr Steve Chia Kiah Hong asked the Minister for Trade and Industry, considering the rising price of crude oil, if Singapore has started exploring into alternative sources of fuel and, if so, what is our success thus far.

Mr Lim Hng Kiang: The rising price of crude oil will have an impact on our economy, especially for the transport sector and power generation.

An increase in crude oil prices will put upward pressure on petrol pump prices. So far, increases in petrol pump prices have been moderated by domestic competition between petrol pump operators. Premium petrol prices increased by 2.9% in April 2005 compared to a year ago. For commercial vehicles and buses that run on diesel, the cost increase has been more significant, as diesel prices have risen by 31% over the past year (from $0.67 per litre in April 2004 to $0.88 per litre in April 2005).

For the power sector, 35% of electricity is generated from steam plants that use fuel oil, and 65% from plants that use natural gas. Natural gas price is also indexed to fuel oil price. From April 2004 to April 2005, power generation companies faced an increase of about 15% in the cost of fuel. Fuel costs account for about 50% of electricity tariffs. Through competition, electricity tariffs have only increased by 1.7% over the same period. However, with rising fuel oil price, it would be unrealistic to expect tariffs to remain at the current level.

With today's technology, using gas turbines for power generation is still the most cost effective solution in Singapore. Some research is being done on the viability of solar energy, in the form of photovoltaic cells; but at current technology levels, this will cost about five times as much in electricity tariffs.

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If there are cheaper technology solutions, the electricity market is designed to allow power generation companies to adopt them. These companies will have an incentive to do so, as it will help them to better compete for market share. By remaining open to new technologies and investors with new electricity generation methods, we can ensure a competitive market that will adopt the most cost-effective fuel solution. This will translate to lower electricity tariffs.

In this period of high oil prices, it becomes all the more important that we adopt good energy conservation practices. Industries should consider conducting energy audits and implementing energy conservation measures. The National Environment Agency recently launched an Energy Efficiency Improvement Assistance Scheme (EASE), which companies can tap on to engage expert consultants to audit their energy consumption and recommend measures to save energy. Consumers should also be more conscious about using energy-efficient electrical appliances. This include opting for energy-labelled air- conditioners and refrigerators, energy-saving lights, choosing the correct capacity of air-conditioner and refrigerator, and enabling "energy-saver" modes in their computers. More information on energy conservation practices at home is available from the National Energy Efficiency Committee website.

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