Opening Address by Assoc Prof Koo Tsai Kee
Senior Parliamentary Secretary
Ministry of National Development

At the Conference-cum-Workshop on "PROFITING FROM EFFICIENT ENERGY MANAGEMENT"
at Grand Hyatt Hotel 7 November 2001, 9.00 AM.

Distinguished Guests,

Ladies and Gentlemen,

I am pleased to be here this morning at the opening ceremony of this conference-cum workshop "Profiting From Efficient Energy Management".

Energy Efficiency and Environmental Protection

Singapore is a small city-state with hardly any natural resources. We are totally dependant on imported fuels to provide all our energy needs. We have to use this energy efficiently not only for competitive reasons, but also to conserve natural resources and minimise the emission of air pollutants and carbon dioxide, a greenhouse gas that causes global warming. We have, therefore, adopted the promotion of energy efficiency and the use of cleaner sources of energy as our national agenda. We have also progressed from viewing energy efficiency improvements purely as an issue relating to costs and competitiveness to one of sustainable development.

Energy efficiency improvements and environmental protection both involve the efficient use of resources, which is key to sustainable development. By improving energy efficiency and using clean energy sources, we not only will minimise emissions of air pollutants, but also enhance the competitiveness and profitability of businesses by reducing the direct energy and material costs.

What is Energy Efficiency?

What is energy efficiency? Energy efficiency means the relationship between the output or service level of a device or a system and the energy that is put into it. Improving energy efficiency is, therefore, doing more with equal or less energy input. Energy efficiency is thus often called a 'no-regrets' policy as organisations reap benefits following this approach.

However, when discussing energy efficiency improvements, it is important to be clear about the difference between what is technologically feasible and the real world of energy suppliers, businesses and consumers. At the national level, we should also consider the societal effects from energy efficiency improvements. Allow me to elaborate on these viewpoints.

Technological Approach

When we consider energy efficiency improvements from the technological angle, we are looking at the achievable savings that result from the maximum energy efficiency improvement available at a given time, regardless of cost considerations. The quandary we face is that nearly all devices and systems are less energy efficient than their theoretical maximal. There is always potential for improvement. Thus, few things are truly energy efficient. A device or system can only be more or less energy efficient than the alternatives at a given time and in a given situation.

But conditions change. Innovation produces improved devices and systems, technology breakthroughs lead to new energy sources, prices fluctuate and government policies and programmes change. Today's efficient device is rarely tomorrow's.

Economic Potential Approach

If we consider the economic potential for energy efficiency improvements, we find that it depends largely on the discount rate used. The problem here is that different discount rates are used by different market entities.

Instead of trying to determine the single, most appropriate discount rate to use to optimise efficiency, a better strategy in policy-making would be to understand how these differences are played out in the marketplace.

Market Potential Approach

This leads to the third approach - that of assessing the savings that can actually be realised in practice, which is the market potential. It reflects what is seen to be technically and financially viable by independent individuals and organisations.

The market potential and cost-effectiveness of an efficiency measure depends on which costs and benefits are considered. For example, from a business perspective, the only relevant costs and benefits are those that affect the bottom line. Costs include the expenditures for equipment, engineering and installation as well as charges for production downtime. The benefits include energy cost savings, plus enhanced labour productivity, environmental compliance or product quality.

To individual consumers, on the other hand, product characteristics are often more important. As energy efficiency is often a minor consideration in their purchasing choices, its costs would have to be paid back at a rapid rate.

Societal Potential Approach

Finally, we should also approach the issue by asking how efficiency savings can be had with a net positive economic effect to society as a whole - the societal potential. Here, various economic actors are included and externalities taken into consideration. An example would be societal investment in energy efficiency to reduce electricity demand growth when this is less expensive than say building a new power plant.

From a national viewpoint, there is a wider range of relevant costs and benefits. These include monetary, health, and environmental costs and benefits that accrue to society.

Certain societal benefits, such as reduced air pollution are external to the market and are difficult to quantify. Moreover, they accrue to society at large, not to the particular unit implementing the efficiency measure.

This wider definition of cost-effectiveness is the more important measure for government policy aimed at energy use and environmental quality.

The Grand Hyatt Hotel Experience

On this note, I would like to congratulate the management of Grand Hyatt Hotel for its exemplary energy management programme that has translated into real dollar savings. Hyatt has taken a long-term approach to energy management and invested in a new state-of-the-art energy efficient air-conditioning system that has not just reduced its energy costs substantially but also resulted in significant other benefits. These include the freeing of floor space, improved customer comfort, plant reliability and maintainability, improved working conditions for its staff and enhanced skills and productivity. Overall, a highly commendable project.

What is equally significant to me is that Hyatt has also expressed its intention to share the information it has gathered in this project in a transparent way. This will, I am sure, inspire other hotel and building owners to undertake similar projects in energy efficiency. I strongly urge you to review the material and Hyatt's accomplishment so that you can benefit and profit from the experience.

Concluding Remarks

Energy efficiency competes with other issues for limited resources within a company. As more businesses begin to realise the profitability of resource efficiency, it will grow in importance as a strategy to stay competitive and maximise shareholder value.

I would like to congratulate the Singapore Association for Environmental, Occupational Health and Safety Companies and the Energy Market Authority for organising this conference cum workshop, and the support given by the Ministry of the Environment and the National Energy Efficiency Committee. I would also like to wish all participants a fruitful and rewarding conference over the next two days. I hope this conference will mark the beginning of many energy efficiency projects and initiatives in the future.

Thank you.