AVOIDING OVER-CONSUMPTION: 'Our basic policy tenet is that energy costs should be borne in full by end-users. We do not subsidise the cost of energy because it will dampen price signals and create the incentive to over-consume.' -- MINISTER OF STATE S. ISWARAN

However, it is setting aside $20 million for a Solar Capability Scheme.

The fund will offset part of the cost of installing solar panels in new, green buildings. The Economic Development Board will release more details soon.

Mr Iswaran was responding to Nominated MPs Edwin Khew and Eunice Olsen, who suggested subsidising solar power, which is costlier than energy from more pollutive sources such as fossil fuels.

'Our basic policy tenet,' MrIswaran said, 'is that energy costs should be borne in full by end-users. We do not subsidise the cost of energy because it will dampen price signals and create the incentive to over-consume.'

He added that the Government should be consistent and not subsidise a specific type of renewable energy.

Otherwise, questions would be raised about why it subsidised solar power but not bioenergy, or why it provided subsidies for energy but not other goods.

It is thus better for the Government to invest in research and development to develop technologies that will lower the cost of generating alternative energy, MrIswaran said.

There would then be no need to talk about subsidies.

Subsidies are also not sustainable in the long run, he said, noting that the Government has instead encouraged competition to put downward pressure on prices.

And consumers have benefited, he said.

To back his point, he observed that the price of fuel oil has doubled since 2001, but the electricity tariff for households has gone up by only 14 per cent, even though fuel makes up 55 per cent of the cost of electricity generation.

Households will also gain when the gas market is further liberalised.

Mr Iswaran noted the tensions and trade-offs between energy security, economic competitiveness and environmental sustainability, but stressed that economic growth is the best response to the current uncertain global energy outlook.

With growth, Singapore will have the resources to secure its energy supply, keep the environment clean and find new solutions.

The Government is also diversifying its sources of energy, such as by importing liquefied natural gas.

It has set up an International Advisory Panel on Energy comprising thought leaders, eminent individuals and energy experts from around the world.

To be chaired by Mr Iswaran, the panel will meet for the first time in November as part of the first International Energy Week here.

ZAKIR HUSSAIN