Energy Forum 15

Energy Forum 15

24 July, 2013
Civic Exchange
Shaping our Energy Policy: Guangdong and Hong Kong in the Mix

Hong Kong finds itself in a unique situation in that we have very few options concerning energy security, meaning that we do not have any local primary sources of energy. All of our primary energy (unconverted raw fuels) resources are imported, therefore all coal, oil, and gas we use in thermal processes to create electricity originates from foreign sources. On top this, we also purchase electricity directly from Guangdong through a lease agreement overseen by China Light and Power (CLP) from the Daya nuclear bay power plant. Thus, we are reliant on China as a source of both primary energy and end-use electrical supply. If we then consider Hong Kong's growing population and energy demand, combined with issues such as global warming and air pollution, without accurate policy implementation and strategic long-term focus, the region’s energy situation may become increasingly complex.

On July 6th the Civic Exchange hosted the 15th Energy Forum, entitled “Shaping our Energy Policy: Guangdong and Hong Kong in the mix” to discuss this situation. In attendance were over 80 participants from various sectors that had the opportunity to both listen and engage with a number of key speakers and panelists with regards to their expertise on the region’s energy outlook and relationship with Guangdong.

Dr. Yuan Xu of the Chinese University of Hong Kong was the first to speak and gave insight into Guangdong's energy outlook with regards to national and provincial development policies, energy options and Guangdong's energy relationship with Hong Kong. He highlighted that coal dominates the energy mix in China, which is not surprising giving its low-cost and abundant supply. 72% of China's energy mix is supplied by coal thermal processes with the remaining energy mix owing to petroleum, natural gas, hydropower, and nuclear. However, just under half of Guangdong's energy mix (48%) is powered from coal sources, significantly less than the nation average due to greater natural gas, nuclear and hydropower production in the province. He noted the main task China faces is continuing to supply its nation’s insatiable energy appetite in a way that is more sustainable and considers the effects of global warming and climate change. Clearly, a move to lower dependency on coal is needed, however other energy options have their environmental implications too; particularly the processes of fracking to acquire natural gas, hydrological consequences of constructing additional dams as well as the risks of nuclear energy.

Professor Johnny Chan from the City University of Hong Kong then addressed the important issue of Hong Kong's energy policy, in which he clearly stated that Hong Kong does not have a “structured, cohesive energy policy – only energy objectives”. At present, these energy objectives focus on providing a safe, reliable, efficient energy supply at a reasonable price with only a recent move to consider reducing carbon dioxide emissions and corresponding intensity. As approximately 68% of greenhouse gases emissions in the region are attributed to power generation, the government has explored the possibility of reducing coal-powered energy sources from the mix, incorporating a new objective to reduce coal in the fuel mix to less than 10% by 2020. Considering that currently coal accounts for just over half of the region’s total energy supply, such a reduction is only feasible through significant purchasing agreements for additional nuclear energy supply from Guangdong and further development of natural gas infrastructures. The issue, as Professor Chan stated, is how this is achievable considering Guangdong's own energy needs, the local Hong Kong's perception towards nuclear energy and how the government can move forward without a well thought out and constructed energy policy in place.

Mr. Michael Thomas then explained the complexities of what this trans-jurisdictional policy formation and integration might entail, specifically highlighting regional examples of where energy is not traded due to the complexities of implementing such arrangements as seen with Singapore and Malaysia. Furthermore, attempting to integrate Guangdong further into Hong Kong's energy mix is sure to complicate matters. From a market and supply stance, Hong Kong's energy grid is privately owned and operated relatively efficiently, where as China's is 95% state owned, that is hugely in debt and operates at a continuous loss. Then there is the issue of whether importing further energy from Guangdong is being sustainable, or a matter of accounting; essentially purchasing a service without having to deal with the externalities of providing it. Therefore, formulating an energy policy that considers all the technical, social and economic variables will not be an easy task, especially trying to reduce coal energy sources so significantly over such a short timeframe. Subsequently, predicting a future fuel-mix without applying in-depth analytics and considering the dynamic nature of globalized fuel markets is premature, and as Mr. Thomas stated, “Don't think about the fuel-mix target, think more about fuel mix potential.”

Throughout the forum there was ample opportunity for listeners to engage with the speakers on certain energy issues. A consistent theme that was emphasized was demand side initiatives, such as energy efficiency measures and how to best integrate them into society. Specifically, focusing on ways to conserve energy in both commercial and residential settings such as incorporating existing technologies into new building projects that could dramatically increase efficiency (as seen in recent studies at CUHK) Incentives were suggested as one way to help increase efficiency but as to how they might be applied was another issue. Other points brought up were environmental law and regulation in China, especially with regard to energy production as well as the need for public awareness and education concerning Hong Kong's energy future and policy formation.

The event was wrapped up through a Skype session with Professor Michael DeGolyer, from the Hong Kong Transition Project and Hong Kong Baptist University. He explained the results from a survey administered during the forum and from a larger public opinion survey he had conducted. This proved to be very insightful into the local Hong Kong attitude towards energy supply, concerns over health and environmental impacts from various energy sources as well as affordability and environmental conservation behaviors. Interestingly, over 50% of respondents were not concerned about Hong Kong's energy supply for various uses (electricity, transport, heating, cooking) bearing in mind all the fuels for these energy sources are imported! Also, when asked to rank energy objectives for the government, 36% of respondents stated that a top priority should be placed on safety, followed by 32% on environmental issues. Considering that neither Hong Kong nor Guangdong has ever had a major energy related disaster, but consistently battles with air, noise and light pollution and the environmental effects from energy production, this response was very interesting and perhaps reinforces the need greater energy literacy in the region.

Overall, the forum provided a great opportunity to engage with a number of knowledgeable speakers about the very relevant topic of Hong Kong's energy supply. How the government will move forward with lowering GHG emissions and carbon dioxide intensity by 2020 whilst still meeting its current supply objectives is unclear, with one of the key points taken from the energy forum is the lack of coherent energy policy to lay the foundation for this start this process.

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By: Michael Jack


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