HK’s energy woes

HK’s energy woes

15 June, 2012
Can we decarbonize?
Experts debate the best way forward

Did you know that Hong Kong placed second highest in the world for its carbon footprint per capita at 29 tonnes of CO2 per year? This was according to a survey released in Norway titled “Carbon Footprint of Nations: A Global, Trade-Linked Analysis” which used global data from 2001. Hong Kong ranks second only after Luxembourg’s 33 tonnes while the United States follows at 28.6 tonnes and Singapore at 24.1 tonnes. This is significantly more than the 6.7 tonnes of CO2 per year figure that was released by Hong Kong’s Environment Protection Department.
While Hong Kong’s figure accounted for local emissions such as from transport and power generation, the Norway survey also included the production of imported goods. With Hong Kong’s dependence on trade and imports, the majority of goods in Hong Kong are grown or manufactured from outside and imported. For greenhouse gases, power plants contribute to 60% of the emissions followed by 16% for petroleum and diesel from transport and 12% for methane from waste disposal. One of the ways that the power companies will be investing in decarbonizing Hong Kong’s energy sector is an investment of HK$10 billion on offshore wind farms. CLP’s 200MW wind farm is at a cost of almost $7 billion. Situated 10km off Sai Kung with 67 wind turbines, the wind farm will produce less than 1% of Hong Kong’s electricity mix and reduce 1.4% of Hong Kong’s CO2 emissions. HK Electric was granted an approval of an Environmental Permit for a wind farm to be located between Lamma Island and Cheung Chau to generate 100MW of power, which will cost HKD three billion to build. The Hong Kong government’s first Sustainable Development Strategy for Hong Kong released in 2005 set a target for Hong Kong’s electricity to be comprised of 1-2% of renewable energy. Having the two wind farms will mean that Hong Kong’s CO2 emissions will be cut by less than 2% and the wind farms will produce about 1.5% of Hong Kong’s electricity. Currently, the Guangdong Daya Bay nuclear power station makes up about one-third of CLP’s power supply and one-quarter of Hong Kong’s total consumption.
The Scheme of Control (SOC) plays a role in influencing the amount of renewable energy investments the power companies make. The SOC is the Hong Kong government’s agreement with the two power companies on electricity provision. It is reviewed and negotiated every 10-15 years. The current scheme began in 2009 and will run for ten years at a permitted rate of return of 9.99%. The scheme also allows for a return of 11% on renewable energy assets as well as financial incentives for exceeding emission targets or fines for failing to reach them. The SOC is set up such that the more assets a company has, the more it can earn. With HK Electric, its peak demand is 2.5GW but has the installed capacity to produce 3.7GW of electricity. For CLP, its peak demand is at 6.5GW and has the capacity to produce 13.6GW. Critics are concerned that the SOC continues to be a way for the power companies to overinvest in assets, including renewable energy.
Professor Bill Barron at HKUST’s Institute for the Environment thinks asset based SOCs are a terrible idea. SOCs used to exist in the U.S. but now companies are making profits by making customers conserve. He notes that “the power companies have incentives for efficiency, but none for end use conservation,” Barron continues ”SOCs encourage companies to overbuild so they can charge for capital investment”. Jeanne Ng, Director of Group Environmental Affairs at CLP notes that “it is really up to the Hong Kong community whether they want renewable energy or not,” she continues “we can provide the option and we want [people] to know if it is technically possible and what it would cost”. Renewable energy is increasingly a larger part of CLP’s portfolio and it does fit into Hong Kong’s 2% renewable energy goal. But Ng admits that “economically, it is expensive and the community might say we could not afford it or we might want more nuclear,” she continues “it is about community engagement, and we do not dictate the market”. In terms of the SOC, Ng thinks that is successful because “we are pretty much all connected with affordable, reliable, and safe electricity whereas other places in the world are having blackouts and problems with the grid and generation more frequently than Hong Kong” she says. “It is up to how that agreement is set up and how to incentivize properly the businesses of what wants to be done,” she continues “with deregulated markets, costs become the driver and with the need to be competitive, that is hard to balance with quality”. With regards to renewable energy projects such as the wind farms in Hong Kong, Barron thinks that “they are more symbolic than anything-you need high efficiency standards, not just labeling, but minimum standards, so you can’t buy a really inefficient appliance,” Barron continues “these are not visible to people like renewable energy is, to really make a difference, power companies can offer money to windmills in the Mainland as long as they agree to shut down coal fired plants”. “Because Hong Kong doesn’t have good solar or wind, we should promote efficiency much more,” Barron says “right now, the energy standards for buildings are not strict enough, there are no appliance standards, and people who build flats are not those who pay electric bills”. Ng believes that “there is a need to figure out the general direction on energy policy to determine what the fuel mix is and the proportion that is generated within Hong Kong or outside of Hong Kong,” she continues “right now, we have enough and we export a little bit, but in the future, the questions are what does the government want to see and how should Hong Kong integrate with the Pearl River Delta region because in most places, energy is a regional thing”. She adds that for China and India, the governments have figured it out to encourage investment with feed-in-tariffs (FIT) and adds that “FITs helped us make the decisions on renewable energy as every case has to be commercially viable in its own way”. Targeting buildings is another way to help Hong Kong move towards a decarbonizing path. Rachel Fleishman, Director of the Climate Change Business Forum, points out that in Hong Kong, buildings use 90% of the electricity. She notes that “the building community is asking for more and we need to get our act together with Hong Kong’s core competency in property development”. She notes that there is a need to change the policy structure, some parts of which are 50 years old in addition to a retrofit and conservation challenge. Across the government, Fleishman believes that “there is a need to align policies in urban development, transit, and infrastructure and other cities have done that already”. At the cities level, cities such as London, New York, and Tokyo have worked on education, transport, and building codes more than Hong Kong has. As renewable energy cannot generate a whole lot, Fleishman hopes to see more work with Guangdong to import more gas or nuclear. She adds that “there needs to be more transparency, in terms of smart metering, as often times, energy fees are wrapped up in the management fee and occupants cannot even control their system and it is currently a fractured information system”, Fleishman continues “there needs to be an improved building energy rating system for people to understand the standards of their buildings.
There is no doubt that Hong Kong needs to play catch up when it comes to moving towards a low carbon economy. No single solution exists. It will take a number of options including energy efficiency measures, integrating better energy conservation features into buildings as well as exploring renewable energy generation options to decarbonize Hong Kong. Action is needed on all fronts and clearly, a roadmap, especially regarding energy, is needed to help us get us get to a low-carbon future.
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By: Ecozine Staff


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