Following is the speech by the Secretary for Economic Development and Labour, Mr Stephen Ip, at the First International Conference on Energy Efficiency and Conservation today (January 15) (English only):
Distinguished guests, Ladies and Gentlemen,
It gives me great pleasure to join you this morning in the First International Conference on Energy Efficiency and Conservation. Let me, first of all, extend a warm welcome to all our guests who have come to Hong Kong to participate in this meaningful event. I hope the organisers would let you have time, outside your busy schedule, to enjoy our vibrant "City of Life". I am glad to see so many friends and colleagues here this morning, and would like to commend the Conference organisers for their efforts in bringing this international event to fruition.
I wish to congratulate the organisers on lining up an impressive list of expert speakers for each of the topics and for putting together a lively and interesting programme. In this respect I note that the opening session focuses on the increasingly important subject of how energy interfaces with the environment. This is an issue very much at the forefront of our current and future infrastructural projects. I note that other key energy issues for Hong Kong, namely energy applications in transportation and new developments in state-of-the-art building design, will also be explored during your working sessions.
Each of these topics has a significant impact for us in Hong Kong. Continued availability of affordable and reliable energy supplies is most important to our continued socio-economic development. So let me provide you with a brief outline of Hong Kong's energy profile and share with you some of my thoughts on the opportunities and challenges ahead.
Overview of Hong Kong's energy profile
Hong Kong has no indigenous energy resources. Being a net energy importer, we are potentially susceptible to changes in the global energy market. It is against this background that we pursue the dual objective of our energy policy, i.e. reliable and safe energy supplies at reasonable prices, to sustain our economic development. We believe the private sector is best placed to meet our energy requirements in response to market demand. And the Government's role is to facilitate the development of the energy sector while, at the same time, safeguard the interests of consumers, ensure public safety, and protect our environment.
Power supply sector
Electricity in Hong Kong is supplied by two private companies: the CLP Power Hong Kong Limited and the Hongkong Electric Company Limited. These companies do not have franchises or exclusive rights to supply electricity, but on a de facto basis serve different territorial areas.
Commencing in the 1960's, the Government has entered into successive Scheme of Control Agreements with the two power companies. These Agreements provide the framework for ensuring continued reliability in supply over the years at reasonable cost. Through these Agreements, the Government is empowered to monitor the companies' financial affairs, thereby protecting on one hand the interests of consumers, while maintaining on the other incentives for the two companies to continue long term investment and improve plant efficiencies. For example this has led to, in the case of existing coal-fired plant, flue gas desulphurization facilities being installed, where possible, in order to reduce the level of emissions. From now on, where there is the need for increasing major generation capacity, new power plant will be high efficiency combined cycle units fired by natural gas so as to minimize environmental impact. Furthermore, the Agreements now contain financial measures to guard against the installation of plant which could result in excess generation capacity.
The current Scheme of Control Agreements will expire in 2008. We hope to draw up, in good time, a broad direction for the future development of our electricity supply market. Whilst different options will be explored, enhancing supply reliability at the lowest price to the customer will remain our primary focus.
Gas supply sector
In the gas sector, the two main types of fuel gas available in Hong Kong are supplied by private sector companies. These are manufactured gas, distributed as Towngas by the Hong Kong and China Gas Company Limited and liquefied petroleum gas (LPG) supplied by four major oil companies. We have entered into an Information and Consultation Agreement with the Hong Kong and China Gas Company to make the Towngas tariff adjustment mechanism more transparent to protect consumer interests.
At present, natural gas is only imported by sub-sea pipeline from the Yacheng gas field in the South China Sea to supply combined cycle gas turbines generating electricity. The region is well supported by available sources of natural gas and we shall be closely monitoring future developments. In particular, it is important to note the first LNG terminal in Guangdong, which is scheduled to come into operation around 2006 in Shenzhen, will be supplying to Hong Kong.
There are opportunities for utilizing land-fill gas on a smaller scale in Hong Kong. These have included projects to generate electricity for on-site use or to take advantage of off-site applications as in the case of the Towngas plant in Tai Po which uses landfill gas to fire process burners in gas production.
Major oil products sector
The largest share of Hong Kong's energy requirement is related to our demand for oil products. There are four major suppliers based in Hong Kong and currently oil products are mainly imported from Singapore and Korea. Being a free market economy, we believe that fuel supply and demand, as well as prices, are best determined by market forces. But in view of public concern over oil prices, we monitor the price movement of major oil products in both overseas and local market and encourage the oil companies to adopt more transparency in their price determination. We are also striving to enhance competition in the downstream automotive fuel market by maintaining its openness and removing barriers to new entrants.
Turning to the important area of protecting our environment, besides focusing on the safe and reliable supply of energy, it is also Government's policy to minimize the impact of production and consumption of energy on the environment. Attention to power plant emissions has resulted in significant reductions since the mid 90's but it is perhaps in the oil product sector where Government has focused its particular efforts more recently. Since April 1999, only unleaded petrol can be sold in Hong Kong and in July 2000, Government introduced a concessionary duty on Ultra Low Sulphur Diesel (ULSD) as an incentive to encourage diesel vehicles to switch over to this environmentally cleaner fuel. From April 2002, ULSD has become our statutory standard for local automotive diesel and, Hong Kong is in fact the first place in Asia to introduce this cleaner motor fuel on such a comprehensive scale.
As most of you will be aware, significant headway has already been made in the replacement of around 16,000 diesel taxis by LPG models, out of a total fleet of some 18,000, before the 2005 target set by the Government. In addition to Government incentives, this has been achieved as a result of support from all parties concerned, including the taxi trade as well as fuel and motor vehicle suppliers. Further trials on the use of LPG and electric public and private light buses have also been successful. Another incentive scheme has started since August 2002 to encourage diesel light buses to be replaced with ones using electricity or LPG. Over 200 have been replaced. Since the introduction of the automotive LPG programme about 2 years ago, there are now 42 LPG filling stations in operation.
Efficient use of energy
Despite the fact that Hong Kong has enjoyed the benefits of reliable and affordable supplies over the years, energy remains, in the medium term at least, a scarce resource. For this reason, the efficient use of energy is always high on our agenda. We continue to encourage the utility companies to engage in demand side management and actively promote good energy conservation practice, both in the work place and at home.
Public education is one of the key issues, and a variety of methods are used to get the message across. These include, for example, the introduction of energy efficiency labelling schemes for household and office appliances, as well as petrol passenger vehicles; TV announcements; and the development, by utility companies, of special learning packages for use in our Hong Kong primary schools. Recently, the Government has commissioned detailed studies in order to compile an energy end-use database to provide us with information which will assist in the formulation and evaluation of energy efficiency programmes in future. These are just some of our initiatives to enhance the efficient use of energy and we look forward to learning about your views and comments during this Conference.
Opportunities and Challenges Ahead
Similar to other economies in the region, the Hong Kong energy sector faces a number of significant challenges in the coming years, not least striving to retain a realistic balance between fossil fuel dependency on one hand and economic development on the other. At the same time, increased public expectations of reliable and safe energy supply being available at reasonable prices need to be taken into account.
Today, there is a growing environmental awareness, and it is essential that we are in a position to obtain maximum benefit from the rapid development of new energy technologies. In fact, I am confident we have the necessary professional expertise in Hong Kong to make this happen. But all of this will come at a cost, particularly in the power generation and supply sector, and we will pay close attention to funding and reliability issues during the forthcoming review of the electricity supply market.
These challenges can become exciting opportunities if they are properly addressed, not only for Hong Kong, but for the region as a whole. We look forward to working with colleagues throughout the region and anticipate that benefits are to be gained through increased cooperation in the APEC network. Bearing in mind our energy policy objective and principle of free market economy, we are supportive of enhancing competition throughout the energy sector where practically feasible. This will include the harnessing of renewable energy and introducing energy efficiency measures in pursuit of sustainable development goals.
As a matter of fact, about 2,500 m2 of solar collector panels for water heating have already been installed in Government properties and new projects, such as the installation of photovoltaic systems in the new Science Park, and our pilot project to test various forms of photovoltaic panels in Government's Wanchai Tower. The private sector is also taking up the challenge in this area and we welcome the support of those utilities that have undertaken an increasing number of pilot studies on the application of photovoltaic and wind generation technologies for example. We believe that our combined efforts will open up new possibilities for sustainable development in the energy sector and I am sure your discussions in the coming two days will shed "new light" in this area.
In conclusion, the development of Hong Kong's energy sector has been underpinned by valuable support and cooperation from all sections of the supply chain as well as end-users. Energy is vitally important to our sustained economic development. It is not merely a local issue, but rather one which has regional or indeed global implications. With this in mind, Hong Kong will continue to participate actively in the international energy arena, through expert forums such as the APEC Energy Working Group. The fact that Hong Kong is hosting this Conference is a clear illustration of our commitment.
Mr Chairman, I wish to thank you, and your organizing committee, especially Dr Raymond Ho, for giving me the opportunity to be here this morning. I am delighted that you have chosen to hold the inaugural Conference in Hong Kong, and wish this international event every success. I am sure that speakers and participants alike will enjoy a highly rewarding experience in the coming two days.
End/Wednesday, January 15, 2003