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Following is a question by the Hon Kenneth Leung and a written reply by the Secretary for the Environment, Mr Wong Kam-sing, in the Legislative Council today (June 11):
Question:
The Environment Bureau released in March this year the Future Fuel Mix for Electricity Generation Consultation Document to launch a public consultation on two fuel mix options (consultation options). One of the options is the "grid-purchase option", under which more electricity will be imported through purchasing electricity from the China Southern Power Grid Co. Limited (CSG) of the Mainland, and the other is the "local generation option", under which more natural gas will be used for local electricity generation. In this connection, will the Government inform this Council:
(1) whether the Government had, before putting forth the two consultation options, conducted detailed studies on the feasibility of other options; if it had, of the details, and the justifications for putting forth the two consultation options only;
(2) as the Secretary for the Environment has indicated that the "grid-purchase option" could be regarded as the first step for opening up the electricity market, but some scholars have pointed out that this could not be regarded as a genuine opening up of the electricity market since electricity bought from CSG would still need to be transmitted to the public through the power grids of the two power companies in Hong Kong (two power companies), whether the Government had, before putting forth the two consultation options, studied how such options could facilitate the opening up of the electricity market and introduction of competition (e.g. the implementation of segregation of the generation sector from the network sector and the introduction of a third power company); if it had, of the details;
(3) given that it has been reported that the consultant commissioned by the Government to conduct the study on the Feasibility of Purchasing Electricity from CSG was formerly under a subsidiary of CSG, whether the Government will publish those contents of the related consultancy report which do not involve sensitive business information; if it will, when it will do so; if not, of the reasons for that; whether the Government will commission an independent consultant to conduct a study and risk assessment on the reliability of CSG supplying electricity to Hong Kong; if it will, of the details;
(4) as the local generation option will involve using more natural gas for electricity generation, whether the Government has any plan to allow the two power companies to build more infrastructure facilities for electricity generation by natural gas (including liquefied natural gas receiving terminals, etc.) and make other investment in related technology under that option; if it does, of the details and the estimated costs; if not, the reasons for that;
(5) whether it has conducted any study on the fluctuations in the price of and the demand for natural gas on the Mainland and the impacts of such fluctuations on the two consultation options; if it has, of the details; and
(6) of the respective target ratios of the use of renewable energy (RE) (including waste-to-energy) in the overall fuel mix of the two consultation options, and whether such ratios are different from that recommended in the public consultation document on "Hong Kong's Climate Change Strategy and Action Agenda" released by the Environment Bureau in 2010; if the ratios are different, of the reasons for that; whether it has conducted any comprehensive review on the cost effectiveness of the existing RE power generation projects which have already been developed (including the impacts of technological development on cost reduction in the long run); if it has, of the details?
Reply:
President,
(1) It is the Government's energy policy to ensure safe, reliable and efficient energy supply at reasonable prices while minimising the environmental impact caused by electricity generation. Having considered various factors, the Government has promulgated two fuel mix options for public consultation, with a view to providing a basis to plan for our electricity infrastructure in the next decade.
Other than the two options put forward, we have also considered other options, including the possibility of importing more electricity by dedicated transmission lines. We consider that purchase from the power grid will allow Hong Kong to gain access to multiple sources of supply on a grid-to-grid basis, thereby enabling us to achieve a higher degree of fuel diversification and allowing Hong Kong to tap into clean fuel sources otherwise not available for use by us now, e.g. hydro power. The grid purchase option is also more flexible in meeting future electricity demand.
(2) The current Scheme of Control Agreements signed between the Government and the two power companies will expire in 2018. We are reviewing the overall development of the electricity market after 2018. Public views on the future fuel mix will provide important considerations for the review. The implementation of the grid purchase option mentioned in the fuel mix consultation document would involve the construction of cross boundary electricity transmission network, and details on the legal, technical, financial and other implications regarding the use of power grid. Subject to detailed information available from further studies, we consider that the grid purchase option may in principle provide more room to introduce more supply sources to the electricity market, thereby enhancing competition and choices.
(3) During the review of the future fuel mix, the Environment Bureau commissioned a consultancy study by the Guangdong Electric Power Design Institute (GEDI) to ascertain the feasibility of importing electricity from the Mainland power grid. We consider GEDI an appropriate consultant given its years of experience in power system planning in the Mainland, and its knowledge of the planning and development of CSG. GEDI is independent of CSG in terms of organisation structure and operation. We have considered the key findings of the consultancy in preparing the public consultation document and duly reflected them in the document. Disclosing the report incompletely without the commercially sensitive and confidential content may result in incorrect interpretation. We therefore have no plan to publish the report. Also, the above study is only a preliminary feasibility study. If it is necessary to study further the option of importing more electricity through grid purchase, detailed technical studies would be conducted to ascertain that import from CSG would be able to meet the supply reliability requirement of Hong Kong.
(4) All along, we have been conducting stringent assessment of the two power companies' investment proposals on generation systems and ancillary facilities, including gas receiving facilities and gas generation units. If the two power companies submit to us relevant capital investment proposals for constructing natural gas infrastructure facilities, storage facilities, liquefied natural gas terminals, other gas supplying technologies, etc., we will as always perform our gate-keeping role and critically assess the two power companies' proposals in respect of their need, timing and cost with a view to avoiding excessive, premature, unnecessary or unreasonable investments, as well as to balancing the energy policy objectives of safety, reliability, affordability and environmental performance.
(5) There are divergent views in respect of the forecasts of future natural gas prices. In the past few years, natural gas prices in the Asian region have increased by three to four times. In formulating the two fuel mix options, we have already taken into account natural gas prices in the past and latest international analyses. We consider that over-reliance on natural gas will increase the susceptibility of electricity tariffs to price volatility of natural gas and have set out the relevant analysis in the consultation document.
(6) The generation of certain forms of RE requires natural resources, such as solar, wind and hydro power. However, the physical environment of Hong Kong has imposed a lot of constraints on the wide application of such RE resources. Not only is it costly but its room for development is also limited. Generally speaking, electricity generation cost of RE is a few times higher than that of traditional electricity generation. Therefore, our current policy is to adopt solar or wind facilities for demonstration purpose, subject to their cost-effectiveness and meeting operational needs. On the other hand, waste-management facilities can also turn waste into RE. We have covered in the "Hong Kong: Blueprint for Sustainable Use of Resources 2013-2022" and "A Food Waste & Yard Waste Plan for Hong Kong 2014-2022" a number of waste-to-energy facilities including sludge treatment facility, integrated waste management facility, and a network of organic waste treatment facilities. With regard to the projects already completed and being planned, we estimate that the share of RE from waste will make up about one per cent of total electricity demand by the early 2020s. References to RE in the consultation document have already taken into account the updated development and information.
Ends/Wednesday, June 11, 2014
Issued at HKT 11:13
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