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Following is a question by the Hon Wong Kwok-hing and a written reply by the Secretary for the Environment, Mr Wong Kam-sing, in the Legislative Council today (January 21):
Question:
In December last year, the Consumer Council published a report entitled "Searching for New Directions – A Study of Hong Kong Electricity Market" (the report). The report has pointed out that as the Scheme of Control Agreements (SCAs), signed by the Government respectively with the Hongkong Electric Company, Limited and the CLP Power Hong Kong Limited, will expire in 2018, the next two years will be critical for a review of the policy on the electricity market. On the other hand, there have been voices in society that it is necessary to review the current mode of regulation of the electricity market, step up the implementation of the clean energy policy, assist grass-roots families to cope with electricity expenses, and increase the energy efficiency of power generation, etc. In this connection, will the Government inform this Council:
(1) as the report has pointed out that the current SCAs enable the two power companies to earn a high risk-free permitted profit and pass business risks on to the consumers to an undue degree, whether the Government has considered conducting a study on reducing the permitted profit concerned when it reviews the policy on the electricity market; if it has considered, of the details; if not, the reasons for that;
(2) as the report has pointed out that renewable energy (RE) currently accounts for only 1% to 3% in the electricity mix of the electricity supply in Hong Kong, whether the Government has considered requesting the two power companies to increase the proportion of RE in the electricity mix; if it has considered, of the details; if not, the reasons for that;
(3) as the report has pointed out that the existing plant margin of the two power companies has reached 40% to 45% on average, whether the Government will, when reviewing the policy on the electricity market, request the two power companies to reduce the plant margin to 25% as suggested by the report; if it will, of the details; if not, the reasons for that;
(4) whether it has installed RE (e.g. solar energy) power generation facilities in the public facilities and housing in various districts (in particular the newly developed districts), so as to encourage members of the public to use clean energy and reduce the reliance on non-renewable energy; if it has, of the details; if not, the reasons for that; and
(5) whether it will introduce special measures (e.g. provision of electricity charges subsidies to grass-roots households on a regular basis, and installation of separate electricity meters for households residing in sub-divisions of flat units, which are commonly known as sub-divided units, etc.) to alleviate the pressure of electricity expenses on grass-roots families; if it will, of the details; if not, the reasons for that?
Reply:
President,
Our reply to the various parts of the question is set out below :
(1) In formulating the energy policy for Hong Kong, the Government has all along been upholding the four policy objectives of safety, reliability, affordability and environmental performance. The current Scheme of Control Agreements (SCAs) signed between the Government and the two power companies will expire in 2018. The Government is conducting a review of the future development and the regulatory framework of the electricity market upon the expiry of the SCAs. In conducting the review, we will ensure that electricity supply will meet the energy policy objectives, and pay due regard to the goal to introduce competition to the electricity market. We will consider the views received during the public consultation on future fuel mix for electricity generation conducted earlier, as well as those from various sectors received during the earlier reviews such as the tariff reviews and the 2013 Mid-term Review of the SCAs, including the public's opinions relating to the current level of permitted rate of return. We plan to consult the public on the outcome of the review in the first half of this year.
(2) and (4) Generally speaking, the generation of renewable energy (RE) relies on 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. Also, the cost of electricity generation using RE is a few times higher than that of conventional electricity generation. This notwithstanding, the Government has been promoting the application and development of RE in respect of policy and public works where technically feasible and cost effective.
To promote the development of RE, the Government has provided economic incentives to the power companies under the SCAs, in terms of a higher permitted rate of return for their investment in RE facilities, and an incentive adjustment in the permitted return depending on the extent to which RE is used in electricity generation.
The Hongkong Electric Company, Limited (HKE) has put in place a solar power system at the Lamma Power Station, with a capacity of 1 000 kilowatt. A wind turbine unit has also been installed at Tai Ling on Lamma Island, with an installed capacity of 800 kilowatt. Besides, CLP Power Hong Kong Limited (CLP) has installed RE generation system on Town Island, with a capacity of about 200 kilowatt.
Regarding the application of RE, the Government has promulgated the technical circular on "Adoption of Energy Efficient Features and Renewable Energy Technologies in Government Projects and Installations", requiring Government departments to consider the adoption of RE technologies (including solar power) in all new Government buildings and major retrofitting projects in existing Government buildings. The technical circular also sets out that for buildings with a footprint area greater than 1 000 square meters, photovoltaic panels should be installed where practicable with due consideration given to the shading effects caused by nearby buildings and structures. Besides, the Government promulgated a comprehensive target-based green performance framework for Government buildings, which, inter alia, sets targets in adoption of RE for new Government buildings. All new schools and educational buildings without air-conditioning should aim to have at least 0.5% of their electricity consumption to be provided by RE, where technically and financially viable. Other Government buildings should also incorporate RE technologies as far as reasonably practicable.
Having regard to actual site conditions, the Government has been installing RE systems in various Government buildings and public facilities, including Government offices, departmental headquarters, fire stations, prisons, museums, art and cultural venues, parks, playgrounds, town halls, recreational centres, holiday villages, theatres, Government quarters, hospitals, schools, sewage treatment plants and landfills, etc. As at September 2014, more than 180 projects with RE facilities at Government buildings and public facilities have been completed.
On the other hand, the Hong Kong Housing Authority (HA) has been installing grid-connected photovoltaic system in newly built public rental housing developments which are considered appropriate for installation since 2011. As at end 2014, HA has installed photovoltaic system with a total capacity of around 280 kilowatt in 21 residential buildings.
The Government has also been providing funding support to schools and non-governmental organisations (NGOs) to set up RE facilities such as solar panels, wind turbines and solar water heaters through the Environment and Conservation Fund. As at end of December 2014, a total of 337 projects have been provided with funding support for the installation of these facilities, including 309 projects at schools, six at camp sites and four at organic farms for public use, and 18 at service units of NGOs (such as elderly homes). Through demonstration of these cases in the community, the Government aims to encourage more residential estates and commercial and industrial buildings to follow suit, thereby further promoting the use of RE.
When we consult the public on the future development and regulatory framework of the electricity market later this year, we will also seek their views on the development and application of RE.
(3) In order to ensure the reliability of electricity supply, the power companies need to have sufficient reserve capacity for meeting increase in electricity demand, shutting down of the generating units during maintenance and emergencies, etc. The actual reserve margin of the two power companies will vary as a result of addition of generating units and variation in electricity demand. For example, there will be a step jump in reserve capacity upon the commissioning of a new generating unit. And the electricity demand can often vary due to economy factor, weather, etc.
With the support of independent energy consultants, the Government conducts stringent review of the two power companies' proposals on capital investments to ensure that these projects are necessary, and to avoid excessive, premature, unnecessary or unreasonable investments. Furthermore, to protect the consumers against any loss arising from premature commissioning of new generating units, the Mechanism for Treatment of Excess Generating Capacity in the SCAs requires that if the new generating units of the power companies cannot pass the test for excess generating capacity in the first two years upon commissioning, a portion of its mechanical and electrical equipment costs will not be counted as fixed assets for calculating the return for the power companies, until they pass the test.
In the coming few years, with the scheduled retirement of some of the coal-fired generators of the power companies, it is estimated that the reserve margin of the power companies in 2018 will drop to around 20% to 30%.
(5) Overall, electricity tariffs in Hong Kong are lower than those of many cosmopolitan cities. Households in Hong Kong on average spend less than 2% of their expenditure on electricity supply. In the past few years, the two power companies have been offering discounts or rebates to low consumption consumers to reduce their tariff level. While the consumption level does not necessarily correlate with family income, majority of the low income customers would likely fall within the group of low consumption customers, who could pay lower electricity tariff under the above tariff arrangement. Various concessionary schemes are also run by the two power companies to provide concessionary tariffs to needy people such as the elderly and the disabled, in order to reduce their burden of electricity tariff. Details of the concessionary schemes are set out in the Annex. CLP has also been working with District Councils, social and welfare organisations and green groups to launch a community programme to give grass-root families energy efficient electrical appliances to provide them with material support while helping them to save energy and cut down their electricity expenditure.
In addition, the two power companies provide assistance to tenants living in sub-divided flats to install individual electricity meters. For example, CLP has been working with different organisations to identify tenants of sub-divided units who have obtained landlords' consent for installation of meters, and install meters for their units without charges. CLP also waives the deposit required when these tenants open electricity accounts. HKE is also considering how to provide assistance to tenants living in sub-divided flats. We would continue to encourage the two power companies to provide assistance to these customers.
Ends/Wednesday, January 21, 2015
Issued at HKT 15:22
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