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LCQ5: Energy policy

     Following is a question by Dr Hon Elizabeth Quat and a reply by the Secretary for the Environment, Mr Wong Kam-sing, in the Legislative Council today (November 27):


     To achieve the reduction targets for pollutant emission by 2015 and those for carbon emission by 2020, to tie in with the gradual reduction in the use of the existing coal-fire generating units, and to meet the future demands for electricity, the Government will review Hong Kong's fuel mix for electricity generation.  Options available for consideration include increasing the use of natural gas, buying electricity from mainland power grid and importing nuclear energy, etc.  The Government has planned to consult the public on the future fuel mix for electricity generation by the end of this year, and indicated that in the relevant review, it will strike a proper balance among the energy policy objectives such as safety, reliability, affordability and environmental protection.  In this regard, will the Government inform this Council:

(a)  whether the authorities will expedite the formulation of a comprehensive energy policy; of the targets of the fuel mix in the short, medium and long terms which have been considered by the authorities when formulating the energy policy, as well as the timetable for implementing such targets; whether the authorities have thoroughly considered and evaluated the impact of increasing the proportion of natural gas used on tariff and people's livelihood when they set the short-term target for the reduction in pollutant emission by 2015; in respect of setting the medium-term target for reduction in carbon emission by 2020, whether the authorities will make reference to Japan's recent announcement on lowering its latest target for reduction in carbon emission and in response to the ever-changing environmental factors, and consider conducting a corresponding review; if they will, of the details; if not, the reasons for that;

(b)  in determining the new fuel mix required for meeting the reduction targets for pollutant emission and carbon emission, whether the authorities have drawn up any option (such as setting up a fund for stabilising the price of natural gas fuel) to ensure a stable supply of fuel for electricity generation and the electricity tariff at a reasonable level which is affordable to members of the public; if they have, of the details of the options; if not, the reasons for that; and

(c)  with regard to the long-term plans for power grid development, whether the authorities will examine different options for opening up the power grids and for power interconnection, so as to tie in with the objective of the future fuel mix (e.g. importing renewable energy from the Mainland by means of "dedicated transmission lines"); if they will, of the details; if not, the reasons for that?  



     At present, coal accounts for about 54% of Hong Kong's fuel mix for electricity generation, natural gas 23% and nuclear energy imported from the Mainland 23%.  In order to reduce carbon emissions from power generation and to combat climate change, the Government proposed in 2010 to improve our fuel mix for power generation in 2020 by substantially reducing the reliance on fossil fuels, which are highly carbon-emitting, gradually retiring existing coal-fired generating units, and increasing the share of non-fossil, clean and low-carbon fuels, including the consideration to import more nuclear energy.   

     While we were consolidating the views received during the public consultation exercise, the Fukushima nuclear incident took place as a result of the earthquake and tsunami hitting northeastern Japan.  Various sectors in the community had expressed different views on the application of nuclear energy since then.  After the incident, the Mainland Government immediately conducted a comprehensive safety check on nuclear facilities and suspended the approval of new nuclear projects, which was resumed only in end 2012.

     As the existing coal-fired generating units in Hong Kong will start to retire in the coming few years, and all electricity supply infrastructure requires long-term planning, we consider it necessary to review the future fuel mix for power generation in a timely manner, in order to meet the future electricity demand of Hong Kong.  We are conducting a review of the future fuel mix, and are engaging various stakeholders, including experts, academics, industry and business sectors, and non-governmental organisations to solicit their views.  We are working out the details of the public consultation which we plan to launch shortly.  As such, we could only provide some in-principle responses to the questions raised by Dr Hon Quat as follows:

(a)  Each fuel source has its own merits and demerits.  In reviewing the overall fuel mix, we will strive to strike a balance among the four energy policy objectives of safety, reliability, affordability and environmental protection.  With regard to environmental improvement, we understand that different countries would set their environmental protection targets having regard to their own circumstances.  In a consultation document published in end 2010, the Government proposed to set a target to reduce carbon intensity by 50% to 60% by 2020 as compared with the level in 2005.  The Government will review the carbon intensity reduction target proposed in 2010 during the review of the fuel mix for power generation.

     In respect of air pollutants emission, as power generation is one of the major sources of air pollutants in Hong Kong, to achieve continuous improvement of the air quality, the power companies should continue to strive to reduce emissions.  As such, we already issued in 2008, 2010 and 2012 respectively three Technical Memoranda (TM) pursuant to the Air Pollution Control Ordinance (Cap. 311) to stipulate emission caps on three specified pollutants.  The first TM specified the emission caps for 2010-2014, the second TM tightened the emission caps for 2015-2016, and the third TM tightened the emission caps further with effect from 1 January 2017.

     One of the major initiatives adopted by the power companies to meet the specified emission caps was to increase the use of natural gas, which will add pressure to tariff increase.  As the fuel market has been volatile, and the tightened TM will only take effect in 2015, we considered it not appropriate to make any assumptions on the trend of fuel prices for assessment of tariff increase during the preparation of the relevant TM.  The two power companies will submit their tariff adjustment proposals to the Government pursuant to the Scheme of Control Agreements (SCAs).  

(b)  The reliability and price of energy supply are two important considerations for our review of the fuel mix.  On energy supply, the HKSAR Government signed a Memorandum of Understanding (MoU) on energy co-operation with the National Energy Administration of the Central People's Government in 2008 to ensure continuous supply of clean energy to Hong Kong for the next two decades.  With efforts from all parties, the MoU is being implemented progressively; the agreement on the supply of nuclear electricity from Daya Bay Nuclear Power Station was renewed for a further term of 20 years until 2034, and the Second West-East Natural Gas Pipeline (Hong Kong branch) was already completed in 2012 for offtaking natural gas for power generation in Hong Kong.

     In terms of price, regardless of the future fuel mix, replacing coal by cleaner energy is inevitable and at the same time would add pressure to tariff increase.  Hence, if we are to reduce greenhouse gas and air pollutant emissions, and mitigate the impact of rising electricity bills for individual electricity consumers, the most fundamental way is to further promote territory-wide energy saving to reduce electricity demand.  Energy efficiency and conservation has always been an important energy policy of the Government.  Regarding the proposal of setting up a fund for stabilising the price of natural gas fuel, we consider it in essence a subsidy on electricity tariff by public money.  It is not the most effective way of using public money, nor can it achieve the result of encouraging energy saving and reducing emissions. We have no plans to consider the proposal at this stage.

(c)  In respect of the regulatory framework of the electricity market, as stipulated in the current SCAs signed between the Government and the two power companies, before implementing any changes to the regulatory regime, the Government will take into account all relevant factors, and discuss with the power companies market readiness, potential future changes to the electricity supply regulatory framework and transition issues before 2016.

     The mid-term review of the SCAs just completed has provided a useful platform for us to listen to different views of the public, and helped us plan the development of the electricity market after 2018.  We will soon launch the public consultation on fuel mix for power generation, and look forward to the active participation by the general public.  The consensus forged on the future fuel mix will be an important basis for the review of the regulatory framework of the future electricity market.  We are now actively proceeding with the preparatory work, and will continue to maintain dialogues with various stakeholders.

     Thank you, President.

Ends/Wednesday, November 27, 2013
Issued at HKT 16:17


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