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LCQ2: Feed-in tariff scheme for renewable energy power generation installations
     Following is a question by the Hon Kenneth Leung and a reply by the Secretary for the Environment, Mr Wong Kam-sing, in the Legislative Council today (July 12):
     To encourage the use of environmental protection (EP) installations in the industrial and commercial sectors, the Government has since 2008 been providing tax concessions of accelerated profits tax deductions to companies which have acquired EP installations, by shortening the time period for apportionment of specified capital expenditure incurred in relation to such installations from the usual 25 years to five years.  Eligible EP installations include renewable energy power generation (REPG) installations.  On the other hand, the new Scheme of Control Agreements that the Government entered into with the two power companies in April this year, which will take effect after 2018, have introduced a feed-in tariff scheme which allows private organisations to invest in installing REPG installations and connect such installations with the public power grids while the power companies will purchase the electricity generated by such installations (green electricity) at a rate higher than the normal electricity tariff rate, so as to encourage the development of distributed renewable energy.  In this connection, will the Government inform this Council:
(1) whether it knows the total number of REPG installations installed by the industrial and commercial sectors since 2008, and a breakdown of the number by type; the annual amount of electricity generated by such installations, and the total amount of tax deductions granted by the Government in respect of such installations; how the Government publicises the tax concession measure and the effectiveness of such publicity;
(2) how the Government and the power companies will determine the feed-in tariff rate of green electricity; whether the Government will require that the power companies must enter into electricity purchase contracts of a certain number of years with electricity sellers and provide subsidies to electricity sellers; if so, of the details (including the current progress of discussion with the power companies and the implementation timetable); if not, the reasons for that; and
(3) whether the existing legislation regulates matters relating to the feeding of green electricity into the power grids (including the technical and safety standards for power generation and transmission); if so, of the details; if not, the timing for enacting such legislation; whether the Government and the power companies will provide technical support to electricity sellers to ensure that the safety and stability of public power grids will not be affected by the feeding-in of green electricity?
(1) According to the information provided by the Hong Kong Electric Company Limited (HKE) and CLP Power Hong Kong Limited (CLP), 50 renewable energy (RE) systems have been installed by industrial and commercial sector (including power companies) and connected to HKE's and CLP's grids since 2008.  The details are provided at Annex 1.
     Since the year of assessment 2008/09, the Government has been providing accelerated tax deduction for environmental protection installations.  A deduction under profits tax for 20 per cent of the capital expenditure incurred on the acquisition of eligible environment-friendly installations (including RE installations) will be provided in each of the five consecutive years starting from the year of purchase.
     The Inland Revenue Department (IRD) does not have a breakdown of the amount of tax deductions by type of environmental protection installations.  The number of applications for tax deductions for environmental protection installations since the year of assessment 2008/09 is set out at Annex 2.
     The IRD promoted the arrangement for accelerated tax deductions for capital expenditures on environmental installations following the enactment of the relevant legislation.  Relevant information has been published at IRD's website and "Departmental Interpretation and Practice Notes No. 5".  On the other hand, the Electrical and Mechanical Services Department (EMSD) also promotes this concession at its seminars to encourage the adoption of RE.
(2) The Government entered into the post-2018 Scheme of Control Agreements (SCAs) with the two power companies in April 2017 and promotion of RE will be a key focus of the new SCAs.  Among other measures, Feed-in Tariff (FiT) will be introduced in the next regulatory period to encourage the private sector and the community to consider investing in distributed RE as the power generated could be sold at a rate higher than the normal electricity tariff rate to cover the cost of their investments in the RE systems and those of generation.  The power companies will also facilitate and improve the distributed RE connection arrangements.
     We are now discussing with the power companies details of the FiT scheme, including the FiT rate(s) and term with a view to launching the scheme as soon as practicable after the new SCAs come into effect.  For the setting of FiT rate(s), we will take into account factors including the cost of investments in the distributed RE systems and generation, the attractiveness of the rate(s) in providing sufficient incentives to encourage the private sector and the community to consider investing in distributed RE, as well as the tariff implications.  We plan to consult the Energy Advisory Committee on the details of the FiT scheme and report to the LegCo once ready in 2018.
(3) Renewable energy power system (REPS) is classified as a generating facility.  Therefore, REPS owners should ensure that the system complies with the safety requirements in the Electricity Ordinance and its subsidiary regulations.  The system shall also comply with the reliability and power quality requirements in Supply Rules and the case-specific technical requirements of the power companies.

     We understand the power companies provide advice to customers interested in installing the distributed RE systems on the technical aspects of the grid connection.  Details are set out on the websites of the power companies.  Besides, to help the public better understand the technical issues of small-scale REPS, the EMSD has also published "Technical Guidelines on Grid Connection of Small-scale Renewable Energy Power Systems" (the Guidelines) which provides the requirements in local codes and international standards on grid connection and power quality.  The Guidelines has also been uploaded to the website of the EMSD.

     Thank you President.
Ends/Wednesday, July 12, 2017
Issued at HKT 14:45
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