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LCQ6: Feed-in Tariff Scheme
     Following is a question by the Hon Kenneth Lau (Dr the Hon Lo Wai-kwok to ask on his behalf) and a reply by the Secretary for the Environment, Mr Wong Kam-sing, in the Legislative Council today (June 15):
     To promote the development of renewable energy (RE), the Government introduced in 2018 the Feed-in Tariff (FiT) Scheme (the Scheme) in collaboration with the two power companies for the private sector to sell the renewable power energy generated to the two power companies at a rate higher than the normal electricity tariff rate. However, the Government lowered the FiT rates in April this year. Many members of the public who intend to apply for joining the Scheme have relayed that owing to the high costs involved in the installation of solar power devices, the Government's lowering of the FiT rates without consultation has caused them great budgeting problems and worries that they may not be able to recover the costs before the Scheme expires at the end of 2033. In this connection, will the Government inform this Council:
(1) whether it knows the respective total numbers of applications from owners of village houses and from owners of industrial and commercial buildings which were received, approved and rejected by the two power companies, in each year since the implementation of the Scheme, and the reasons for the rejected applications; among such applications, the number of those which were required to lower the proposed generating capacity as it would exceed the load capacity of the power grids, and the measures put in place by the two power companies to improve such situation;
(2) as it is learnt that the reason for the Government's decision to lower the FiT rates is that the costs for the installation of solar power devices have decreased in recent years, resulting in a shortened payback period for investment, of the relevant data and the method for calculating the payback period, as well as the mechanism and criteria for adjusting the FiT rates; and
(3) whether it will consider extending the time period of the Scheme, so as to continue encouraging public participation in the development of RE; if so, of the details; if not, the reasons for that?
     To promote renewable energy (RE), we, together with the power companies, have launched the Feed-in Tariff (FiT) Scheme since end 2018 to shorten the payback period for private RE systems to about 10 years. The Government has also implemented a series of support measures, such as suitably relaxing the requirements on the installation of solar energy generation systems on the rooftops of New Territories village houses and facilitating the private sector in installing solar energy generation systems at open car parks. 

     In comparison with only some 200 private RE systems that were connected to the power grid in Hong Kong in the decade prior to the introduction of the Scheme, the two power companies received a total of over 20 000 applications from end 2018 to the first quarter of 2022 following the introduction of the Scheme, of which over 18 000 applications have been approved. Upon completion of installation of the systems approved, it is estimated that about 300 million kilowatt hour (kWh) of electricity can be generated each year, which is sufficient to meet the electricity demand of about 90 000 households (roughly equivalent to all households in the Central and Western District).
     My reply to the question raised by the Hon Lau is as follows:
(1) Applications under the FiT Scheme mainly involve the installation of RE systems in village houses or detached houses with over 15 000 such applications in total, amounting to over 70 per cent of the total number of applications, of which more than 14 000 applications have been approved. There are over 1 000 FiT applications involving the installation of RE systems in commercial and industrial premises, accounting for about five per cent of the total number of applications, of which over 900 applications have been approved. No application under the FiT Scheme has been rejected by the power companies so far.

     While implementing the FiT Scheme, the power companies have to ensure the safe and reliable power supply. Therefore, if the generating capacity of an individual RE system applied for under the FiT Scheme exceeds the capacity of the power grid concerned, the power companies will liaise with the applicant on adjustment of the generating capacity of the RE system, so as to ensure that the electricity system remains safe and reliable when the RE system is connected to the grid. Since the introduction of the FiT Scheme, the CLP Power Hong Kong Limited (CLP) has adjusted the generating capacity of about 1 300 applications (about 6 per cent of the total number of FiT applications). These applications are mainly related to the installation of generation systems with a generating capacity of 10 kilowatts or less in Yuen Long, Tai Po and North District. As for the Hongkong Electric Company, Limited, it has not adjusted the generating capacity of any of the applications so far.

     To further support the development of RE, CLP has been assigning dedicated customer service managers to follow up each application and suggest different technical solutions with a view to resolving the matter, and consider whether and if so how to lay or reinforce the power grid. If the solution requires laying or reinforcing the power grid, apart from considerations on cost-effectiveness and impact on tariff, the works and applications involved will be complicated and time-consuming. FiT applicants may choose to accept immediately a generating capacity at a level lower than that they have applied for, or to wait till completion of the reinforcement works which would allow connection of their RE systems to the CLP power grid at the capacity level they have applied for. The power companies will continue to explore different ways to flexibly increase the capacity of the power grid, with a view to enabling more systems to get connected to the grid, so that the FiT Scheme can be fully leveraged to facilitate the private sector in developing distributed RE.
(2) To encourage early participation of those who are interested in installing RE systems, FiT schemes worldwide are all designed to offer better FiT rates to those who join the schemes at an earlier stage. Our country has also adopted a similar direction for RE development, and has from 2021 onwards cancelled central financial subsidies for various newly-constructed RE projects and implemented grid parity whereby the FiT rates are determined according to the prices of local coal-fired electricity generation or through participation in market-based transactions. 
     The Government and the two power companies have completed the annual review of FiT rates recently, during which changes in the costs of installing and maintaining RE systems were considered. The FiT rates were adjusted downward from $3 to $5 per kWh to $2.5 to $4 per kWh with a view to providing sufficient financial incentives whilst balancing the tariff impact of FiT. In view of the significant reduction in the cost of distributed RE systems in recent years by about 30 per cent to 40 per cent as compared to that before the FiT Scheme was launched and that there is only a downward adjustment of about 15 per cent to 25 per cent in the new FiT rates, we believe that FiT participants will still be able to enjoy a payback period of about 10 years with the new FiT rates as the Scheme was designed. The new FiT rates will also continue to be among the highest offered by similar schemes worldwide. The new FiT rates can thus continue to provide sufficient and appropriate financial incentives, thereby continuously encouraging various sectors of the community to participate in the development of distributed RE systems.
(3) The FiT Scheme is implemented under the Scheme of Control Agreements (SCAs) signed between the two power companies and the Government. As the SCAs run till December 31, 2033, FiT is offered throughout the project life of the RE systems that have joined the FiT Scheme until the day when the term of the SCAs expires. 

     As mentioned above, subsidies for RE systems have been gradually reduced internationally. From 2021 onwards, our country has cancelled the central financial subsidies for various newly-constructed RE projects and implemented grid parity. Under this general direction, we believe that the chance of the FiT Scheme being extended beyond the expiration of the SCAs in 2033 is slim. Yet the electricity produced by the relevant RE systems will belong to the owners of the relevant systems and can thus ease off the owners’ expenditure on electricity charges.
     The Government will review and adjust the measures on promoting RE from time to time having regard to actual circumstances in striving to meet our target of increasing the share of RE in the fuel mix for electricity generation to 7.5 per cent to 10 per cent by 2035 and to 15 per cent gradually thereafter, with a view to attaining the long-term goal of “net-zero electricity generation” and carbon neutrality before 2050.
     Thank you, President.
Ends/Wednesday, June 15, 2022
Issued at HKT 14:45
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