The year 2015 will mark a milestone on some environmental protection issues such as global climate change and the targets for sustainable development, and Hong Kong will definitely be part of it.
Last year the Environment Bureau released a consultation document on “Future Fuel Mix for Electricity Generation”, and in December the Consumer Council published a detailed research report on the structure of the local electricity market and put forward some constructive suggestions. At the same time, the Scheme of Control Agreement (SCA) made between the government and the two power companies is due to expire in 2018 and will be subject to review by then.
Like I said before, Hong Kong requires an energy policy that can meet the electricity needs of the general public and secure our energy self-sufficiency given our geographical limits and lack of natural resources. On the other hand, in order to cut carbon emissions over the next 30 years according to plan, the government must speed up the pace of introducing clean and renewable energy.
As we all know, electricity is a commodity that we cannot live without, and because of its steady demand and the protection of the SCA, there are simply no incentives for the two local power companies to be proactive in searching for more diversified and cheaper fuel supply. To make matters worse, they often pass their cost on to consumers on the pretext of introducing clean energy sources.
The report by the Consumer Council suggested that diversifying our fuel sources for generating electricity will definitely prove more efficient than opening up the electricity market to full competition. Reform of the electricity market might take years to achieve, and I don’t think the government will be able to revolutionize the entire market structure in 2018. Therefore we should, in the short run, stay more focused on revitalizing the existing SCA so that it can keep pace with changing social atmosphere and public expectations.
For example, when reviewing the scheme, the government should put more emphasis on the reduction of carbon emissions, energy efficiency and network reliability instead of focusing almost entirely on adjusting the rates of return enjoyed by the two power companies like it did before.
One thing I need to point out is that the existing terms under the current SCA don’t even mention the reduction of carbon emissions, which I find unacceptable because it not only neglects the long term impact of climate change on the global environment but also ignores Hong Kong’s basic responsibility as an international city.
Some experts suggest the government get rid of the SCA and open up the electricity market to full competition. But that won’t be practical.
Since power supply affects hundreds of thousands of households and businesses across the city, it seems unrealistic to rely on the power companies to regulate themselves.
The electricity market should always remain under strict government regulation as maintaining high standards of service reliability and safety should always be the prime concern when it comes to power supply. The high standards must not be compromised even if the government introduces a certain degree of competition to the local electricity market in the future.
On the other hand, it has become highly controversial as to whether Hong Kong should continue to use nuclear energy, especially after the Fukushima nuclear meltdown in 2011.
In order to eliminate our dependency on nuclear power in the long run, Hong Kong should increase the use of natural gas and renewable energy by improving our current gas transmission and distribution network through regional cooperation, building more natural gas storage facilities and strengthening cooperation with the Mainland on developing renewable energy. The government should also set targets to increase the proportion of natural gas and renewable energy use in our total energy consumption in the future.
It is undeniable that the development of renewable energy often requires a huge amount of investment in its initial stage, and demands a lot of expertise and infrastructure. It might also take a long time before the project really gets off the ground. But once it does, the pay-off is enormous, and will not only create a better living environment for our next generation but also facilitate the diversification of our economy and upgrade the social capital of Hong Kong.
In conclusion, even though the Consumer Council’s report did not lay down any detailed and specific framework for our electricity market reform, it has already drawn public attention and sparked further discussion. The administration should therefore facilitate public participation in the consultation over how to reform the market structure of our electric supply, so that the market will be able to fulfill changing public expectations in the post-2018 period.
This article appeared in the Hong Kong Economic Journal on Jan. 7.
Translation by Alan Lee
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