Renewable Energy in Hong Kong: Worth it or not?

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Cheap, clean, politically palatable and rock-solid stable. We want it all when it comes to energy.  Hong Kong faces hard choices.

The relative affordability of coal explains much of the reason why tropical Hong Kong is chilly all summer and lit up all night. Some want to save the planet, but many Hongkongers balk at much higher costs of wanton implementation of renewable energy.

Today, the average price for a unit of electricity in Hong Kong is around HK$1. According to Hong Kong Electric’s (HK Electric) data provided, wind power is 180%-230% the price of coal combustion. If this city went all wind, consumers would have to pay HK$1.8-HK$2.3 for each unit of electricity generated from wind power. Electricity bills would be doubled.

Renewable energy only constitutes around 1% of Hong Kong’s current fuel mix.

Gavin Edwards, Director (Conservation) of World Wild Fund-Hong Kong (WWF), takes a different tack.

“A lot of people have a poor understanding of the potential for renewable energy,” Edwards says. “Last century, renewable energy was very expensive and not very technologically advanced. In the last five years, it has moved very quickly, but not many people have access to that information.”

Another frequently raised concern is whether Hong Kong’s climatic conditions can provide sufficient energy to power all Hong Kong. Perhaps not entirely, but Edwards thinks solar is worth a try, regardless.

“We estimate about a third of the city can be powered by renewable energy,” he says, “Predominantly by solar PV, offshore wind, and then maybe some waste-to-energy as well; but solar PV and offshore wind are most encouraged by the government.”

It sounds impressive, but may be easier said than done. Renewable energy only constitutes around 1% of Hong Kong’s current fuel mix. Making that number more than 30 times greater could be a huge challenge.

Clouding solar’s future

According to WWF research, the current payback period on a solar PV panel installed in Hong Kong today would take about 46 years. However, the lifespan of a solar PV panel is around 25 years. In Taiwan, on the other hand, it only takes 15 years for a solar PV panel to pay back those who install it.

“[The difference] is because the proper policies are not in place [in Hong Kong]. There aren’t policy incentives to promote demand for solar PV ,” WWF Senior Campaign Officer (Climate) Sarah Keung explains. “By implementing a feed-in tariff scheme, people would be motivated to install solar PV panels as the installation costs can be compensated by the tariff, or even make profit from it.”

There, cost is put back on the power company. The feed-in tariff scheme operates by making power companies buy renewable energy from small-scale producers at a higher price, and sell the same amount of electricity generated from fossil fuel to the same small-scale producers at a lower price. Those installing the renewable power generators, in effect, receive a subsidy whose cost must be borne by the whole consumer base.

This scheme could work well for non-residential consumers like schools and office buildings. On weekends and holidays, the solar PV panels would still be working, with little drawdown on the energy reserves as schools and offices would be partially vacated. If the solar PV panel could be connected to and constantly fed into the public grid, the energy could be used by someone else out in the public grid, and owners of the panels would get paid back. As solar power cannot be stored up for too long, the energy is likely be wasted anyway.

Presently, HK Electric has two renewable energy projects connected to the grid, Lamma Winds and a solar power system, both operated by the company itself. CLP has around 200 individual small-scale renewable energy producers connected to the grid who have received technical support and backup power supply from CLP.

These producers have not installed meters, inhibiting measurement of production. Small production levels have only been used for personal consumption. According to CLP, none of them are capable of producing surplus electricity for the public grid.

The company is on the record as recommending against implementing a feed-in tariff scheme. CLP Director of Marketing Services Chow Lap-man claims using feed-in tariffs in Hong Kong is ‘impractical’, according to the SCMP (June 12, 2015), due to the small production levels.

Renewable energy depends heavily on weather conditions, making it impossible to ensure stable supply when used in isolation.

Top up

A different policy option is the net metering system. Under this system, consumers power themselves with renewable energy most of the time; but if the consumption exceeds production, they buy electricity generated from fossil fuel from power companies.

In this case, the installation and maintenance costs will not receive compensation from government nor from power companies. Solar power generated during the time the structure is not in use is wasted as well.

Net metering is considered a less than ideal option by green groups like WWF as it falls short in incentivising consumers. However, power companies tend to favour this option, assuming they do not have to bear the cost or risk associated with  consumers’ installation  and maintenance of renewable energy generators.

Keung believes now is the right time for the government to actively promote solar power.

“The technology has improved a lot over the years,” she says. “The price of solar PV panels has dropped by 80%.”

CLP explains that the price of the solar panel constitutes only 20% of the total cost. Much of the cost is attributed to maintenance and complementary services. Since solar PV panels produce direct current electricity, installation of a device that converts direct currents to alternating currents is necessary.

Renewable energy depends heavily on weather conditions, making it impossible to ensure stable supply when used in isolation. Solar-powered buildings would still have to rely on electricity generated from fossil fuels on the days when sunshine is lacking. CLP requires that for every renewable energy generator, the power company has to have fossil fuel capacity that is capable of producing the same amount of electricity, as a backup plan.

CLP and HK Electric have a 40%-50% plant margin—that means having stand-by generator units that are capable of producing extra 40%-50% electricity whenever regular units fail—so as to maintain 99.9% uptime. Keung questions whether such high margin is necessary:

“Hong Kong power companies take pride in their 99.9% uptime, and tell you that they provide very good services to consumers,” she says, “But consumers paid for it! The power companies build the units with the money they made from consumers.”

It is likely that the issue of plant margin will be brought up again as part of discussions around the renewal of the Scheme of Control, the arrangement whereby energy pricing and provision are regulated.

Don’t use it in the first place

With all that’s being said, it is undeniable that renewable energy costs significantly more than fossil fuels. If Hong Kong wants both cleaner energy and cheaper electricity bills, we might have to start with cutting down on our usage.

“If we are going to spend the money, how should we spend it?”—Robert Gibson, Fellow at Civic Exchange.

According to the government consultation document on the future of Hong Kong electricity, having an offshore wind farm to power 1%-2% of the city will result in a 3%-5% increase in the electricity tariff. In other words, say one pays HK$100 for 100 units all-coal power. If an offshore wind farm is built, the new price on the electricity bill becomes HK$101-HK$104: HK$98-99 for 98-99 units of coal power, and another HK$3-5 for 1-2 units of wind power.

Robert Gibson, Fellow at Civic Exchange, thinks that is still too much:

“That to me is too expensive, four times the price [per unit]! That’s an enormous difference,” he exclaims. “If we are going to spend the money, how should we spend it? The money we are talking about is a HK$10 billion investment if these wind farms went ahead. […] If you are to spend that money on improving the energy efficiency of buildings, you will have more substantial saving than 1% of the electricity bill.”

Edwards holds a similar view. The government projects that in the future, natural gas will account for 50% of Hong Kong’s fuel mix. But he has a different vision: “We can cut our energy use by 50%,” he says.

WWF runs a “Low-carbon Office Operation Programme” in Hong Kong, helping local offices reduce energy consumption and carbon emissions. Measures to reduce consumption includes changing to LED lighting, installation of split type air conditioning, improving electrical loops, and so on.

By cutting total energy use by 50%, combined with powering a third of the city with renewable energy, Hong Kong’s consumption of fossil fuels would be reduced to less than 20% of current levels, according to Gavin Edwards. Carbon emissions would drop significantly as well.

Beyond the dollar

Expensive renewable versus cheap fossil fuels. Simple choice then. Or not.

“Coal is not paying the hidden costs. Coal and gas are heavily polluting. Their single biggest price is climate change. The impact of climate change can be far greater.”—Gavin Edwards, Director (Conservation) of WWF-HK

Edwards claims carbon emissions are the uncounted cost. Edwards believes this dichotomy fails to address the costs not written in dollar signs. The environment pays a great price.

“Coal is not paying the hidden costs. Coal and gas are heavily polluting,” he says. “Their single biggest price is climate change. The impact of climate change can be far greater.”

While Hong Kong’s impact is small in the global impact of mankind’s CO2 output, Edwards believes we need to make our contribution.

“If we have no contribution to tackle the climate change, and if the whole world take this attitude, then what will be the cost to the city?” Edwards says. “The sea level will rise, food production in the Pearl River Delta will be heavily impacted by the floods.”

Not all costs, it seems, make it on the bill Hong Kong consumers pay every month, but some day a bill will be paid.

This summer, HT will continue investigating different challenges and solutions to Hong Kong’s electricity supply. Next issue: Nuclear energy.