The Chief Executive of Hong Kong, Secretary for the Environment, Director of Electrical & Mechanical Services,
In view of the global climate challenges, we urge the Government to take the following actions:
Incorporate the 【4R20】plan into the Hong Kong Climate Action Plan, so as to increase the share of renewable energy in power generation to 4% by 2020.
Adopt the【4R20】plan as the basis for negotiation of the Scheme of Control Agreements with the power utilities, so as to turn the companies into partners for renewables, and to allow members of the public, the community and business sectors to participate actively in renewable energy development.
For details of the【4R20】plan, please see below.
【4R20】plan – Achieving 4% Renewables by 2020
Data from the International Monetary Fund shows that Hong Kong government is making annual subsidy of more than US$9.64 billion in 2015 for the use of fossil fuel. Since electricity generation accounts for 54 per cent of the city’s fossil fuel consumption, mostly in the form of coal and natural gas, we can conclude that power generation and consumption benefit from about HK$40 billion subsidy.
Fossil fuel subsidies stand in the way of changes needed to achieve the goals set at last year’s Paris climate summit of a net-zero carbon economy this century, according to both the UN and the World Bank.
In Hong Kong, the scheme of control agreements will expire in 2018, providing an important opportunity for change. The city has the potential for solar, wind, tidal and wave power. The key lies in shaping a beneficial renewable energy policy and an enabling market environment.
To shape policy, we can learn from the experience of similarly developed economies. Based on their experience we can develop a credible [4R20] plan – achieving 4% renewables by 2020, using the five pillars below:
Market access and diversification is important. Beyond 2018, power company regulations should give priority access to all who are willing and able to generate renewable energy, with a guaranteed connection to the grid.
Investment in renewable energy must be supported by a guaranteed price for clean electricity. Guangdong province, for one, pays twice the rate for solar power as for coal-generated electricity. In Macau the feed-in-tariff for distributed solar power is around HK$4 per kwh. Hence it is reasonable for the feed-in tariff for renewables to be set between HK$2-4 in Hong Kong.
A redirection of existing funds is needed. The Environment Bureau wants to revise the scheme of control agreements so the permitted return on fixed assets is lowered from 9.9 per cent to around 6 per cent. If all or part of the reduction went into a feed-in tariff fund (FIT Fund), it could provide a stable source of funding to encourage the development of renewable energy in Hong Kong.
Since each percentage cut of permitted return is equivalent to HK$1.5 billion, the FIT Fund can be endowed with HK$4.5 billion annually by one of the following ways:
- A 3% cut on permitted return paid into the Fund;
- A 2% cut on permitted return paid into the fund, with a 2:1 matching grant by government.
If the average feed-in tariff is set at HK$2.50 per kWh, the fund would be sufficient to buy 1.8 billion kWh of clean electricity per year. This would kick-start renewable energy power generation by raising its contribution to 4 per cent of total production.
Providing space for community participation is vital. Citizens and businesses with suitable rooftops could take advantage of clean energy programmes. The government could allot space in housing estates, public facilities and other suitable areas for groups to form social enterprises and plan community-based investment in solar or wind power facilities.
Germany has invested heavily in renewables, which now account for a third of its energy use. Some 92 per cent of Germans support the transition. One of the main reasons is that the government placed great emphasis on opportunities for ordinary citizens to participate in creating and benefiting from renewable energy programmes through funding and investment schemes.
In Hong Kong, there are 17 reservoirs suitable for the installation of floating solar power plants, similar to those now appearing elsewhere. Offshore waters are also suitable for the installation of wind farms.
Green finance is essential for the new era. With a stable feed-in tariff, renewable energy schemes are predictable enough to attract green funds from around the world. To allow more people to share the fruits of renewable energy development, the government could consider issuing green bonds.
There are many advantages to the transition to renewable energy. A transformation of our energy system to multiple technologies and diverse suppliers will stimulate the economy and create green jobs.
The power companies may see asset growth stemming less from generation and more from an expanded role as providers of a smart grid. A new energy model for Hong Kong can reduce pressure on the government to import power from the mainland. It will also mitigate pubic calls to open up the electricity market, or interconnect the two existing power grids, or to separate power generation and distribution.
For the public, implementing a feed-in tariff does not increase electricity tariffs. On the contrary, introducing more diverse renewable energy sources would reduce future vulnerability to increases in gas prices and electricity costs. The public would also benefit from reduced pollution and avoid hefty health care costs.
Meanwhile, local business can find new opportunities in engineering design, equipment supply, installation and maintenance in the fast-growing renewables sector.
For the financial sector, the development of local renewable energy projects is the best opportunity for Hong Kong to become a credible green finance centre. By 2030, it is estimated the world needs US$2.4 trillion invested in renewable energy to reach targets set in Paris.
China’s National Energy Administration has set a national average target for utility companies to generate 9 per cent of total electricity from renewables by 2020, not including hydroelectric or nuclear power. For Guangdong province, the target is 7 per cent. In this context, the plan outlined above for Hong Kong to put in place incentives to generate 4 per cent of its power from renewables should be seen as only a first step in the right direction.