BPA Submits Views on Future Fuel Mix for Electricity Generation

The BPA considers supply reliability to be of primary and immutable importance.

The BPA considers supply reliability to be of primary and immutable importance.

The Business and Professionals Alliance for Hong Kong (BPA) today (18 June) submitted its views to the Environment Bureau in response to a government consultation document on the “Future Fuel Mix for Electricity Generation”.

The Government has put forward two options on meeting Hong Kong’s future energy demands. Option 1 proposes purchasing 30% of total electricity needs from China Southern Power Grid (CSG) while Option 2 suggests increasing local gas-fired generation capacity to 60%. Dr Lo Wai-kwok, BPA Vice Chairman, said BPA was of the view that the key principles of supply reliability, cost effectiveness and environmental were fundamental to the discussion of the issue at hand. He singled out supply reliability as being the most significant and stressed the importance of upholding this regardless of the outcome with the latest consultation exercise.

Dr Lo said that Hong Kong could not afford any incidences of power outage given its standing as an international financial and trading centre. The consequences of blackouts or brownouts would cause widespread market disruption and result in huge economic losses. This would in turn weaken our competitiveness and threaten our status as an international business hub. Hong Kong’s aspiration to develop into a regional data centre would also be called into question. As such, “There should be zero tolerance for the loss of power no matter how short the duration,” Dr Lo said.

The BPA feels that the absence of critical information and data from the Consultation Document to be less than ideal as the public would not be able to make an informed choice as a result. The following is a non-exhaustive catalogue of issues and concerns that would have to be addressed to the public’s satisfaction:

  1. Hong Kong’s two power companies have a record of reliability that is on par with international standards. In 2012, the total duration of power failure was less than 2.6 minutes compared with the CSG’s 192 minutes. Given the distinct differences in reliability there were material concerns that there would a corresponding increase in power interruption duration and frequency if Hong Kong were to import electricity from China. Furthermore, where would Hong Kong stand in terms of priority of access in the event of insufficient supply on the Mainland? Would backup generation units be required to ensure uninterrupted supply?
  2. As regards cost, the public have expressed concerns about the likelihood of a significant rise in prices, as well as a decline in Hong Kong’s bargaining power over the longer term should the majority of our power requirements be met with imports from CSG. Macau provides a useful example; since it began purchasing power from the Mainland in 2007, the price of electricity there has increased by 27% between 2008 and 2013. If Hong Kong were to import electricity from CSG, how could we ensure that there would be a steady and reasonable increase in tariff levels over the longer term? How transparent would be the price adjustment process?
  3. For Option 2, there have been observations that the demand for natural gas in Asia has continued to go from strength to strength. As this would push up costs, would it be possible to cap electricity prices at a reasonable level if local gas-fired generation capacity were to increase to 60% as had been proposed?
  4. The Consultation Document states that the two options were comparable in terms of cost but does not specify the amount of investment involved. In this regard, could more information be provided by the Government on the projected costs, as well as the degree of risk in exceeding the budget limit for each of the options? Who assumes responsibility for the additional costs in the case of the latter?
  5. As CSG relies mainly on coal as a fuel source, would the adoption of Option 1 result in the export of Hong Kong’s pollution issues across the border into the Pearl River Delta region? Are there other alternatives? How can we ensure that the electricity purchased is derived from a clean source?


Dr Lo Wai-kwok, BPA Vice Chairman, said that fuel mix had a profound impact on Hong Kong and that it would extremely difficult to change course once we have decided on a solution.

Dr Lo Wai-kwok, BPA Vice Chairman, said that fuel mix had a profound impact on Hong Kong and that it would extremely difficult to change course once we have decided on a solution.

 Dr Lo pointed out that the issue of fuel mix was closely intertwined with those of supply reliability, electricity price and carbon emissions, and would have a profound impact on the planning of future infrastructure and ancillary facilities. He said, “It is very difficult to change course once we have made up our minds on which option to take.”

Mr Andrew Leung Kwan-yuen, BPA Chairman, criticised the Consultation Document for being too vague. Drawing parallels between the consultation exercise and ordering a meal from a restaurant menu, he said, “What is the cost for Set A (Option 1)? And what about Set B (Option 2)? You will only find out when you are presented with the bill!” The BPA called on the Government to provide more information on such issues as generation costs and operating mechanism to allow the public and businesses to make an informed judgment, rather than to ask for a hasty decision on between Options 1 or 2.

Mr Jeffrey Lam Kin-fung, BPA Vice Chairman, said the BPA welcomed regional cooperation and believed that CSG would improve its supply reliability, efficiency and environmental performance over time. It would, however, be quite challenging to decide between the two options at this stage given the lack of information that was available to the public.

As a result, the BPA urged the Government to provide more concrete data and information to the public and to also explore other options to that would enable us to eventually find an appropriate solution that was sustainable, beneficial and adaptable to the Hong Kong context.

During the consultation period, the BPA organized a seminar on “Hong Kong’s Future Energy Solutions” on 9 June. Stakeholders and government representatives attending the event included Mr Wong Kam-sing, Secretary for the Environment, Mr Vincent Lau Ming-kwong, Deputy Secretary for the Environment, Professor Way Kuo, President of the City University of Hong Kong, Professor Raymond So Wai-man, Dean of the School of Business and a professor of finance at the Hang Seng Management College, Mr Clement Chen Cheng-jen, Chairman of the Hong Kong Productivity Council, Mrs Betty Yuen So Siu-mai, Vice Chairman of CLP Power Hong Kong, and Mr Wan Chi-tin, CEO and Managing Director of HK Electric. They examined the future of Hong Kong’s fuel mix from different perspectives, as well as Hong Kong’s energy autonomy, electricity price trends, natural gas price and supply, and greenhouse gas emissions, among other issues. The BPA has also taken into account the views collected from the business community, as well as local districts when formulating its submission.



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