Fuel bills will go up substantially as power firms move away from coal
The increase in electricity prices proposed by the power companies comes as no surprise. Such rises are attributed to a HK$10 billion capital project completed in 2010 on emission control measures at Castle Peak B station and Lamma power station, and an increase in the amount of natural gas, to 30 per cent of the fuel mix, used for power generation. These measures were taken to meet the 2010 emission caps imposed by the Environmental Protection Department.
HK$10 billion in capital expenditure means an annual return of HK$1 billion for the power companies, based on the permitted rate of return of 9.99 per cent allowed in the scheme of control agreements. The cost of generating electricity using natural gas is more than double that of coal. This is why both power companies can increase their electricity prices by close to 10 per cent.
Hong Kong's fuel mix in 2010 was 30 per cent gas, 23 per cent nuclear and 47 per cent coal. The government proposes a fuel mix of 40 per cent gas, 50 per cent nuclear, 2 to 4 per cent renewables and 6 to 8 per cent coal as a core measure to achieve a carbon intensity reduction target of 50 to 60 per cent by 2020, using 2005 as a base year.
To accomplish that, the power companies can ask for electricity prices of more than HK$2 per unit in 2020 due to:
Investment in a gas pipeline to bring in new gas to CLP Power due to depletion of the Yacheng 13-1 gas field;
The fact the new gas is four times more expensive than that from the Yacheng13-1 gas field;
Investment in power transmission lines to bring nuclear power to Hong Kong Island;
The fact additional nuclear power will be more expensive than that presently used; and
HK$10 billion investment to build 300-megawatt offshore wind farms can earn an 11 per cent return.
Another important issue is the big reduction in the amount of coal in the fuel mix. This means that most of the coal-fired units retrofitted with HK$10 billion emission reduction installations will no longer be required after 10 years of service. What a waste.
The community has the right to know that the price of electricity will double to meet the proposed 2020 fuel mix.
Anyway, the most effective way to combat pollution and climate change is to consume less electricity by opting for a much simpler lifestyle.
C. W. Tso, Tai Po