Hong Kong must warm to the benefits of solar power in future energy mix

Anthony Dixon and Lu Lin say economic and environmental advantages cannot be ignored

There is a persistent and almost universal misperception in Hong Kong that solar energy is an insignificant, costly and unreliable potential source of electricity for the city. The latest manifestations of this appear throughout the Environment Bureau's recent consultation document on the future fuel mix for electricity generation, in which solar energy and renewable energy in general are dismissed.

The fact is that Hong Kong has a relatively high solar energy resource that could deliver more than 10 per cent of our fuel mix with currently available technology and no additional land requirements.

The cost of solar electricity is rapidly approaching parity with conventional electricity and modest subsidies now could accelerate its deployment and stimulate a whole new industry in Hong Kong.

The city receives 1,350 kilowatt hours of solar energy per square metre per year, comparable to mainland China (1,000-2,200), Japan (1,000-1,600) and Britain (900-1,300), countries that were among the five fastest-growing solar electricity markets globally in 2013.

Despite its abundant solar resources, Hong Kong's installed solar generating capacity is only about 2 megawatts. Per capita, that is less than 0.4 per cent of the installed capacity in the UK (not a notably sunny place), where 1,900 solar rooftops are being completed every week and an estimated 25,000 new jobs have been created. Last year, worldwide solar investments reached US$115 billion, of which half was in Asia, according to Bloomberg New Energy Finance.

These figures indicate that Hong Kong is missing out on an important opportunity for economic development and cleaner energy.

Some argue the need for land limits the suitability of solar for Hong Kong. But roof-mounted or building-integrated solar installations require no new land. Recent research at Hong Kong Polytechnic University has shown there is enough roof space in the city to generate 5,981 GWh of electricity per year or 14 per cent of 2011 demand.

Although solar electricity in Hong Kong today is more expensive than electricity from the grid, the far more relevant question for the fuel mix consultation is: what will the cost comparison be in 2023 and the decades beyond?

The cost of solar panels has fallen dramatically in the past five years, with the result that solar electricity is now competitive, without subsidies, with grid electricity in 19 markets around the world, according to Deutsche Bank.

Meanwhile, tariffs in Hong Kong have increased by 28 per cent since 2004 and the fuel mix consultation paper predicts a doubling of future generation costs for both the fuel mix options under consideration.

The convergence of these two cost trends will continue as advancing technology and economies of scale further reduce the cost of solar in the coming years.

Recognising the importance of solar as part of a strategy to mitigate climate change and create jobs, governments around the world are accelerating the deployment of solar through the use of tariff subsidies for limited periods.

What would be the costs and benefits of such a scheme in Hong Kong? A subsidy of 80 HK cents per kilowatt hour in 2015, declining by 8 cents per kilowatt hour every year for the next 10 years on annual installations of 300MW, would enable 6.6 per cent of the city's projected electricity demand to come from solar by 2024 (about half of the potential), cutting the need for coal in option one of the fuel mix consultation from 10 per cent to 3 per cent and enabling some of the ageing coal units to be retired without replacement.

That would avoid some 2 million tons of carbon emissions per annum. The average cost of this subsidy would be HK$540 million per year for 10 years.

A commonly cited shortcoming of solar as an energy source is its variable nature or intermittency. Would the use of solar threaten the prized 99.99 per cent reliability of Hong Kong's electricity supply?

The UK, Germany, Italy and Spain are some examples of industrialised nations where intermittent renewables such as solar and wind make up between 10 and 25 per cent of the fuel mix with no material impact on reliability.

Flexible generation, such as that provided by combined cycle gas turbines, grid storage technologies such as pumped hydro, demand side management, and greater grid interconnectivity are all effective and proven methods to manage modest levels of intermittency.

In a city entirely dependent on imported fossil fuels for its primary energy, our failure to use an abundant indigenous renewable resource - sunlight - is a form of waste.

In the context of our current solid waste management crisis, we must "use less, waste less". However, in the case of solar energy in our future fuel mix, the mantra should be "use more, waste less".

This article appeared in the South China Morning Post print edition as: Hong Kong must warm to the benefits of solar power in future energy mix