Just who is leading Hong Kong’s electricity market development?

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Under a plan to sharply reduce its carbon intensity, Hong Kong plans to increase the ratio of natural gas in the fuel mix from 27 per cent in 2015 to 50 per cent by 2020, and higher still by 2030. Photo: David Wong

Published: 7:01pm, 12 Jul 2018Updated: 10:00pm, 12 Jul 2018

Last week, the Executive Council approved the five-year development plans for CLP Power and HK Electric, while the Environment Bureau proposed to spend HK$8.7 billion to ease the burden on households from the tariff rise in the next five years. This raises a few questions.

I am sure the Environment Bureau was aware of the potential tariff increase while developing climate change policies. The Hong Kong Climate Ready Action Plan 2030+ launched last year stipulates an aggressive carbon intensity reduction target of 65 per cent to 70 per cent by 2030.

It requires increasing the ratio of natural gas in the fuel mix from 27 per cent in 2015 to 50 per cent by 2020, and higher still by 2030. The two power companies will therefore invest substantially on new gas-fired units and purchase more natural gas in the coming years.

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Moreover, the global demand for natural gas is expected to rise when nations act to fulfil their commitments to the Paris climate agreement.

In last five years from June 2013, the price of natural gas reached its lowest level, of US$1.70 per million metric British thermal units, in March 2016; since then, the price has kept rising.

A view of HK Electric’s power station on Lamma Island. Hong Kong’s two power companies, HK Electric and CLP, will invest substantially on new gas-fired units and purchase more natural gas, the price of which is rising, in the coming years. Photo: Roy Issa

If the government had considered these factors, it should not have been difficult to predict the tariff increase under the controversial regime of the “scheme of control” agreements with the power providers, and wouldn’t have given the public a false hope of a 5 per cent decrease in tariff in the new agreements.