Power industry appears to be leading the government when it comes to developing market

(13 July 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.
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.
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.
Questions have been raised by lawmakers and green groups regarding the investment to build connections with the China Southern Power Grid, since this option was rejected in the 2014 public consultation on the future fuel mix for electricity generation in Hong Kong, and was shelved.
Since an earlier consultation on the future development of the electricity market in Hong Kong in 2005, opening the electricity market for competition; splitting the transmission business from power generation; and overhauling the scheme of control have been the key proposals raised and discussed, repeatedly.
After all, it seems that the power industry has been leading the administration to develop the future electricity market. No wonder no fundamental changes were made to the scheme of control agreements that keep guaranteeing healthy profits for a well-developed business in Hong Kong.
Edwin Lau
Executive Director of The Green Earth
13 July 2018 SCMP