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Hongkong Electric

Two million consumers to pay more, but Hongkong Electric tariff frozen

CLP Power (SEHK: 0002) was yesterday given government approval to raise its tariff by 2.6 per cent next year, including the basic tariff, which was adjusted for the first time in 10 years.

But Hongkong Electric (SEHK: 0006)’s charges for next year will be frozen.

The approved increase for more than two million power users in Kowloon and the New Territories triggered fears that it would push up inflation, and raise more questions on the future cost of clean energy.

From January 1 CLP Power’s charge per kilowatt hour will be 91.5 HK cents – 2.3 cents, or 2.6 per cent, higher than the existing 89.2 cents.

The increase includes a 2.6 cent rise in the basic tariff, which is partly offset by a fall in the fuel charge of 0.3 cents made possible by stable prices over the past year.

It means more than 70 per cent of domestic and commercial users will see monthly increases of less than HK$10 and HK$40, respectively.

CLP Power attributed the basic tariff increase to a rise in capital investment on emissions controls, and provision of a replacement gas supply, along with a rise in the cost of raw materials such as copper and aluminium.

“We are seeing in 2010 a slightly higher level of capital expenditure compounded by higher material costs,” Richard Lancaster, CLP Power’s chief operating officer, told the economic development panel yesterday. Lancaster said emissions control projects must be carried out to meet licence requirements, and new gas supplies had to be made ready by 2012 before the existing source from Hainan ran out.

The company is working on a desulphurisation project, and planning new pipelines from Shenzhen to receive natural gas from Central Asia and a LNG terminal.

The company also has to provide about HK$5 billion for power supply infrastructure at new developments such as in Kai Tak. Lancaster said it was the first time in 10 years that the firm had raised its basic tariff, and the new net tariff would still be lower than last year’s level.

Environment secretary Edward Yau Tang-wah said yesterday that while anti-pollution measures at power plants were necessary, they were not the only reasons behind the tariff rise.

He said emissions control accounted for less than a third of the total capital spending of CLP Power, with about a half being spent on power transmission and distribution to new developments.

Hongkong Electric will freeze its tariff at 119.9 cents per kilowatt hour, without changes to either the basic rate or fuel charge.

“We hope this will help the economic recovery of Hong Kong, and minimise the impact on the public,” Tso Kai-sum, its group managing director, said.

However, Tso warned that the company was still under pressure to increase charges, because it had to double its gas use for power generation to 600,000 tonnes next year, and gas was about three times dearer than coal.

A person familiar with the negotiations between the government and the power firms said both companies had originally proposed raising their tariffs by 3-5 per cent. The person said Hongkong Electric would have a greater deficit in its fuel account next year as it expanded its gas intake.

Concerns have been expressed over the cost of increasing gas-fired electricity generation to a half in Hong Kong to improve air quality or mitigate climate change. Hongkong Electric said it needed to build more gas-fired units for this, while CLP Power said that its newly sourced gas supply from the mainland would be more expensive than what it was currently paying.

Meanwhile, legislator Lee Cheuk-yan criticised CLP Power for ignoring the financial difficulties low-income groups faced.

“This is likely to trigger a chain of price increases and the poor, who have not had any pay rises in recent years, are the hardest hit,” the unionist said.

Miriam Lau Kin-yee of the Liberal Party queried if it was justifiable for power firms to pass on all capital spending to consumers.

CLP Power replaced generators in island with wind and solar power

CLP Power introduce green technology in Island.

CLP Power introduce green technology in Island.

Transfer electricity to the islands had long been a problem for the engineers in power plants. Neither using submarine cables nor overhead lines would be practical for the electricity supply to the island. Using an overhead line would damage the sea view, but using submarine cable would damage coral in the sea. However building wind and solar power facilities can be a good alternative now. CLP Power is a good example on this ecology friendly technology.

The Dawn Island Drug Treatment and Rehabilitation Centre located in Town Island, southern tip of Sai Kung, and using generators for electricity supply for years. However it is not effective and do harm to the environment. The generators emitted carbon dioxide while operating. At the same time they often break down, and the Centre needs to stop electricity for many times a day. The CLP Power therefore will build wind and solar power facilities to replace the generators, and the Dawn Island Drug Treatment and Rehabilitation Centre will become the first location in Hong Kong powered entirely by renewable energy.

Drug Treatment and Rehabilitation Centre will become first location in Hong Kong powered entirely by renewable energy.

Drug Treatment and Rehabilitation Centre will become first location in Hong Kong powered entirely by renewable energy.

After the install of solar plants and wind turbines, they will provide 192kW of electricity which enough to run about 200 air conditioners. At the same time, carbon dioxide emissions will be reduced by 70 tonnes a year, and the electricity generated can be used in hostels, visitors’ centre and other facilities.

This is a good example for us to follow, and will give us valuable experience on green energy development. For now there is a small rehabilitation centre powered by renewable energy, how about a New Territory village later on? If the scale increased, we can have a whole district powered by renewable energy, and reduce carbon dioxide emissions dramatically. Let’s support more green energy proposal just like the Dawn Island one.

Hongkong Electric Plans Overseas Growth as Net Falls (Update3)

By John Duce, Bloomberg

Aug. 5 — Hongkong Electric Holdings Ltd., controlled by billionaire Li Ka-Shing, plans to expand overseas after a government agreement in the city limiting returns led to a decline in first-half profit.

Net income fell 16 percent to HK$2.67 billion ($345 million) from a year earlier, the company said in a statement to the Hong Kong stock exchange today. That’s better than a median estimate of a HK$2.52 billion profit in a Bloomberg survey of five analysts. Earnings from operations in the city dropped 35 percent.

“We will continue to look for investment opportunities outside Hong Kong,” Chairman Canning Fok said in the statement, without elaborating. The utility expects electricity sales in Hong Kong to remain little changed in 2009.

Under a Scheme of Control agreement introduced in January, the rate of return on fixed-asset spending by Hongkong Electric and bigger rival CLP Holdings Ltd. was reduced to 9.99 percent from between 13.5 percent and 15 percent. The agreement, valid until 2018, links power companies’ returns to efforts to cut pollution for the first time.

“The results reflected the new limits on returns,” Michael Yuk, an analyst at Sun Hung Kai Financial, said in Hong Kong. “The company will have to continue its policy of investing in businesses overseas to try to lessen the impact and achieve more growth.”

Overseas Projects

The city’s second-biggest electricity supplier has invested in projects in mainland China, the U.K., Thailand, Australia and New Zealand to offset reduced earnings from Hong Kong. Earnings in its home market fell to HK$1.8 billion in the first half, while profit from overseas operations more than doubled to HK$883 million, today’s statement said.

Higher contributions from abroad have helped to counter the impact of the lower rate of permitted return, said Fok.

Shares fell 0.4 percent to HK$42.20 in Hong Kong. The Hang Index dropped 1.5 percent. The stock has declined 2.6 percent this year, while the Hang Seng gained 44 percent.
Electricity sales in Hong Kong in the first six months fell 0.6 percent, today’s company statement said. Directors have declared an interim dividend for this year of HK$0.62, the same as given in 2008.

Hongkong Electric said in March, when it announced its annual results for 2008, that 2009 would be “challenging” and the revised Scheme of Control would likely cut earnings.

Domestic operations posted a HK$7 billion profit in 2008, before the revised limits on returns were introduced, while earnings from overseas projects exceeded HK$1 billion.

The utility’s more recent overseas acquisitions include the HK$5.68 billion purchase of three power stations in mainland China from parent company Cheung Kong Infrastructure Holdings Ltd. The supplier of 20 percent of the Hong Kong’s power also acquired a 50 percent stake in the electricity distribution network in Wellington, New Zealand, last year and increased its holding to 35 percent in Northern Gas Networks in the U.K.

Local Electricity Production

Local Electricity Production
Year Quarter Electricity generated at local plant
1979 41 006
1980 45 537
1981 47 912
1982 52 223
1983 59 360
1984 64 524
1985 69 298
1986 77 108
1987 85 513
1988 91 827
1989 98 508
1990 104 256
1991 114 800
1992 126 272
1993 129 411
1994 96 267
1995 100 496
1996 102 384
1997 104 195
1998 113 092
1999 106 185
2000 112 783

Lamma Island power station cleans up its act to meet pollution-reduction targets

Austin Chiu, SCMP

Hongkong Electric (SEHK: 0006) has installed new equipment at its Lamma Island power station, marking the completion of the first phase of a HK$1 billion project aimed at reducing emissions of gases that contribute to smog and acid rain.
The first phase of the project included the installation of a flue-gas desulfurisation system, which cuts sulfur dioxide emissions, and a burner system designed to produce less nitrogen oxides. The new kit is expected to reduce emissions of sulfur dioxide by 45 per cent and of nitrogen oxides by 23 per cent.

Two more desulfurisation systems and another low-nitrogen-oxides burning system are to be installed by April.

The new desulfurisation equipment, using German technology, can remove 92 per cent of the sulfur dioxide content from coal smoke. The low-nitrogen-oxides burner system, from the US, cuts production of the gases by 60 per cent.

The firm also expects to boost the proportion of its power output produced by burning liquefied natural gas to 30 per cent by January, after the conversion of an oil-fired generating unit. It already has one LNG-powered generator.

Burning LNG does not produce sulfur dioxide or respirable suspended particles, so increasing its use would mean lower emissions, said Tso Che-wah, the company’s general manager for projects.

“With the emission-reduction programme, together with our plan to increase gas-fired generation to around 30 per cent, we are confident of achieving the government’s 2010 emissions targets,” Dr Tso said.

The government has set a target of cutting sulfur dioxide emissions by 45 per cent from 1997 levels. It wants to reduce emissions of nitrogen oxide by 20 per cent and of respirable suspended particles and volatile organic compounds both by 55 per cent.

Dr Tso also said the company was working on the environmental- impact assessment for its proposed wind farm off Lamma Island, which would comprise 35 wind turbines with a generating capacity of 100 megawatts. The proposal would be ready for public consultation by the end of the year, he said.

Meanwhile, the Advisory Council on the Environment yesterday approved CLP Power (SEHK: 0002)’s proposal to build a wind farm off Sai Kung on the condition that it increase fisheries resources, maintain close contact with the fishery industry and strengthen environmental monitoring.

200MW Wind Farm off Sai Kung Viable, CLP Power Says

Cheung Chi-fai, SCMP – Updated on Jun 03, 2009

An offshore wind farm at Sai Kung, capable of generating enough power for 80,000 households, was technically feasible and environmentally acceptable, CLP Power said yesterday.

The project, which the utility has been developing for three years, calls for 67 wind turbines 135 metres high near the Ninepin Islands, about 10km east of Clear Water Bay in Sai Kung. The turbines have been shifted 1km east in response to residents’ concerns about the visual impact.

“You won’t be able to see it clearly most of the time, especially in hazy weather as it is quite far away from land,” said Joseph Law Ka-chun, the project manager for CLP Power.

The farm would have a capacity of 200 megawatts – enough power for 80,000 households – avoid carbon emission, and help towards Hong Kong’s goal of getting 1 to 2 per cent of its energy from renewable sources in the next decade, the utility said.

CLP Power and its partner in the project, Wind Prospect, which designs and builds turbines, are today releasing their environmental impact assessment report, which they have submitted to the Environmental Protection Department for approval. The bureau still needs to review the business plan, and the project financing would then have to be arranged. Work would begin after 2011 and take three years.

But once completed, the wind farm, spread across 16 sq km, would be comparable to the world’s largest – 91 turbines with a 209MW capacity in the North Sea off the west coast of Denmark.

Hongkong Electric is also studying building a 100MW offshore wind farm adjacent to the CLP Power’s near Ninepin or south of Lamma Island. The utility said an estimate of the cost would only be available after detailed studies on the wind and the waves, which affect the size of the turbines. An earlier estimate by the utility, however, put the cost of a 100MW wind-farm development at about HK$3 billion.

Each CLP turbine would be set between 500 and 650 metres apart. The electricity would be transmitted via a 25km undersea cable that connected to CLP’s grid at Tseung Kwan O. If the wind was sufficiently strong and the technology worked, an alternative plan of installing 40 wind turbines of 5MW each would be considered.

The turbines would be coated only with non-reflective paint, and the air-traffic warning lights would point skywards, with the intensity carefully planned, CLP Power said. For security reasons, marine traffic in the area would be restricted to authorised vessels. But the utility has not ruled out some form of limited tourism at the site.

Mr Law said the construction method, similar to that used for offshore oil and gas drilling platforms, was endorsed by the Buildings Department after a pilot test last year.

It did not require dredging and avoided the negative impacts of conventional drilling and piling into the bedrock beneath a 30 metre layer of mud and sand.

No offshore wind farms had been built with this technology yet and the cost was similar to that of conventional piling.



‘Smart’ Meters To Help 20,000 Firms Cut Power

Cheung Chi-fai, SCMP – Apr 13, 2009

About 20,000 businesses that use large amounts of power, such as restaurants and hotels, will have their meters replaced with “smart” ones that will enable them to monitor their consumption online, Hongkong Electric (SEHK: 0006) has announced.

The data fed by the meter to a business’ computer network can help the business come up with ways to reduce energy bills by as much as a few per cent, the utility says. A hotel, for instance, could decide to run its laundry at night instead of during peak hours. “It will be a useful tool for our users to understand their power consumption patterns at different time intervals,” Hongkong Electric manager Ip Pak-nin said.

“The data will help them formulate energy conservation measures accordingly and gauge the success of these measures.”

Hongkong Electric installed the meters for about 4,000 commercial and industrial users in 2002, Mr Ip said. It would install 20,000 more for other users that consume about 20,000kW a month.

Smart meters take a snapshot of consumption levels every 30 minutes and transmit the data to the users’ computer network.

Businesses can check whether energy-saving measures are working by comparing levels against previous baselines.

They can also receive suggestions on how to reduce consumption through other adjustments.

“It will be a useful tool for our users to understand their power consumption patterns at different time intervals. The data will help them formulate energy conservation measures accordingly and gauge the success of these measures,” Mr Ip said.

Bills for heavy users are calculated differently from those for the public. They are charged not only for kilowatts consumed but also on the basis of their energy demands and when they are made, which is referred to as “maximum loading”.

Hongkong Electric said that if businesses could reduce maximum loading, they could potentially cut their power bills by a few per cent.

Currently, 1,800 top power users, or those accounts consuming no less than 25,000kW a month, pay a maximum demand fee on top of the charge for units used. The fee accounts for 10 to 20 per cent of a heavy user’s bill. Hongkong Electric has invested in the city’s distribution and transmission infrastructure. The smart meter replacement will start later this year and take about 10 years. Meters approaching the end of their life span would be given priority to avoid waste, Mr Ip said.

The smart meter has a life span of about 15 years, half of the mechanical meter, and is also three times more expensive for Hongkong Electric, although it saves the utility money as staff are not required to read the meter on a regular basis.

Mr Ip said they had no plan to introduce the smart meters to homes since their consumption was lower and the basic energy-saving measures, like the use of more efficient products, were sufficient to help them conserve power.

He said the utility would continue to provide advice to the public on how to conserve energy.

Under the new scheme of control agreed last year, the power firm will receive an extra combined total of 0.02 per cent of the rate of return for completing at least 50 energy audits, and achieving a saving of no less than three gigawatt hours a year.

Substation Uses 15pc Less Power With Roof Garden, Sun And Wind

Ng Yuk-hang, SCMP – Updated on Dec 26, 2008

Two windmills on the roof of a grey building in Marsh Road, Causeway Bay, might not mean much to the casual observer but they are clues to the unique character of what Hongkong Electric calls the “first green substation in Hong Kong”.

The Marsh Road substation, which came into use in August this year, serves Wan Chai, Admiralty and Central, including the Tamar site where the new government headquarters will be built.

Hongkong Electric said the project cost HK$100 million, of which 2 per cent was spent on environmentally friendly facilities.

The six-storey substation uses 15 per cent less electricity each year than traditional substations.

That amounts to 250,000 kWh, or the equivalent of a month of electricity used by 714 families, according to Tso Che-wah, the power company’s general manager for projects.

The British-made windmills and 16 solar panels provide enough energy to light the entire substation.

Meanwhile, the building uses light-emitting diode tubes and energy-saving 16mm fluorescent lights, which consume less energy, have a longer lifespan and lead to lower carbon dioxide emissions.

Dr Tso said the substation was characterised by its rooftop garden, whose plants helped to lower the interior temperature by 2 degrees Celsius – in turn saving 10 per cent of the energy used each year on air conditioning.

The plants are watered mainly by rain, which is collected and stored in a tank on the roof. That saved about 180,000 litres of water a year, Dr Tso said.

The substation had been built in an environmentally friendly way, he said. It used concrete that contained 5 per cent fuel ash, from the company’s power station on Lamma Island.

Further, the rooftop was paved with recycled plastic waste.

Inside the building, elevators are switched off if left unused for more than 30 minutes, while extra windows for ventilation in the corridors reduce the need for air conditioning.

The Marsh Road substation was built to “accommodate community development in the next decade”, Dr Tso said.

Hongkong Electric has about 40 substations on Hong Kong Island.

Some older substations had been renovated to include more environmentally friendly features.

For example, a rooftop garden was added to the Connaught Road zone station, which is next to the Harbour Building.

Future substations would all be green, according to Dr Tso.

HK Aims To Raise Proportion Of Clean Fuels To 50% At Power Plants

Thomson Financial News – 15 October 2008

The government aims to increase the proportion of clean fuels in the power generation sector to 50 % of generated output to combat pollution, Hong Kong Chief Executive Donald Tsang said.

‘As electricity generation is a major source of pollution in Hong Kong, I pay special attention to ways of reducing coal-fired power generation and promoting the wider use of clean fuels while maintaining secure supplies of energy,’ he said.

He noted in his annual policy address that 28 % of electricity generated by power plants in Hong Kong comes from gas-fired facilities at present.

‘To improve air quality and address the challenges posed by global warming, we will actively explore ways to gradually increase the use of clean energy by, for example, increasing the proportion of natural gas for local electricity generation to 50 percent,’ he said.

Tsang did not provide a specific timeframe for achieving the objective.

Gains From Natural Gas Power Will Be Lost If Consumption Soars

Updated on Oct 03, 2008 – SCMP

I refer to the article by Secretary for the Environment Edward Yau Tang-wah (“A cleaner, cheaper energy future for Hong Kong“, September 23).

Replacing coal with natural gas for electricity generation is no doubt a great step towards controlling the sulfur dioxide (SO{-2}) emissions that are a significant source of damage to the air quality in Hong Kong. It is also good news for consumers in Hong Kong to hear that the excessive capital outlay and direct environmental impact will be minimised with the change of plan to build the liquefied natural gas terminal on the mainland instead of on the Soko Islands.

While this plan seems to echo our government’s commitment to tackle the air pollution problem, it has unfortunately also shown the administration’s political myopia.

Excessive SO{-2} emissions are a direct consequence of excess energy demand.

If the government does not seek to reduce energy use in tandem with switching to cleaner fuel, no sustainable change is going to happen.

In a way, the removal of the HK$10 billion capital outlay for the Soko Islands plant (hence the cost of power is likely to remain at the present level) almost encourages consumption.

It gives consumers a false sense that “it is okay to use power now because it is clean”.

Nevertheless, CLP Power and Hongkong Electric are for-profit organisations. They would be shooting themselves in the foot if they endorsed plans that reduced consumption.

Finally, another closely related problem is that nearly half of our air pollution comes from north of the border.

It is of no use if only Hong Kong regulates the use of coal for fuel and the desulfurisation requirements. The same standards must be applied in cities in the Pearl River Delta in order to achieve the intended results.

Pollution is a difficult problem. The lobbying will get ugly and some aspects of the economy will be compromised, but we must trust that the Hong Kong government is aware of what needs to be done and will endeavour to achieve what is best for us.

Michelle M. Lee, Mid-Levels