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Cutting Pollution For Profit

Jan 9th, 2008
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International Herald Tribune – Posted by Daniel Altman in High energy

Could power generators cut pollution if it helps them to make money? From Hong Kong, Keith Bradsher descibes a new scheme agreed by the government and two electricity providers. It looks like a fairly marginal proposition, but, if it works, it could lead to big changes around the world.

The generators in Hong Kong will be allowed to set their rates to earn a fixed return. But if they pollute more than the law permits, then they’ll be forced to lower their rates. If they pollute less, they’ll be allowed to charge more. The differences here aren’t big; the maximum bonus is 0.1 percentage points added to a fixed return of 9.99 percent, and the maximum penalty is 0.4 percentage points.

This system is definitely a work in progress, if a very interesting one. Until a couple of years go by, it will be hard to say whether Hong Kong’s government has set the incentives correctly to make a difference. The generators may even find that it’s profitable to pollute more! And that’s where a potential moral objection comes in: Should you be able to pay to harm the environment? I doubt that objection will get in the way, though – it applies equally to emissions trading programs, and they’re not going away any time soon.

Hong Kong Power Regulations Based in Part on Emissions

Jan 8th, 2008
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The New York Times
By KEITH BRADSHER
Published: January 8, 2008

HONG KONG — The two electric power companies here agreed Monday to a new regulatory system that sets their annual rate of return, based in part on how much pollution they emit, a carrot-and-stick approach that could some day be a model for mainland China’s giant power industries.

The 10-year agreement between the Hong Kong government and the territory’s two companies — Hong Kong Electric and CLP — authorizes the companies to charge electricity rates that will give them a 9.99 percent return on assets.

If either company exceeds regulatory limits for any pollutant, however, it would be required to charge customers less, reducing its allowed rate of return by 0.2 to 0.4 percentage point.

If the companies manage to cut their pollution more than required, then they are allowed to raise prices to the point where they effectively earn bonuses of 0.05 to 0.1 percentage point on their rate of return.

A complicated formula also allows them to charge slightly more for electricity as they exploit renewable energy sources.

Western regulators increasingly provide complex environmental incentives and impose penalties on power companies. But regulators in mainland China and Hong Kong have tended to rely mainly on fines if companies fail to meet basic requirements.

Particularly on the mainland, though, fines are seldom assessed, and violations are rampant, according to environmental critics.

Mainland power companies also have limited incentives and flexibility to choose fuels that are more environmentally friendly than coal. For instance, only a few provinces allow wind-turbine operators to charge significantly more than coal-fired plant operators for the electricity they sell to the grid. And the rate subsidy for burning agricultural waste to generate electricity is not high enough to make it economical in many areas.

Instead, the regulatory system on the mainland has focused on keeping electricity rates as low as possible, with little regard for the pressure this puts on power companies to choose cheap but highly polluting coal-fired power plants.

Melissa Brown, a specialist in Hong Kong power regulation, who is executive director of the Association for Sustainable and Responsible Investment in Asia, a research group, said the new system in Hong Kong sets a useful precedent for the mainland.

“Anything that is a bonus-and-penalty scheme is a positive,” she said.

But Ms. Brown cautioned that regulators there were unlikely to follow the example soon.

She also noted that the government released too few details on Monday on future allowable levels of specific pollutants to make it possible to calculate the actual effect of the new agreement on air pollution here.

Smog has become a chronic problem in the city. CLP and Hong Kong Electric have denied that they are the main sources of pollutants, hinting that nearby factories and power plants on the mainland are to blame.

Exxon Mobil owns 60 percent of a power-generating joint venture with CLP, and CLP owns the rest plus all of the distribution grid, which serves three-quarters of Hong Kong’s nearly seven million people.

Two officials at the State Electricity Regulatory Commission in Beijing said on Tuesday morning that while the mainland and Hong Kong maintain separate regulatory regimes, the mainland is looking at ways to make power companies more responsive to environmental concerns by encouraging the use of alternatives to coal, notably by allowing generating companies to charge distribution companies extra for electricity from renewable sources.

Edward Yau, Hong Kong’s secretary for the environment, said that the government had set the new regulated rate of return at 9.99 percent after deciding that public opinion strongly favored a rate below 10 percent.

The previous rate, under a 15-year agreement expiring at the end of 2008, was 13.5 percent to 15 percent, and was widely criticized as excessively generous to the politically influential power companies. The new rate of return is still well above the prime rate of 6.75 percent that the dominant local bank, HSBC, charges for loans to companies with strong credit ratings.

Black Point Power Station Gets New License

Jan 3rd, 2008
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Hong Kong’s Black Point Power Station Gets New License

January 3, 2008 – China CSR

Hong Kong’s Environmental Protection Department issued a renewed license for the Black Point Power Station at the end of December 2007.

“The renewed licence under the Air Pollution Control Ordinance will come into effect tomorrow (January 1) and remain valid until the end of 2009,” said an EPD spokesman in an issued press release. “Having regard to the need to keep the emissions to the minimum and the current level of natural gas supply, the emission caps of the Black Point Power Station will be maintained at the current levels. As natural gas for power generation emits significantly less air pollutants than coal-fired units, it is the Government’s policy to encourage the use of natural gas in place of coal to reduce emissions. For this purpose, we have provided in the licensing conditions for an increase in the use of natural gas at the Black Point Power Station whenever this is become feasible.”

The spokesman also said when there is an increase in electricity generation due to increase in the use of natural gas at the Black Point Power Station, the increase in emissions at the station has to be offset by a corresponding reduction at the Castle Peak Power Station by a ratio ranged between 5.6 to 58 times, depending on the particular different pollutants.

Hong Kong’s also tightened the emissions cap for the Castle Peak Power Station ein early 2007, effectively bringing down the emission of air pollutants from the power plants. To improve air quality, Hong Kong reached a consensus with the Guangdong Provincial Government in April 2002, to reduce, on a best endeavor basis, the emission of four major air pollutants — sulphur dioxide, nitrogen oxides, respirable suspended particulates and volatile organic compounds — by 40%, 20%, 55% and 55% respectively in the region by 2010, using 1997 as the base year.

To achieve the reduction targets, Hong Kong says it has implemented a series of measures to improve air quality, including the tightening of fuel and vehicle emission standards, requiring the retrofitting of emission control device to trap the particulate emission from diesel vehicles, strengthening vehicle emission inspections and enforcement against smoky vehicles, incentivizing early replacement of old diesel commercial vehicles with vehicles that comply with Euro IV standard, encouraging the use of environment-friendly vehicles through tax concession, limiting the emissions of volatile organic compounds from paints, printing inks and consumer products, requiring the installation of vapour recovery systems in petrol filling station and tightening the emission control on power stations.

CLP Plant Can Flout Pollution Cap

Jan 1st, 2008
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Cheung Chi-fai
Updated on Jan 01, 2008 – SCMP

Limits on the amount of pollution CLP Power’s gas-fired power station may emit have been renewed, but with the proviso that the company may breach them if it reduces pollution from its coal-fired turbines.

The Environmental Protection Department said the proviso was intended to encourage the company to use more gas.

“This offsetting arrangement will ensure a greater net reduction of the overall emissions from power generation, which is the biggest local source of air pollutants,” a spokeswoman for the department said.

However, CLP Power says it faces a shortage of gas supplies – the reason for its application to build a liquefied natural gas terminal on South Soko Island, in a marine reserve off Lantau, to receive overseas gas supplies shipped by tanker.

There are no figures for its output of pollutants last year, but it announced in December 2006 that the proportion of electricity it would generate in 2007 from gas would drop by a third to conserve supplies from its Yacheng gas field off Hainan , and that it would burn more coal, pushing up emissions.

The power station at Black Point, Tuen Mun, will be allowed to emit 520 tonnes of sulfur dioxide, 5,200 tonnes of nitrogen oxides and 65 tonnes of particulates per year this year and 2009. In 2006, the latest year for which figures are available, emissions of sulfur dioxide and nitrogen oxides came in far below the caps, at 180 tonnes and 1,962 tonnes respectively, but particulate emissions, at 70 tonnes, breached the cap.

The cap extension was announced as the deadline for agreement between the government and Hong Kong’s two electricity suppliers on new scheme-of-control agreements regulating profits on their investments passed without a deal.

“The talks have been very difficult. So far there is no comprehensive and concrete agreement,” a source close to the negotiations said. The source would not say whether the talks would be extended.

The government had said earlier that if the deadline passed without agreement, it intended to draft a law to regulate the companies.

Tso Kai-sum, managing director of the other power generator, Hongkong Electric, said three weeks ago that a deal was close.

Both companies were tight-lipped yesterday over the talks.

CLP Coal in Hong Kong

Dec 8th, 2007
by AdminCTA.
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Patsy Moy and Nishika Patel

Saturday, December 08, 2007: HK Standard

China Light and Power has pledged not to build any more coal plants in Hong Kong while setting a global target to cut its carbon intensity – the amount of carbon emitted per unit of energy used.

CLP, the producer of electricity in six Asian economies, will set a group- wide target of reduction at 75 percent by 2050 to benefit from global emissions trading.

The company has also fixed interim targets for emission cuts for 2010, 2020 and 2035.

As part of its strategy, CLP will boost investments in renewable energy, including an 82.4-megawatt wind farm in India.

The Environmental Protection Department welcomed CLP’s green policies.

But the green initiatives have failed to please local environmentalists who accused the Hong Kong company of “playing with figures and jargon.”

They said the benefits to be brought by the company’s green policies remain uncertain.

Friends of the Earth environmental affairs manager Hahn Chu hon-keung criticized the Hong Kong-based company for declining to specify the amount of carbon to be reduced in the city.

“It doesn’t mean the company should only protect Hong Kong’s environment at the expense of other places. But as a Hong Kong-based company, it should specify its pledge for Hong Kong people,” Chu said.

Frances Yeung Hoi-shan, Green Peace’s climate and energy campaigner, also accused CLP of not spelling out its target reduction rate for specific places except Australia.

CLP has a subsidiary in Australia which has set a standard to cap emissions, according to Yeung.

She also explained that the carbon intensity reduction did not amount to an actual cut in carbon emissions if the company continued to increase its energy production.

“They are playing with figures to give the public an impression that they are a green company,” she claimed, adding that power plants are Hong Kong’s largest greenhouse gas emitters, accounting for about 70 percent of total CO2 emissions in the city.

“The government only restricts power plants’ air pollutants at the moment but to combat climate change, it should also regulate their CO2 emissions.

“If power plants exceed the caps, they should be penalized financially,” she said.

CLP on Friday said a major initiative for Hong Kong is to bring in a liquefied natural gas terminal to increase natural gas in fuel mix of up to 50 percent for power generation against the current 30 percent.

Developing an offshore wind farm in Hong Kong is a possibility that the company will also look into.

CLP now operates one coal-fired power plant in Hong Kong at the Castle Peak power station.

The company said it is committed to not building new coal-fired power stations in Hong Kong or in developed countries.

It has plans for a transition from conventional coal to more climate-friendly fuels or technologies.

In developing countries where the company has conventional coal-fired generation plants, it will ensure they can be fitted with carbon capture and storage equipment to tackle emissions.

Climate Change Starts Here

Dec 6th, 2007
by AdminCTA.
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Greenpeace climbers captivate power plant urging government to regulate its CO2 emissions

Hong Kong SAR, China — While the UN Climate Conference in Bali is thrashing out solution to global warming, two Greenpeace vessels gear towards the Castle Peak Power Plant, allowing the climbers to scale to a 30M-tall ash silos and suspend a 15m x 15m banner reading “Climate Change Starts Here” to protest against the government shirking its responsibility to restrain greenhouse gas emission from power plants.

Four Greenpeace climbers captivated today the largest local perpetrator of climate change, CLP Castle Peak Power Plant, while the UN Climate Conference in Bali is thrashing out solutions to global warming. The climbers scaled the fly ash silos and dropped a massive banner to urge the government to limit carbon dioxide emissions from power plants as a move to tackle climate change.

Frances Yeung, Greenpeace Climate and Energy Campaigner, says the action alerts the public to indifference of the government to damages the power plants have done to the climate. “While other countries and metropolitans have already taken actions, Hong Kong government has made no immediate response to reduce greenhouse gas emissions from the power plants. Donald Tsang’s boast of his concern to global warming is far from the truth,” says she.

Power plants are the biggest local source of greenhouse gas emissions, which account for about 70% of carbon dioxide emissions (the major warming gases) in Hong Kong. Among them CLP is the biggest polluter, responsible for half of the release.

At present, the Government does not regulate emissions of carbon dioxide. Greenhouse gas emissions in Hong Kong have been increasing rapidly over the decade. Between 1990 and 2005, the emissions have increased 14%.

The government is now negotiating the new Scheme of Control Agreement (SOC) with the two local power companies which will last for 10 years. Greenpeace believes that global warming is too serious for the government to allow power plants to continue damaging the climate. The government must limit carbon dioxide emissions from power plants and their profits must be deducted if they exceed the emission caps.

Green Groups Push For CO2 Caps in Scheme of Control

Nov 28th, 2007
by AdminCTA.
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Nishika Patel

Wednesday, November 28, 2007

Six green groups have accused the government of not doing enough to curb greenhouse gas emissions, saying the new scheme of control will not force power companies into line.

Staging a protest at the Environment Bureau yesterday, members of the alliance urged authorities to cap carbon dioxide emissions for power plants and deduct their profits if the targets are not met.

Greenpeace said CLP Power and Hong Kong Electric are responsible for emitting 70 percent of carbon dioxide in the SAR and are the biggest source of greenhouse gas emissions

The groups are angry that the government only regulates emissions of sulfur dioxide, nitrogen dioxide and respirable suspended particulates, but not the chief greenhouse gas, carbon dioxide .

“While countries around the world are actively fighting global warming, the SAR government simply allows carbon dioxide emissions to damage the climate without regulation. The government should not shirk its responsibility,” Greenpeace climate and energy campaigner Frances Yeung Hoi-shan said.

The alliance also wants a new scheme of control to set targets to reduce energy consumption and sanctions imposed if the power firms fail to meet the targets.

“Energy saving is the most cost- effective means to control greenhouse gas emissions and improve air quality. However, the government has suggested offering incentives to power plants to improve energy saving and demand-side management which, however, are not compulsory and only serve as foil,” Yeung said.

The groups included Friends of the Earth, Greeners Action, Green Sense, WWF Hong Kong and Clear the Air, along with Carbon Dioxide Foundlings.

Areva Wins Deal To Build Two Guangdong Nuclear Reactors

Nov 27th, 2007
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Areva wins deal to build two Guangdong nuclear reactors

€8b contract hailed as the largest in the industry’s history

Al Guo in Beijing
Nov 27, 2007

French state-owned nuclear power giant Areva yesterday sealed the biggest deal in the industry’s history with an €8 billion (HK$92.53 billion) contract to develop two reactors for China Guangdong Nuclear Power Group Corp.

“A new era is opening in nuclear energy partnerships between our two countries,” said Areva chief executive Anne Lauvergeon, a member of French President Nicolas Sarkozy’s delegation to Beijing this week.

Areva and Guangdong Nuclear will build two next generation European pressurised water reactors, EPRs, in Taishan, Guangdong province. The French company will provide the materials and services to operate the reactors.

As part of the deal, Guangdong Nuclear gains access to 35 per cent of the production from Areva’s uranium unit, UraMin. The mainland will be the third country after Finland and France to use EPR technology.

Areva and Toshiba’s US-based Westinghouse Electric unit have been competing to build as many as 30 nuclear reactors in the mainland since Beijing unveiled long-term plans to increase its reliance on nuclear power from less than 2 per cent now to 4 per cent by 2020.

Westinghouse reportedly secured a US$5.3 billion order in July to build four reactors in the mainland.

The new deal Areva signed yesterday has put the French company back in the race for the bulk of mainland contracts.

“China is one of the most important markets and is accelerating its nuclear development,” Ms Lauvergeon said. “So it’s important for us to be part of this competition.”

She said some advanced technology would be transferred to the company’s mainland partners to help them run and maintain the reactors but was reluctant to go into detail about how Areva would protect its proprietary knowledge.

“We are a company that spends a large share of our income on research and development so we have to protect our intellectual property rights,” she said. “At the same time, we’d like to share our expertise with our Chinese partners and someday maybe together we can spread that technology to more international markets.”

Guangdong Nuclear initially planned to build the two reactors in Yangjiang and only this summer decided to move the site to Taishan. Ms Lauvergeon admitted that the decision was made solely by the mainland company.

“It’s a bit late to change the site at this stage and I guess we have to outsource part of our projects to other companies to make sure we can get the job done on schedule,” she said.

She said the two reactors were expected to be installed by 2014, with a generating capacity of 1,600 megawatts each.

In a separate deal, Electricite de France agreed to take a 30 per cent stake in the two reactors Areva will build in Guangdong.

CLP Power Plants in China

Oct 15th, 2007
by AdminCTA.
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Cover-up of pollution in Guizhou [China]

Author: Minnie Chan, South China Morning Post

Dated: 15 Oct 2006

A report issued by the State Environmental Protection Administration (Sepa) following investigations into water pollution in Guizhou, Jilin and Heilongjiang said it found extensive illegal operations in the provinces’ power plants…In Guizhou…, 287 of 8,274 enterprises investigated had been penalised by mid-September…In Liupanshui, one senior official publicly denied the city had a coal-chemical industry or drinking-water problems…Facilities that look complete on the outside are often just facades to fool environmental inspectors, the report said…The report also said three power plants near Liupanshui had not been approved by the National Development and Reform Commission. “The production facility of Anshun Power Plant [in Guizhou] [owned by Guizhou CLP Power, part of CLP Holdings] is critically backwards…Two generators in Qing Township Power Plant [or Qingzhen Power Plant, part of China Huadian] should be shut down according to our country’s policy, but they are still in production…In Jilin province, the Sepa team found local governments below the city level had turned a blind eye to many polluting factories being built on the upper reaches of rivers or drinking-water sources…In Jilin, steel factories refused to upgrade water-treatment facilities and continued to discharge effluent on farmland. The report said waste water discharged from leather, paper and milk industries in Heilongjiang did not meet environmental protection standards.

Folly of the Soko gas plant

Feb 24th, 2007
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Published in the SCMP on the 24th of February 2007:

AIR QUALITY Christian Masset

Folly of the Soko gas plant

Much has been said about the liquefied natural gas (LNG) terminal proposed for South Soko Island by ExxonMobil and CLP Power. So it is necessary to clarify whether the options being considered will achieve the original purpose – namely, improving our air quality.

CLP Power has said that it was not possible to commit to a clear objective in reducing the burning of coal at the CLP Castle Peak station, even assuming the LNG terminal was in operation. In plain English, this means that ExxonMobil- CLP will offer no guarantee that it will pollute less if the terminal is built.

To reduce coal pollution in our air significantly, we have three options: a very cost-effective one; a bold and highly effective option; and one filled with high risks and uncertainties.

The first involves no additional costs for the Hong Kong electricity user. It has three steps: first, complete as soon as possible the installation of flue gas desulfurisation systems on all coal-fired turbines in Hong Kong operated by our electricity suppliers. This will reduce sulfur dioxide pollution, a major cause of poor visibility, by over 95 per cent.

Both CLP Power and Hongkong Electric say these are highly expensive investments, but they can afford them thanks to their massive earnings under the scheme of control.

The second step is to limit CLP Power’s electricity sales to Guangdong. They have increased from 600 units in 1997 to 4,500 units in 2005. Those exports account for about 18 per cent of total sales yet produce over 40 per cent of coal related pollution from power generation, since that electricity is produced in the highly coal-reliant Castle Peak plant.

The third step is to finalise and implement as soon as possible the emissions tabletrading framework on thermal plants reached last month by the Hong Kong government and authorities from the Pearl River Delta.

The second option – the bold and highly effective one – would be to accompany the above measures with a comprehensive energy-saving policy. Then, to have energy savings translate into less air pollution and stable prices, we need to revise or adapt radically the scheme of control. Bear in mind that, in its present form, the scheme defeats all effective and standard demand-side energy saving policies.

Prolonging the scheme of control in its present form encourages two major flaws. One, individual users who reduce their power consumption are likely to be charged at a higher rate, since utilities are unlikely to seek more revenue from corporate clients. Two, it leads to everhigher and unnecessary investments paid for by Hong Kong citizens, the overconsumption of electricity and projects that are impossible to justify – such as the Soko LNG terminal.

The third option is the proposed LNG terminal. We won’t even consider, here, the environmental degradation that the plant would cause, on land and in the sea. But the project offers no guarantee of better air quality, or stability in electricity costs to the users, corporate or individuals.

LNG shipments in Asia are currently about 50 per cent more expensive than the gas piped into Hong Kong from the Yacheng field on Hainan Island. And surging global demand for LNG will inevitably cause a price increase on the world market. So, we can expect the cost of electricity to go up.

For these reasons, the Soko LNG project doesn’t meet any of the promises offered: it doesn’t guarantee clean air or stable energy costs, and it encourages an unhealthy dependence on a single, vertically integrated foreign corporation able to influence the supply of raw material, and the production, transmission and distribution of electricity.

A sustainable energy policy for Hong Kong has to break the duopoly of Exxon-Mobil-CLP and Hongkong Electric. Deregulation in energy, similar to that in the telecommunications sector, has to happen as soon as possible. That would encourage the offering of cleaner energy, cost-effective energy distribution and price competition – from a range of reliable and innovative sources.

In this way, Hong Kong can achieve the goal of a return to the blue skies that all its residents yearn for – and which the administration has repeatedly promised.

Christian Masset is the immediate past chairman of Clear The Air

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