Straight Talk presenter Eugene Chan (left) interviews Energy Advisory Committee Chairman Jimmy Kwok, May 9, 2023. (PROVIDED TO CHINA DAILY)
Energy Advisory Committee chairman Jimmy Kwok is on Straight Talk this week.
While the Scheme of Control Agreements with the Hong Kong's two power companies won't be renewed until 2035, the five-year review is due soon. Given the recent power supply mishaps, with three this year, Kwok says there's room for cutting down the existing 8 percent guaranteed return on investment. Also, he says changing the fuel mix in our energy supply and introducing competition to the city could also lower the electricity price for HK people.
Check out the full transcript of TVB’s Straight Talk host Dr Eugene Chan’s interview with Jimmy Kwok.
Chan: Good evening. Thank you for joining us on Straight Talk. Our guest is the chairman of the Energy Advisory Committee, Jimmy Kwok. Kwok is a chemist, industrialist and the managing director of Rambo Chemicals. He also chairs several other government committees, including being the honorary president of the Federation of Hong Kong Industries, as well as the Federation of Innovative Technologies and Manufacturing Industries. We have invited Kwok to talk to us about our energy supply in Hong Kong. And we will ask him if Hong Kong citizens are getting value for money. Welcome, Jimmy!
Kwok: Thank you for inviting me here.
Chan: Right, Jimmy, I want to ask you, for many people, we don't have sort of a clear view of the energy scene in Hong Kong. Maybe can you tell us briefly a snapshot of the energy scene in Hong Kong, apart from electricity, what else do we have?
Kwok: Normally we have the local power generation plan in Hong Kong, one in CLP, another in HKE, Hong Kong Electric, and that two power companies are under a scheme of control signed by the government and they have to generate the electricity in a power generation plant. Normally, we will have the fuel mix of about 50 percent by the natural gases and 45 percent from the coal, and also the nuclear energy, nuclear energy maybe in about 25 percent.
Chan: Right? Would you say Hong Kong's energy supply is quite reliable in general?
Kwok: Certainly, if you just compare those figures all over the world, Hong Kong still maintains 99.99 percent stability. It’s a very high reliability of the energy supply in the world, if you compare with other international cities.
Chan; For most Hong Kong people, in a way, we are very fortunate. So, we take things for granted, saying that I mean we never worry about not having any electricity. So, I mean, from your point of view, I mean, you're in that field, why is it so important that we have such a reliable and predictable energy supply?
Kwok: If you see Hong Kong as an international financial centre. About 50 percent of the people are living and working also on over the 15th floor in a city. So, if that... in energy supply, and that stability of supply is very, very important.
Chan: Right? So, what you're saying is, if there are many people living over the 15th floor, I believe that if you don't have electricity here, we just can't walk up and down.
Kwok: Yes.
Chan: It's very inefficient, isn't it?
Kwok: Yes. Sure.
Chan: Yes. And also, you've also mentioned about the fuel mix, you said about 60 percent are from coal and some other from nuclear energy and maybe natural gas, and then coal and energy. Why do we have to have a different energy mix? Why can't we just rely on one energy source?
Kwok: The fuel mix is… before that fuel mix, it’s in 2005, it's about 50 percent by coal. And now reduced to ... minimized to 25 percent and hopefully over 50 percent by natural gases, but all the natural gases are now importing.
Chan: I see.
Kwok: … at very high costs in the transportations. Now, the government has spilled … with the two Hong Kong companies in the LNG ... We call the liquefied natural gas stations, they will be commenced to use about this year, maybe in the middle of September. So, that would have a very stable price of natural gas. You cannot open a tender to get the contract from overseas. And so, you have the high bargaining power. If you have, we call the LNG terminal.
Chan: That means if you have a different energy mix, you've got better control on our costs as well, isn't it?
Kwok: And also a better control, and because one gas shut down then got delivery problems, you can have another ... could be replaced.
Chan: You also I think you also mentioned nuclear power, nuclear energy, you know, we have a Daya Bay. Recently, we had a nuclear exercise, just in case Hong Kong had a nuclear accident, it was quite well covered. Are people worried about nuclear energy in your view?
Kwok: As far as I know, it is very clear from all the experts in the world that nuclear energy is safe. Of course, it is a green energy, we call that carbon-free energy. And also the prices are very stable. And if you don't rely on what we call nuclear energy, you have very high risk of the price fluctuations like last year's.
Chan: Right, since you mentioned that we had Betty Yuen, the vice-chair of CLP on a show in October. And she told us that, although our energy supply will not be affected due to the energy crisis happening all over the world like Ukraine, they said that we just can't escape from the energy costs, because we are tied to international fuel prices. So, she's turned out to be right and the tariff went up to about 20 percent by CLP. And the Hong Kong Electric for 45 percent in November, and subsequently another 5 percent three months later. So, sorry to have to ask from the viewers’ point of view? Do you think Hong Kong people are getting value for money?
Kwok: If you compare with the price the people getting from other power companies in the world, in Hong Kong, the price tariff is still very stable. And it was under the control of a Scheme of Control Agreement, then you have a long planning on the supply. And also you have a long planning on the price. So, it’s more stable than the other cities.
Chan: I mean we read in the news that in Europe, I mean, the costs have skyrocketed.
Kwok: Yes. True.
Chan: How about our energy supply compared to mainland cities like Shenzhen and Shanghai? How do we compare to our neighboring cities?
Kwok: You cannot compare with the charges of electricity from the mainland, because the residential areas got heavy subsidies from the government, right? But the industrial, or the commercial electricity costs are a lot higher than the residential area. So, we can't make any comparisons at all. But I believe if we can have the input from the nuclear energy source in the mainland, that would be a very stable price strategy for Hong Kong in the future.
Chan: Right. So, you mentioned Europe that has the hardest hit. And then the mainland city, we can't really compare because they have subsidies. How about other cities like Singapore and Tokyo?
Kwok: Oh, that's ... we can compare it with that international city. Hong Kong is always staying at the very lower than are the international cities in compare with the price of the energy. Only Singapore has in recent two years been lower than Hong Kong. All the others are over 50 percent or even 100 percent more than Hong Kong.
Chan: That's encouraging. So, let's talk about some recent mishap that happened on the news, I'm sure many people read the news and they see some issue with the electricity supply and actually I think Betty Yuen actually said that say for CLP customers, they expect only on average about 5.7 minutes of unplanned outage per year. But last year, there was a Yuen Long cable breach that saw a two-day blackout period. And so far this year, we have had another 3 incidents, like recently in March, we have over 1,000 people trapped in lifts across Kowloon and the New Territories. And then a few weeks ago, there's another power outage incident on Hong Kong Island. So, can you give us an account of what has happened? Why all of a sudden in the last 12 months with all these things happening suddenly … because you hardly hear on the news on the electricity supply. And now you have the bridge and then you have a lift and then you have another one in Hong Kong Island. Why?
Kwok: I think that is something … because in Yuen Long, it’s very clear, it's due to the fire and accidentally getting in and ... but it might be uncontrollable. But in May, the Hong Kong Electric, according to the news, that would be arising from controllable issues because of they claim that unfortunately mismatched with the .... match with the cables and caused fire and get the incidents.
Chan: Which shouldn't happen.
Kwok: It shouldn't happen because it's controllable. Of course, what happened, happened. But still, if you bring on why, it’s controllable right? It can make it safer than before. And now I believe that the government should have an interim review, particularly on these kinds of incidents and how to get better ready, and by more inspections and safety factors.
Chan: Yes, Jimmy, you've been the chairman of the Energy Advisory Committee with the government. So, how would you address all these issues? I mean what will your committee do to help Hong Kong have better energy for our citizens? What will your committee do?
Kwok: We will soon have a committee meeting, we definitely will put on the agenda and have a closer look on why it happens. And we will make some recommendations to the government.
Chan: Right. Okay, let's take a break now. And please stay with us. We will be right back.
Energy Advisory Committee Chairman Jimmy Kwok attends the Straight Talk show on TVB, May 9, 2023. (PROVIDED TO CHINA DAILY)
Chan: Thank you for staying with us. We have been talking with Jimmy Kwok about the energy supply in Hong Kong, whether residents here are getting value for money, and how it compares to the situation on the mainland and overseas as well. And Kwok gave us a brief account of some of the mishaps, and in that context, we are going to talk about the regulatory framework for energy supply we have in Hong Kong. So, chairman, we have touched on newest issues in such a short time, and thank you very much, I think the viewers would appreciate now they have an overall view. So, let's talk about what we call the SCA, the Scheme of Control Agreements that’s between the government and the two power companies. Can you give the viewers and some salient points of disagreement and tell us why this is in place in the first place?
Kwok: The Scheme of Control Agreements is very important because the government can give a long-term investment planning to the 2 power companies to get the future ready for Hong Kong electricity growth. Without such, it is difficult to find the investors into the long-term investment, particular on the power generation plant.
Chan: You mentioned the two companies. Will you call that kind of a monopoly in Hong Kong?
Kwok: It is kind of monopolized in businesses, but in a way if you got a high quality of service, reliable electricity supply, it is going to give betterment to the society.
Chan: Right, okay. And you mentioned about the … we talked about the SCA, we talked about the pros and the cons, and you said we can make better plans. So, what are the…because everything has two sides, right?
Kwok: Yes.
Chan: So, the pros is we can make better development, the investors, they know what to do, what to expect. I know that there is an 8 percent guaranteed return, is that a high return?
Kwok: But today, it is not high return, because interest rate already hit up to 7 percent.
Chan: Right.
Kwok: So, in the long run, 8 percent is relatively a high rate, but it all depends on the cycle of the economy. Today, yes or no, and maybe tomorrow no or yes. So, it’s reasonable… would… maybe…okay. The last Scheme of Control Agreements was signed on the 15 years ago. At that moment, this Scheme of Control Agreements has 10 percent ...
Chan: Right.
Kwok: …return on investments. And today we are only 8 percent. I think this is gradually slowing down, hopefully we could have the next Scheme of Control Agreements signed by the government with the 2 power companies in year 2035. Maybe that would be further down.
Chan: Right. Because I saw that the recent agreement was signed in 2018, and it is going to be 2035. And this upcoming, the first 5 years review is this year.
Kwok: Yes, this year.
Chan: I mean definitely we need people to invest, I mean 8 percent sounds like a good number, but if the interest rates keeps on going up like 9 percent or 10 percent , then that become not a good investment, doesn't it?
Kwok: Yes.
Chan: So, do other countries have similar agreements to ensure the investors will invest into such infrastructure investments?
Kwok: I think they should have some, but definitely not the same as Hong Kong because Hong Kong has a long story, over 100 years of histories, with the two power companies in Hong Kong. But the other countries may not have the same company owner are the same.
Chan: Right. And I understand that under the SCA, they have also have an incentive and also a penalty mechanism, so that I think the rationale is it wants to encourage the power company to do well. Can you tell the viewers do you agree with this mechanism? And should this keep going on?
Kwok: Okay, this incentive and the penalty, normally it’s to encourage the business partners to do better, to control better. But if the control of the power supply company, if that is controllable but you got failure, even you can make it restoration within the limit, and then you can get the incentive, which is not reasonable.
Chan: Right. Chairman, I think you are referring to that saying that the two companies will receive a 0.15 percent additional return if the power is restored within 65 minutes on average. I know that it is a sort of over one year period, 65 minutes. And you know, I think you were just talking about the blackout on the 19th of April on Hong Kong Island, that was caused by a short circuit that you just mentioned. And people are saying that it was restored within 65 minutes, it was a controllable mistake, but they still have a sort of a … they should be having a penalty, but if they should be having an incentive. So, is that fair?
Kwok: If under the Scheme of Control Agreement signed on the documents, it was over one year’s term to consider the calculation for the incentive. I am sure with that latest interim review, the government should have a good talk with the 2 power companies.
Chan: So, hopefully there will no more mistakes, so they can actually have this incentive, right?
Kwok: They have to get only… for the restoration time is not enough, maybe you could see the influence is to what scale, it’s too big, and you cannot compare with just sudden few minutes or an hour or two for only one building, it is totally different.
Chan: Maybe I can suggest, apart from looking at the time of restoration, look at the nature of the mishap. If it was sort of an accident, just like some fuels blown, like overflowing water and tripped us, that you can't control, compared to a sort of man-made mistake, that is something different, isn’t it?
Kwok: Yes.
Chan: Right. I know the secretary for environment said in December the government actually will consider opening up the electricity market to more competition to stabilize price. What are your thoughts on that?
Kwok: If we could have more competition from the mainland on the power supply sources, that would be very sensible because you will create a competition, but again it fully depends on the Scheme of Control Agreements signed by the two power companies. Before the 2035, we can't do anything, but of course, if two power companies have so agreed to the government, then we can proceed immediately.
Chan: Right, I see. So, I mean just like a television station, sometimes if you have like the third or fourth television stations in Hong Kong, they may not have necessarily been saving costs. So, do you think for… that may not be the best analogy, so do you think that having say another power player, will that improve the cost and service to our residents?
Kwok: But Hong Kong is lack of land, you wouldn't want to build another power station definitely, it is not sensible.
Chan; Right.
Kwok: And also the power grid is owned by the two power companies individually. You have to share with the grid, but you can't open the grid to another competitor. So, it won’t be sustained.
Chan: Right. Some legislators actually said that both power companies should be more transparent on how they procure their fuel. They said that if their fuel costs are 100 percent reimbursable, they have no incentive to source cheaper fuels, do you agree?
Kwok: In fact the SCA has limited the two power companies to have full transparency about the costs of the fuel, the source, and all the financial information, should have been make it publicly, by e-copy. So, maybe, I believe, the two power companies should do more on the PR and let the public know, and there is a high transparency as set by the SCA.
Chan: Right. So, chairman, I think any discussion about energy is never complete without addressing carbon neutrality. Hong Kong target was set by the previous government, say at 2050, and we had the CEO of CLP again, Richard Lancaster, on our show 2 years ago. And he said in Hong Kong, the electricity generation is responsible for nearly 2/3 of our CO2 emission. So, do you think our electricity is going to be decarbonized in time from your view?
Kwok: It is getting better, but if you want to get even better than before, you have to think about how to use more natural gases and the power generation plant, again it will be very costly, so in the long run, everybody thinks that should have stability of the price of the electricity. It is no way to avoid to get the import of the electricity supply from the mainland.
Chan: Right. Another area we talked about is renewable energy, although it makes up of a very small part of the fuel mix. What are some of the challenges if we are going to increase such renewable energy, from your point of view?
Kwok: It is very challenging if you…as the government has policy addressed on before the year 2035, we will have 10 percent of renewable energy in the fuel mix. Very challenging.
Chan: I think we are talking about wind and solar energy, isn’t it?
Kwok: Yes, wind and … of course, even … 2 years ago the solar panels on the roof supported by the government policy, and also the price is very reasonable to get the return on the investment, within 7 to 10 years and everybody go to install the solar energy on the roof. All and all, we have only 0.1 percent or 0.2 percent of the renewable energy increased.
Chan: Right. Last question: is going green going to cost Hong Kong people more in the long run? Simple answer.
Kwok: Yes. Certainly the green energy is our future.
Chan: Right. Okay, good. So, thank you, Kwok, for showing us that relative to many overseas countries at the moment, Hong Kong residents are indeed getting value for money in energy supply. That also gives us a good basis to work towards achieving our target of carbon neutrality before 2050, fulfilling our role as good international citizens.
Thank you viewers for tuning in, and we will see you next time.
