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POWERING A CARBON-FREE HONG KONG: Pathways Towards a Net-Zero Emissions Power System for Hong Kong 1

WRI.ORG.CN

XINYUAN WEN XIAOQIAN JIANG HELEN DING LAWRENCE IU LAUREN CHAN

SIMRAN SAWHNEY WEE KEAN FONG

PATHWAYS TOWARDS A

NET-ZERO EMISSIONS POWER

SYSTEM FOR HONG KONG

Powering a Carbon-Free Hong Kong

2WRI.org.cn

Design and Layout by:

Harry Zhang harryzy5204@gmail.com

ACKNOWLEDGEMENTS

This publication is a joint eort by HK 2050 Is Now, an initiative of the World Resources Institute

(WRI), Civic Exchange, ADM Capital Foundation, HSBC, RS Group, and WYNG Foundation. We

would like to express our gratitude to those who provided timely and helpful advice, support,

and assistance during the preparation of this publication. Special thanks go to the following

individuals and organisations for providing inputs and reviewing draft versions of this document:

• Charles Tsai, Power Assets

• CW Tse, Environment Bureau, The Government of the Hong Kong Special Administrative Region

• Daphne Ngar-yin MAH, Hong Kong Baptist University

• Davis Bookhart, The Hong Kong University of Science and Technology

• Debra Tan, CWR

• Edward Chow, Hong Kong Productivity Council

• Fanny Law

• Isabel Carrera Zamanillo, Stanford School of Earth Energy and Environmental Science

• Jim Taylor, Jeanne Ng, Thomas Lui, CLP Hong Kong Limited

• Kevin Hsu, Centre for Liveable Cities, Ministry of National Development, Singapore

• Lisa Genasci, ADM Capital Foundation

• Victor Kwong, Jasper Chan, Hong Kong and China Gas Company Limited

• Wei Fang, Yu Gu, Sungrow Power Supply Co., Ltd

• Xi Liang, UK-China (Guangdong) CCUS Center

• Xiaoliang Yang, China Oil & Gas Climate Investments

• Yuan Xu, The Chinese University of Hong Kong

• John So, Fiona Lau, Bon Cheung (intern), Cindy Tanaka (intern), Justine Ip (intern), Edgar Siu

(intern), Civic Exchange

• Beth Elliot, Hong Miao, Katie Ross, Li Fang, Min Yuan, Rajat Shrestha, Ran Wei, Su Song, Tian

Yu, Wenyi Xi, Zhe Liu, Bokai Qi (intern), Weizhe Ma (intern), Wenjing Ma (intern), Yanping Qiao

(intern), Yingyue Chai (intern), WRI

We are also grateful to Bill Dugan, Caroline Taylor, Emilia Suarez, Renee Pineda, Romain

Warnault, Rory Coen, Ruiyun Dou, and Ye Zhang for providing editing, administrative, and

design support.

We are pleased to acknowledge our institutional strategic partners, which provide core funding

to WRI: Netherlands Ministry of Foreign Affairs, Royal Danish Ministry of Foreign Affairs, and

Swedish International Development Cooperation Agency.

Funding from the ADM Capital Foundation and the Overlook Foundation made this analysis

possible. We appreciate their support.

POWERING A CARBON-FREE HONG KONG: Pathways Towards a Net-Zero Emissions Power System for Hong Kong I

TABLE OF CONTENTS

III Foreword

V Executive Summary

PART I. CURRENT POWER SYSTEM

1 Chapter 1. Power System in Transition

PART II. NET-ZERO TECHNOLOGY OPTIONS

9 Chapter 2. Renewable Energy and Waste

to Energy

19 Chapter 3. Fossil Fuels with CCS

25 Chapter 4. Green Hydrogen

35 Chapter 5. Regional Collaboration on

Low-Carbon Energy

PART III. NET-ZERO PATHWAYS

47 Chapter 6. Pathways to a Net-Zero

Emissions Power System

59 Chapter 7. Recommendations

65 Annex. Scenario Setting

68 Endnotes

68 References

/90

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POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong1WRI.ORG.CNXINYUANWENXIAOQIANJIANGHELENDINGLAWRENCEIULAURENCHANSIMRANSAWHNEYWEEKEANFONGPATHWAYSTOWARDSANET-ZEROEMISSIONSPOWERSYSTEMFORHONGKONGPoweringaCarbon-FreeHongKong2WRI.org.cnDesignandLayoutby:HarryZhangharryzy5204@gmail.comACKNOWLEDGEMENTSThispublicationisajointeffortbyHK2050IsNow,aninitiativeoftheWorldResourcesInstitute(WRI),CivicExchange,ADMCapitalFoundation,HSBC,RSGroup,andWYNGFoundation.Wewouldliketoexpressourgratitudetothosewhoprovidedtimelyandhelpfuladvice,support,andassistanceduringthepreparationofthispublication.Specialthanksgotothefollowingindividualsandorganisationsforprovidinginputsandreviewingdraftversionsofthisdocument:•CharlesTsai,PowerAssets•CWTse,EnvironmentBureau,TheGovernmentoftheHongKongSpecialAdministrativeRegion•DaphneNgar-yinMAH,HongKongBaptistUniversity•DavisBookhart,TheHongKongUniversityofScienceandTechnology•DebraTan,CWR•EdwardChow,HongKongProductivityCouncil•FannyLaw•IsabelCarreraZamanillo,StanfordSchoolofEarthEnergyandEnvironmentalScience•JimTaylor,JeanneNg,ThomasLui,CLPHongKongLimited•KevinHsu,CentreforLiveableCities,MinistryofNationalDevelopment,Singapore•LisaGenasci,ADMCapitalFoundation•VictorKwong,JasperChan,HongKongandChinaGasCompanyLimited•WeiFang,YuGu,SungrowPowerSupplyCo.,Ltd•XiLiang,UK-China(Guangdong)CCUSCenter•XiaoliangYang,ChinaOil&GasClimateInvestments•YuanXu,TheChineseUniversityofHongKong•JohnSo,FionaLau,BonCheung(intern),CindyTanaka(intern),JustineIp(intern),EdgarSiu(intern),CivicExchange•BethElliot,HongMiao,KatieRoss,LiFang,MinYuan,RajatShrestha,RanWei,SuSong,TianYu,WenyiXi,ZheLiu,BokaiQi(intern),WeizheMa(intern),WenjingMa(intern),YanpingQiao(intern),YingyueChai(intern),WRIWearealsogratefultoBillDugan,CarolineTaylor,EmiliaSuarez,ReneePineda,RomainWarnault,RoryCoen,RuiyunDou,andYeZhangforprovidingediting,administrative,anddesignsupport.Wearepleasedtoacknowledgeourinstitutionalstrategicpartners,whichprovidecorefundingtoWRI:NetherlandsMinistryofForeignAffairs,RoyalDanishMinistryofForeignAffairs,andSwedishInternationalDevelopmentCooperationAgency.FundingfromtheADMCapitalFoundationandtheOverlookFoundationmadethisanalysispossible.Weappreciatetheirsupport.POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKongITABLEOFCONTENTSIIIForewordVExecutiveSummaryPARTI.CURRENTPOWERSYSTEM1Chapter1.PowerSysteminTransitionPARTII.NET-ZEROTECHNOLOGYOPTIONS9Chapter2.RenewableEnergyandWastetoEnergy19Chapter3.FossilFuelswithCCS25Chapter4.GreenHydrogen35Chapter5.RegionalCollaborationonLow-CarbonEnergyPARTIII.NET-ZEROPATHWAYS47Chapter6.PathwaystoaNet-ZeroEmissionsPowerSystem59Chapter7.Recommendations65Annex.ScenarioSetting68Endnotes68ReferencesIIWRI.org.cnPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKongIIIFOREWORDUNSecretaryGeneralAntónioGuterresstatedin2019that“citiesarewheretheclimatebattlewilllargelybewonorlost,”ascitiesaccountforaroundthree-quartersofglobalfinalenergyconsumption.Therehavebeenencouragingsignsthatgovernmentsworldwidearebecomingmoreambitiousindecarbonisingtheirenergysectors,whichwouldbepivotalforcitiestomeettheircarbontargets.InNovember2020,HongKongbecamethefirstcityinChinatomakeatime-specificcarbonneutralitypledgewhenthechiefexecutiveofHongKongannouncedthatHongKongwouldstrivetoachievecarbonneutralitybefore2050,joining796municipalgovernmentsin63countrieswithnet-zeroemissionstargets.TheenergysectoristhemostimportantsectorforHongKongtowintheracetozeroemissions,aselectricitygenerationisHongKong’sdominantsourceofgreenhousegasemissions.Inthefuture,continuedeconomicgrowthandpopulationgrowth,aswellaswidespreadelectrification,willgreatlyincreasedemandforelectricity.Forthisreason,arobustzero-carbonpowersystemneedstobeestablishedassoonaspossible.AccordingtothelatestInternationalEnergyAgency(IEA)report,NetZeroby2050:ARoadmapfortheGlobalEnergySector,nearly90percentoftheglobalpowergenerationwillcomefromrenewableenergytoachievenet-zeroemissions.Windandsolarphotovoltaicpowergenerationwillaccountfornearly70percent,whiletherestwillpredominantlycomefromnuclear.However,geographicalandresourceconstraintsmeanthatthecontributionoflocalrenewableenergytoHongKong’senergymixwillbelimited.Therefore,HongKongneedstoidentifyanddevelopalternativezero-carbontechnologies—specifically,nuclear,hydrogen,andcarboncaptureandstorage(CCS)—onalargescale.Thisreportproposesfiveenergy-mixscenariostodecarboniseHongKongby2050andevaluatestheirclimate,economic,environmental,health,andenergysecurityimpacts.HongKong’seffortswillcontributetonet-zeroemissionsintheGuangdong-HongKong-MacaoGreaterBayArea(GBA).Collaborationwilldrivegreaterinvestment,innovation,andtalenttotheregion,layingthefoundationfortheGBAtoleadtheglobalenergytransition.Actingnowisouronlyoption.OurrecommendationsprovidesomesolutionsforHongKongtowardsanext-generationpowersystemthatfostersacleaner,greener,andsaferenvironment.WorldResourcesInstituteandCivicExchangeareproudtojointhedesignofthegreatestchangethatliesahead.WehopethisreportwillgiveinsightsintoHongKong'sfutureactionsanditscontinuedleadershipinthenewcarbon-neutralera.LiFangChiefRepresentative,BeijingRepresentativeOffice,WRIChinaLisaGenasciBoardMember,CivicExchangeIVWRI.org.cnPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKongVEXECUTIVESUMMARYHIGHLIGHTS▪TheIPCC’sSixthAssessmentWorkingGroup1Report,publishedin2021,warnsthatiftheworldhasanychanceofkeepingatemperaturerisewithin1.5°C,weneedtoreduceouremissionsimmediately,rapidly,andonalargescale.HongKongisalreadyexperiencingsomeclimatestress,suchasheatwaves,stormsurges,andotherextremeweatherevents.Tominimisethethreatofclimatechange,suchassealevelriseswhichcoulddamagethecity’scriticalinfrastructureanddisruptitseconomy,HongKongneedstodecarboniseasquicklyaspossible.▪InNovember2020,HongKongpledgedtoachievecarbonneutralitybefore2050,makingitChina’sfirstcitywithatime-specificcarbonneutralitygoal.On6thOctober2021,theHongKongClimateActionPlan2050waspublished.ItsetaninterimtargetofreducingHongKong’scarbonemissionsby50percentbefore2035comparedto2005levels.▪Thegreatestpotentialforreducingemissionsiswithinthepowersector,whichaccountedforapproximately66percentofHongKong’stotalgreenhousegas(GHG)emissionsin2019.InthenewlyreleasedClimateActionPlan,Governmentcommittedtoceasecoalusagefordailyelectricitygenerationby2035,aswellasincreasetheshareofrenewableenergyto7.5–10percentby2035andto15percentgraduallythereafter.▪ThisreportisoneofanumberofsectoralreportsundertheHongKong2050IsNowinitiativeexaminingpossiblepathwaystodecarbonisation.Itevaluatespotentialdecarbonisedpowertechnologiesanddevelopsfiveenergy-mixscenariosinvolvingdifferenttechnologicalcombinations.Thesescenariosconsidertheeconomic,social,andenvironmentalimpactofbuildingadecarbonisedpowersystem.Ourrecommendationscaninformgovernmentplanninginitspursuitofthemid-andlong-termtargetslaidoutintheClimateActionPlan.▪Wehavefoundthatadecarbonisedpowersystemwithahighratioofimportednuclearenergyhaseconomicadvantagesandcanreducepowersystememissionsby70percentby2035.Incontrast,powersystemswithahighrelianceonemergingtechnologies,suchasCCSandhydrogen,facehighercostsanddeploymentfeasibilitychallenges.Ultimately,thefuturecostsofthesetechnologieswilldeterminetheirlong-termutility.▪HongKongshould,inafirstinstance,beproactiveinscalingupdomesticwindandsolarenergy,aswellasexpandingwaste-to-energyfacilities.Givenitslimitedlandarea,HongKongalsoneedstoenhanceregionalcollaborationandimportmorelow-carbonenergy,suchasnuclearandgreenhydrogen,tobuildadecarbonisedpowersystem.VIWRI.org.cnIntroductionInherNovember2020annualPolicyAddress,HongKong’sChiefExecutive,CarrieLam,setoutthegovernment'sstrategiesandproposalstoachievecarbonneutralityandpromotegreentransportandenergyefficiency,andpledgedthatthecitywouldachievecarbonneutralitybefore2050.Currently,thepowersectoristheprimarysource(66percent)ofcarbonemissionsinHongKong.Therefore,decarbonisingthissectoriscriticalforthecitytoachieveitscarbonneutralitygoal.ThisreportanalysesHongKong’soptionsinthisregard.Basedonanin-depthanalysisofdifferentpowertechnologies,wedevelopedfiveenergy-mixscenariosandproviderecommendationsforpolicymakersandpowercompanies.ZeroCarbonTechnologyOptionsforHongKongWeexaminethefeasibility,opportunities,andchallengesforthelarge-scaledeploymentofrenewableenergy,CCS,andgreenhydrogen.Wealsoevaluatethepossibilityofdevelopingjoint-ventureopportunitieswithrenewableenergyandnucleargeneratorsinMainlandChina.OurobjectiveistopromoteregionalcollaborationoncleanenergydevelopmentandapowersystemthatisbetterintegratedwithMainlandChina.Domesticrenewableenergy(RE):Limitedbygeographicalconditionsandresources,domesticREcanonlyplayalimitedroleinHongKong’senergymix.However,itmustundoubtedlybeanindispensablepartofanyfuturedecarbonisedpowersysteminHongKong.OuranalysisshowsthatdomesticREcouldsupplyupto4percentofHongKong’selectricitydemandby2030and10percentby2050.AmongallREoptionstohelpachievedecarbonisation,offshorewindfarmsappeartohavethegreatestpotential.Inthefuture,ifCCStechnologybecomescommerciallyavailable,itcouldhelpabateemissionsfromfossil-fuelpowerplantswhilemaintainingtheirdispatchablepoweroutput,andassurereliabilityinaflexiblemanner.ThisisofgreatvaluetoHongKongbecause,withlimitedrenewableenergyresources,fossilfuel-basedpowergenerationislikelytoperformsomerole.HydrogenhasgreatpotentialasanalternativeenergycarrierinsupportingHongKong’scarbon-neutralitygoal.Theutilisationoflow-orzero-carbonhydrogencanreduceourcarbonfootprint,aswellasstrengthenHongKong’senergysecurity,thuscontributingtogreaterclimateresilience.Thepowersectorcouldgreatlybenefitfromhydrogen’scontributiontogridbalancingandthemanagementofpeakloadissues,thereforeenhancingsupplyreliability,deployment,andtransport.Thedeliveredcostofhydrogencouldsignificantlyaffectthepower-generationcostofelectricityinHongKong.ImportingcleanenergyfromMainlandChina.HongKongshouldworkwithGuangdongProvinceandaspirefortheGreaterBayAreatoleadeffortsinChinatoachievecarbonneutralityby2050.Nuclearenergyistechnicallyfeasible,commerciallyviable,andanavailabledecarbonisedoption.ThereispotentialforHongKongtoimportmorenuclearenergyfromGuangdongaspartofitscleanenergytransition.Offshorewindisalsoapromising,increasinglyeconomicandavailableoption.Themainpower-sectorchallengesforgovernmentincludenegotiatingwithcitiesinMainlandChinaforcleanenergyresourcesand,consequently,ensuringadequateinfrastructurefortransportanddistribution.Governmentandthecity’stwolocalpowercompaniesneedtobeginnegotiationswithMainlandChinatohelpsecurestable,adequate,anddecarbonisedenergy.Hydrogen:HydrogenhasgreatpotentialasanalternativeenergysourceinsupportingHongKong’scarbon-neutralitygoal.Theutilisationoflow-orzero-carbonhydrogencanreducethecity’scarbonfootprint,aswellasstrengthenitsenergysecurity,thuscontributingtogreaterclimateresilience.Thepowersectorcouldbenefitgreatlyfromhydrogen’scontributiontogridbalancingandthemanagementofpeakloadissues,therebyenhancingthereliabilityofthepower-sectorsupply.However,asHongKonghaslimitedgreenhydrogenfacilities,itwilllikelyhavetoimportgreenhydrogenfromAustralia,theMiddleEast,orMainlandChina.Currently,usinggreenhydrogentopowerthebaseloadfaceschallengesduetolimitedsuppliesandhighfuelcosts.ThesuccessofutilisinghydrogeninHongKong’spowersectordependsonglobaleffortsingreenhydrogendevelopment,POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKongVIIFigureES-1EvolutionofPowerGenerationMixAssumedacrossScenariosdeployment,andtransport.Thedeliveredcostofhydrogencouldsignificantlyaffectthepower-generationcostofelectricityinHongKong.CCS.In2020,naturalgascontributed48percentofHongKong’selectricitygeneration,whilecoalaccountedfor23percent.DespiteHongKong’splanstophaseoutallcoalinthefuture,electricitygenerationfromnaturalgaswouldstillproduceworryingamountsofemissions.IfCCStechnologybecomescommerciallyavailable,itcouldabatetheemissionsoffossil-fuelpowerplantswhilemaintainingtheirdispatchablepoweroutputtounderpinlocalreliabilityinaflexiblemanner.ThisisofgreatvaluetoHongKongbecause,withlimitedrenewableenergyresources,fossilfuel-basedpowergenerationislikelytoperformsomekindofarole.PathwaystowardsaNet-ZeroEmissionsPowerSystemBasedonananalysisofthepotential,feasibility,andreadinessoftheabovetechnologies,aswellasthroughconsultationswithstakeholders,wedevelopedfivescenariostodemonstratetheeffectsofdifferentenergymixes.FigureES-1illustratestheenergymixofeachscenario.Weexaminedtheperformanceofthefivescenariosintermsofcost,airpollution,andhealthrisks.TableES-1showsthatthefivescenariosperformdifferentlyagainstthesecriteria,andnosinglescenariooutperformstheothersinallaspects.Governmentisadvisedtoconsiderthesefiveoptionsinitseffortstoachieveits2050carbon-neutralitygoal.Source:Assumptionofprojectteam.Powergeneration(GWh)020,00060,00010,00050,00040,00030,000203520452050203020402025203520452050203020402025203520452050203020402025203520452050203020402025203520452050203020402025SolarPVWastetoenergyImportedREOffshorewindImportednuclearHydrogenCoalOnshorewindNaturalgaswithoutCCSNaturalgaswithCCSNaturalgasRE+Fossil-freeDiversityNuclearVIIIWRI.org.cnNote:$representsthelowestcostcomparedwiththeotherscenarios;$$$$$representsthehighestcostcomparedwiththeotherscenarios.Source:Scenariosfortheenergymixin2050aretheauthors’assumption;evaluationcriteriaarecalculationresultsoftheprojectteam.Source:Calculationoftheprojectteam.NATURALGASRE+NUCLEARDIVERSITYFOSSIL-FREEScenariosEnergyMixin2050NaturalgaswithCCS65%35%30%35%-LocalRE10%10%10%10%10%ImportedRE-30%10%15%-Nuclear25%25%50%25%60%Hydrogen---15%30%EvaluationCriteriaFeasibility-technologicalmaturityNoforCCSNoforCCSNoforCCSNoforCCSandhydrogenNoforhydrogenEconomiccompetitiveness(avg.LCOEin2050)$$$$$$$$$$$$$$$CarbonandairpollutantemissionsHighMediumLowMediumLowAssociatedhealthconcernsHighMediumLowMediumLowDiversityLowMediumMediumHighLowTableES-1ComparisonofDifferentScenariosFigureES-2AnnualCO2EmissionsunderDifferentScenariosNuclearscenarioDiversityscenarioFossil-freescenarioRE+scenarioNaturalgasscenarioAnnualCO2emissions(Millionsoftonnes)20252020205020302035204020450102520155POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKongIXIntermsofclimatemitigation,theNuclearscenariohasthelowestcumulativecarbonemissionsbecauseitinvolvesaone-timeswitchtoalarge-scaledecarbonisedenergysource.TheFossil-Freescenariopresentsapathwaywiththesecond-leastcumulativecarbondioxideemissionsandwillleadtonet-zerocarbonemissionsby2050.TheRE+,Nuclear,andDiversityscenarioswillallbringcarbondioxideemissionsin2050tolessthan5percent,comparedwithtoday’slevels.Fromatechnicalreadinessperspective,allthescenariosrelytoacertaindegreeonearly-stagetechnologies—naturalgas-firedpowerplantsequippedwithCCSandgreenhydrogen—thatarenotyetcommerciallyviable.TheNaturalGasandDiversityscenariosrelyonthesetechnologiesfor50–65percentofthetotalgenerationmix.TheRE+,Nuclear,andFossil-Freescenariosrelylessonthesetechnologies,takingup30–35percentofthetotalgenerationmix.Thescenarioswithahigherrelianceonearly-stagetechnologiesbeargreateruncertaintiesduringenergytransitions.Inthisrespect,theNuclearandFossil-Freescenariosperformbestastheyleveragethesetechnologiesleast.GlobaleffortsinthedevelopmentanddeploymentofCCSandgreenhydrogenwillbecrucialforCCS-equippedpowerplantstobecommerciallyviableandforgreenhydrogenproductiontotheeconomyscale.Intermsofcost-effectiveness,increasingimportsofnuclearenergywillhelpHongKongachieveitscarbonneutralitygoal,whileavoidingthehighercostsassociatedwithtechnologiesinearly-stagedevelopment.EstimatesonthefuturecostsofvariousdecarbonisedpowergenerationtechnologiesmainlycentreonthefuturepriceofgreenhydrogenandCCStechnologies.TheeconomicperformanceoftheNuclearandFossil-Freescenariosoutperformstherest.RecommendationsItiscriticalforHongKongtotakeambitiousanddecisiveactionnowtotransformtoanet-zerocarbonpowersystem.Asgovernmentconsidershowtodecarbonisethecity’spowersystem,potentiallyadoptingoneofthefivescenariosordifferentcombinationsofthem,italsoneedstounderstandtheimportance,regardlessofwhatitchooses,ofkeepingupwithtechnologicalandmarketdevelopments.Delayinactionwillleadtoacarbonlock-in,whichwilleventuallyleadtolargercumulativeemissions.ItwillalsochallengeHongKong’spositionasanimportantinternationalfinancialcentre.XWRI.org.cnThesearewhatwecall‘no-regret’actions.Regardlessofwhichpathwaygovernmentchooses,theserecommendationsshouldbeforimmediateimplementation.AnydelaywilllikelyjeopardiseHongKong’scarbon-neutralityvision.Scaleupdomesticwindandsolarenergy.ManystudiesindicatethatHongKong’srenewableenergypotentialcouldconstituteupto10percentoftotalenergyconsumption,whichismuchhigherthanthecurrentgovernmenttargetof3–4percent.Regardlessofwhichpathwayischosen,governmentshouldutilisedomesticrenewableenergyresourcesasmuchaspossible.Todoso,governmentshouldauthoriseanewstudytoexaminetheavailabilityofHongKong’srenewable-energyresources.InadditiontothecurrentFeed-inTariffscheme,governmentshouldintroduceotherfinancialincentives,suchasfiscalandtaxationmechanisms,toencouragebothutilityandnon-utilitycompaniestodeveloprenewable-energytechnologies.Furtherscaleupwaste-to-energyfacilities.Waste-to-energy(WtE)technologyisaninvaluabledomesticrenewableresourcethataddressesbothwastemanagementandGHGemissionschallenges.Regardlessofwhichpathwayischosen,alongsidepoliciesthatreducewaste,HongKongshouldoptimiseWtEutilisation.GovernmentmayincludeaWtEtargetintheSchemeofControlAgreements(SCAs)andaskbothpowercompaniestodevelopWtEfacilitiesattheirplantsites.Forinstance,CastlePeakandLammaIslandarepotentialsitesforuptothreeincinerators.However,governmentneedstoaddressresidents’environmentalconcerns,suchasairpollutionandodours.Thesecouldeasilybeaddressed,however,withgreatertransparencyand,forexample,real-timeairqualitymonitoringduringconstruction.ExplorewaystoenhanceregionalcollaborationtowardsincreasingimportsofrenewableandnuclearenergyfromMainlandChina.BuildingnewnuclearpowerplantsandoffshorewindprojectsareatthetopofGuangdong’senergy-developmentagenda,andthatcouldprovideopportunitiesforHongKongtoincreaseitsproportionofimportedcleanenergythroughcollaborativemodels,suchasnegotiatingjointventureswithindividualgenerators.GovernmentmayconsiderexploringthefeasibilityofimportingrenewableandnuclearenergyfromGuangdong.GovernmentshouldalsoexploretheviabilityofadditionalinterconnectionsbetweenHongKongandtheChinaSouthernGridtoensurethatreliabilitystandardscanbemaintained.POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKongXIExplorethepotentialoflarge-scalegreenhydrogenutilisation.Hydrogen-basedtechnologiesarebecominganimportantsolutionforanet-zerocarbonsocietyandhavethepotentialtosatisfyHongKong’speakload,gridbalancing,andenergy-securityissues.Governmentmayconsiderestablishingacross-agencytaskforcetodevelopagreenhydrogenstrategyforHongKong.Itwouldalsobeworthwhiletoexplorethepotentialof‘pink’hydrogenproducedbynuclearpower,or‘blue’hydrogenproducedfromfossilfuelsplusCCS.HongKongpowerplantsbuiltafter2020shouldalsobehydrogen-ready.Governmentshouldconsiderprovidingsubsidiesforgreenhydrogenresearchanddevelopment,aswellasfosteringcarbonpricingtoallowgreenhydrogentobecomeacost-competitivealternative.Enhancegridbalancingandenergystoragetoaccommodateabroaderenergymix.Gridbalancingbecomesmorechallengingasahigherpercentageoftheenergysupplymovesfromcoalandgastomultiplesources.HongKongneedstolookatalloptions,suchasimprovinginterconnectionswithinthecity,constructinganinterconnectionwiththeChinaSouthernGridthatmaintainsHongKong’scurrentreliability,andincreasingstoragecapacity.Governmentmayconsiderconductingastudytoidentifymeasurestoenhancegridbalancing.Itcouldseekinvestmentinnewsourcesofsystemreliabilityandflexibilityinresponsetotheshiftfromadispatchablegeneration-dominatedpowersystemtoonerelyingmoreonrenewablepower.ExplorethepossibilityofCCStechnologydeployment.ThereisgrowingrecognitionofthepartCSScanplayinthedecarbonisationprocess.Itisimportanttoensurethatallfossilfuel-basedpowerplantsbuiltafter2020areCCS-ready.RetrofittingexistingfacilitieswithCCStechnologiesiscostlyandsometimesinfeasible.WhilethefuturedevelopmentofCCSisstilluncertain,governmentandtheutilitycompaniesshouldstartactivelyengaginginregionalCCSdevelopmentprojects,includinginGuangdong.ThiswillhelpensurebetterplanningforfutureCCSdeployment.ContinuetoincreasetheelectrificationofHongKongsociety.Althoughthisreportfocusesonreducingemissionsfromthepowersector,nosingleindustry’seffortscanensurethatHongKongachievescarbonneutralitybefore2050.DetailedrecommendationsforthetransportandbuildingsectorscanbefoundinotherreportsintheHongKong2050IsNowseries.XIIWRI.org.cnPARTICURRENTPOWERSYSTEMPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong1POWERSYSTEMINTRANSITIONInNovember2020,HongKong’schiefexecutivepledgedthatthecitywouldachievecarbonneutralitybefore2050,makingitthefirstcityinChinatosetatime-specificcarbon-neutralitygoal.PublishedinJune2020,thefirstHongKong2050IsNow1report,TowardsaBetterHongKong:PathwaystoNet-ZeroCarbonEmissionsBy20502,demonstratesthatHongKongcouldachievenet-zeroGHGemissionsby2050throughabroadrangeofinitiatives,includingdecarbonisingitspowersystem,buildingenergy-efficiencyenhancements,andimprovingtransportsystems.CHAPTER12WRI.org.cnInOctober2021,governmentpublishedtheHongKongClimateActionPlan2050,whichsetaninterimtargetofreducingHongKong’scarbonemissionsby50percentbefore2035ascomparedto2005levels.Theplancommittedtoceasecoalusagefordailyelectricitygenerationby2035,aswellasincreasetheshareofrenewableenergyto7.5–10percentby2030andto15percentgraduallythereafter(HongKongGovernment2021).Thesemeasuresrepresentasignificantincreaseofambitionfromtheprevioustargetsoutlinedinthe2017ClimateActionPlan2030+,whichaimedfor3–4percentrenewableenergyby2030.However,theupdatedplandoesnotcontainaconcretedirectiontowardstheachievementofthenewtargets.ThisreportoffersroadmapsthataimtoguideHongKongtowardsadecarbonisedpowersystemandwillhopefullyinformgovernment’splans.TheNeedforaCleanPowerSystemPowergenerationandotherenergyindustriesarethesinglelargestsourceofGHGemissionsinHongKong.AccordingtoHongKong’s2019GHGinventory,approximately66percent,or26.3MtCO2eofitsemissionscamefromelectricitygenerationandtowngas3productionthatyear(EPD2021).Ouranalysisshowsthatdecarbonisingthepowersectoriskeytoachievingnet-zerocarbonemissionsandshowsthepotentialforemissionsreductionsof27MtCO2by2050.Thatrepresents60percentofHongKong’stotalemissionsreductionpotential(Jiangetal.2020).Thisreportisdividedintothreeparts:Chapter1elaboratesonthecurrentpowersysteminHongKongandtheneedtodecarbonisethissystem.Basedonananalysisofvariouszero-emissionspowertechnologies—includingdevelopingdomesticrenewableenergyresources,equippingcoalandgaspowergenerationwithCCStechnologies,replacingcoalorgaswithgreenhydrogen,andimportingcleanenergyfromMainlandChina.Chapters2to5offeranevaluationandrecommendationsforHongKongwhenconsideringdifferentnet-zerocarbon-technologyoptions,includingrenewableenergy,fossilfuelswithCCS,andgreenhydrogen,aswellasregionalcollaborationonlow-carbonenergydevelopment.Chapter6definesconcretepathwaysandimplementationroadmapsfordecarbonisingthepowersystem.Finally,Chapter7delvesintorecommendationsforactionoverthenext5to10years.IncreasingPowerDemandHongKong’selectricityconsumptionwas44.1TWhin2020(CSD2021),aslightdecreasefrom2019levelsduetotheCOVID-19pandemic.Inthepast20years,growthinelectricitydemandhasslowed.Percapitaelectricityconsumptionpeakedin2014,thesameyearthattotalemissionspeaked.Figure1HongKong'sElectricityConsumptionandGHGEmissions(I)Source:CSD2021;EPD2021.TotalelectricitydemandandpercapitaelectricityconsumptionTotalelectricitydemand(TWh)2004200220002020200820062010201420122018201602040501030Percapitaelectricitydemand(KWh)5,0005,6006,0006,2005,4005,2005,800PercapitaelectricityconsumptionTotalelectricitydemandPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong3ElectricityisplayinganincreasinglyimportantroleinHongKong’senergysystem.Electricityaccountedfor55percentofthefinalenergydemandin2018,withmostcomingfromcommercialbuildings,residentialbuildings,industries,andtransport(EMSD2020).ThebuildingsectordominatesHongKong’selectricityconsumption,accountingformorethan93percentoftotalelectricityuse(EMSD2020),asshowninFigure2.Electrificationwillcontinueinthefutureandisvitalforlocalsustainabledevelopment.Drivenbyeconomicandpopulationexpansion,bothcommercialandresidentialbuildingshaveexperiencedmoderategrowthoverthepastdecade.Thenumberofresidentialunitsincreasedby14percentbetween2008and2018,whilethefloorareaofcommercialandindustrialbuildingsroseby4percent(CSD2019).Thistrendincreasedelectricitydemandinthebuildingsector,especiallyfromcommercialbuildings.ThoughthetransportsectoraccountedforarelativelysmallpercentageoftotalelectricityconsumptioninHongKongduringthistime,itactuallygrewFigure1HongKong'sElectricityConsumptionandGHGEmissions(II)Figure2ElectricityConsumptionbySectorin2018Source:CSD2021;EPD2021.Source:EMSD2020.Industrial5%Transport2%Commercialbuildings67%Residentialbuildings26%MilliontonnesofCO2e2004200220002020200820062010201420122018201601,0002,0003,0003,5004,0004,5005,0005001,5002,500TotalGHGemissions4WRI.org.cnfasterthantheothers,at27percent.ThisismainlyduetoincreaseddemandfromtheMTRandTram—largetransportsystemspoweredbyelectricity(EMSD2020).Duringthesameperiod,electricityconsumptioninHongKong’sindustrialsectordeclined34.5percentduetoadecreaseinindustrieslocatedinthecity(Figure3).BasedontheresultsfromtheHongKongEnergyPolicySimulator(HongKongEPS)4,whichwerealsopresentedinTowardsaBetterHongKong:PathwaystoNet-ZeroCarbonEmissionsby2050,HongKong’sfuturepowerdemandwillgraduallyincreaseatanaverageannualgrowthrateof0.4percent.Totalpowerdemandisexpectedtoreacharound46.7TWhin2043.Afterthat,itwillstarttodeclinetoaround45.6TWhin2050(Jiangetal.2020).ThebuildingsectorisforecasttodominatedemandforelectricityinHongKongoverthenextthreedecades.Totaldemandwillremainatthecurrentlevelasaresultofincreasedbuildingareasandelectrification,butwithimprovedenergyefficiency,accordingtotheHongKongEPS.InMarch2021,governmentreleasedtheHongKongRoadmaponPopularisationofElectricVehicles,whichstipulatesthatHongKongintendstoprohibitnewregistrationsofprivatefossilfuel-poweredcars,includinghybrids,by2035.ThisshouldaccelerateamovetowardselectrificationinHongKongandincreasedemandforelectricityinthetransportsector.Itisexpectedthattransportwillaccountfor10.9percentoftotalelectricitydemandin2050,comparedwithonly1percentin2020(Figure4).Terajoules080,000100,00040,00020,00060,000120,000140,000160,000180,0002008totalResidentialbuildingsCommercialbuildingsIndustrialuseTransport2008totalFigure3HongKong'sElectricityConsumptionChangebySector,2008–2018Figure4HongKong’sFutureElectricityDemandbySector,2021-2050Source:EMSD2020.Source:HongKongEnergyPolicySimulator(https://hongkong.energypolicy.solutions/).147,3454,86510,839-4,244689159,494IndustryTransportBuildingTWh/year20272029202520232021204720352037203320312043204520412039204904050203010POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong5TransitioningfromCoaltoCleanEnergyIn2020,localpowerplants,dominatedbyfossilfuel-firedpowerplants,provided73.4percentofHongKong’stotalelectricitydemand,whileimportednuclearenergyfromtheDayaBayNuclearPowerStationinGuangdongProvincecontributedtheremainder.(CSD2020a).Historically,coalhasdominatedlocalpowergeneration,butitisgraduallybeingreplacedbygas-firedpowergeneration.In1997,governmentdecidedtostopbuildingnewcoal-firedpowerplants.In2017,itpublishedHongKong’sClimateActionPlan2030+,whichlaidoutaplantocontinuephasingoutcoalforelectricitygenerationto25percentoftheenergymix,toincreasetheshareofnaturalgasto50percentby2020,andtoincreasenon-fossilfuelsources.(HongKongSteeringCommitteeonClimateChange2017).In2020,naturalgas(48percent)surpassedcoalastheprimarysourceofelectricitygeneration,followedbyimportednuclearenergy(28percent)andcoal(23percent)asshowninFigure5.HongKongalsoseekstodevelopandintroducecleanenergysolutions,suchassolarandwindpowergeneration,aswellashydrogen,toreducecarbonemissionsandachieveitscarbonneutralitytarget.However,consideringresourceFigure5ElectricityGenerationMixinHongKong,2015and2020andgeographicalconstraints,HongKongneedstodeveloprefinedpoliciesforbothrenewableenergysubstitutionanddecarbonisationofitsfossil-fueldominatedpowersystem.InstitutionalandRegulatoryFrameworkfortheTransitionHongKong’selectricityissuppliedbytwoinvestor-ownedandverticallyintegratedutilitycompanies,CLPPowerHongKong(CLP)andtheHongKongElectricCompanyLimited(HKE).ThesetwocompaniesownandoperateHongKong’slocalpower-generationplantsandtransmissionanddistributionnetwork,whilstservingdifferentareasofthecity.CLPsupplieselectricitytoKowloonandtheNewTerritories,includingLantau,CheungChau,andmostoftheoutlyingislands.CLPownedatotalinstalledcapacityof9,573MWin2020(CLP2021b)andhas25percentequityintheDayaBaynuclearpowerplant(CLPn.d.b).HKEsupplieselectricitytoHongKongIsland,ApLeiChau,andLammaIsland,andownedatotalinstalledcapacityof3,617MWin2020(HKElectricInvestment2021).Thetwocompaniesaretheimplementingpartiesforthepowersector’sdecarbonisationgoal.Governmentisresponsibleforregulatingtheelectricitymarket.Every15years,itentersSCAsSource:HongKongSteeringCommitteeonClimateChange2017;CLP2021a;2021b;HKE2021.Naturalgas27%Coal48%Nuclear26%2015Naturalgas48%Nuclear28%Coal23%2020Other1%6WRI.org.cnwitheachutilitycompany,imposingspecificrequirementsonthetwomonopoliesregardingshareholderdividendlimits,electricityprices,andcorporateresponsibilitiesandobligations,aswellasotherfinance-relatedmatters.Anyadditionalgeneration,transmission,anddistributionfacilitiesmustbeapprovedbygovernment.AsSCAsregulatetherightsandobligationsofthecompanies,theyareconsideredthemostimportantdocumentsinthelocalelectricitymarket.Theyareavitaltoolinensuringenergysecurityandminimisingtheenvironmentalimpactofelectricitygeneration,whilepromotingenergyefficiencyandconservation(ENB2021a).ThefirstSCAwassignedin1964.ThecurrentSCAsweresignedin2017andbecameeffectivein2018forCLPand2019forHKE.Thetwoagreementswillexpirein2033.TheyreflectHongKong’scommitmenttocombattingclimatechange,promotingefficiencyandconservation,developingrenewableenergysources,andmeetingpublicexpectationsforthefuturedevelopmentoftheelectricitymarket.EversincethefirstSCA,theagreementshavefocusedongovernment’sroleinmonitoringelectricity-relatedfinancialaffairs,suchastherateofreturn,whichiscurrentlyat8percentforshareholdersunderthecurrentSCA.Increasingly,governmenthasfocusedonprovidingfinancialincentiveschemesforthepromotionofsustainability,suchasanadditionalrateofreturnfortheimprovementofenergy-efficientperformancethroughenergyauditsandsupportingtheFeed-inTariffScheme.SCAsareimportantregulatorytoolsfortheelectricitymarket.Ourrecommendationsinthisreporthighlighttheirpotential.POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong78WRI.org.cnPARTIINET-ZEROTECHNOLOGYOPTIONSPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong9RENEWABLEENERGYANDWASTETOENERGYLessthan1percentofHongKong’selectricityconsumptionissuppliedbyrenewableenergysources(Figure6).HongKong’sClimateActionPlan2030+indicatesarenewableenergytargetof3–4percentby2030,butotherresearchsuggeststhecityshouldaimmuchhigherinthisfield.(HongKongSteeringCommitteeonClimateChange2017).ThisChapterexaminesthepotentialofWtE,solarpower,andwindpowerinHongKong.CHAPTER210WRI.org.cnWastetoEnergyCurrentCapacityAsacitywithoneoftheworld’shighestlevelsofwastepercapitaperday(1.47kg),HongKongsent4.04milliontonnesofmunicipalsolidwaste(MSW)tolandfillsin2019(ENB2021b).GHGemissionsfromthewastesectordoubledfromabout1,550kilotonnesCO2ein1990to2,940kilotonnesCO2ein2019(EPD2021).ItistheonlysectorinHongKongthathasincreaseditsemissionssince2014.WtEcontributed84%ofelectricitygenerationfromlocalrenewableenergy(Figure6).WtEtechnologyoffersasolutiontothreeofthecity’smostpressingproblems:anoverburdenedwastemanagementsystem,thelackoflow-carbonenergy,andlimitedlandavailableforlandfillandwastedisposal.Currently,WtEproduces560.83GWhofenergyandmakesup86percentofalltherenewableenergyinHongKong(EMSD2020).MajorWtEtechnologiesincludelandfillgasutilisation,anaerobicdigestion,andthermaltreatmentwithenergyrecovery.Figure7LocationofWasteManagementFacilitiesSource:ENB,2013.Figure6CompositionofRenewableEnergyinHongKong(GWh)Source:EMSD2020.WtE,568.889Biodiesel,88.611Solar,13.055Windandhydropower,4.167POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong11PotentialCapacityHongKong’swastemanagementstructurereliesheavilyonlandfillsandhasvirtuallynoincinerationcapacity,asgovernmentshutdownallmunicipalwasteincineratorsduringthe1990s.InHongKong’sClimateActionPlan2030+,governmentestimatesnomorethan1.5percentofHongKong’selectricitywillcomefromWtEthroughtheOrganicResourcesRecoveryCentre(ORRC)Phase3andIntegratedWasteManagementFacilities(IWMFs)thatrecoverheatenergyfromtheMSWincinerationprocess.In2017,theEnvironmentalProtectionDepartment(EPD)commissionedanenvironmentalimpactassessmentoftheORRCPhase3,orO-Park3,withaproposedcapacityof300tonnesperday(EPD2017).AsiteinShekKong,YuenLong,wasidentifiedforthisfacility,yetnofurtheractionhasbeentaken.InadditiontothecommissionedIWMFPhase1siteinShekKwuChau,whichispredictedtoproduceapproximately480millionkWhofsurplusenergyforthepowergridannually,theTsangTsuiAshLagoonwasalsoidentifiedasasuitablesiteforIWMFPhase2(EPD2008).SituatedadjacenttotheWENTLandfillandCLP’sBlackPointPowerStation,thisnewlocationoffersmultipleadvantages,includingtheabilitytoshareexistinginfrastructure,suchasberthingfacilitiesandtheeasydisposalofashresiduegeneratedbyIWMFintothelandfill.Itsproximitytothepowerplantalsomeanseasyconnectiontothepowergrid.ChallengesandOpportunitiesLiuetal.(2017)conductedananalysisoftheenvironmentalimpactoffivewaste-managementtechnologies.TheyfoundthattheoptimumstrategyforGHGreductionwastheanaerobicdigestion(AD)ofsource-separatedorganicwasteandtheincinerationofportionsofwastehighinplastics.Residuelandfillingwastheleastoptimaloption.Iqbaletal.(2019)supportsthisconclusion.IntheiranalysisofvariousintegratedsolidwastemanagementscenariosbasedonnetGHGemissionsandenergyuse,theyfoundthatintegratingincinerationwithcombinedADandcompostinghasthebestpotentialforenergyrecoveryandcansaveupto87percentofGHGemissions.Withoutenergyrecovery,though,theincinerationmethodisunfavourable.Theapplicationofcarbonsequestrationisalsoadecisivefactorthataffectstheoverallimpactofeachscenario.WhenestimatingthepotentialGHGemissionsinHongKong’swastedevelopmentplan,Dongetal.(2017)foundthatafterimplementingIWMF,GHGemissionsfromlandfillswoulddecreaseby52percentby2030,comparedto2018levels.However,totalGHGemissionsfromtheentirewastesectorwerepredictedtoincreaseby332,206tonnesofCO2ein2020,comparedto2010levels.Theadditionalemissionscomefromthecombustionofpetroleumproductswhenplasticsarethrownaway.Thiscanbenegatedbyrobustrecyclingandwaste-sortingeffortstoremoveplasticsfromtheincinerationstreamorbyreducingoverallsolidwastedisposalby40percent.Dongetal.(2017)demonstratethatincinerationisnotasilverbulletforthecity’swasteorcleanenergyissues;instead,theremustbeactivewaste-reductioneffortsandimprovementsinrecyclingforIWMFtobeconsideredaclimate-friendlysolution.Despitethebenefitsofintegratedwastemanagementandthepotentialforincineration,thepeopleofHongKongareresistanttothenewShekKwuChauincinerator.In1989,governmentissuedPollutioninHongKong—ATimetoAct,awhitepaperwhichdeterminedthatincineratorswereamajorsourceofpollutioninurbanareas,accountingforapproximately18percentofallrespirableparticulatesemittedintotheatmosphere,aswellasasourceoftracequantitiesofhighlytoxicsubstances.Thisledgovernmenttoshutdownmunicipalwasteincineratorsinthe1990s.Sincethen,incineratortechnologieshaveimproved.Byadoptingadvancedprocess-controlmeasurestooptimisethecombustionprocessandmeetingstringentinternationalemissionstandards,incinerationhasbecomemoreacceptedandiswidelyusedaroundtheworldtoday.Governmentreverseditsdecisionagainstincineratorsintheir2005PolicyFrameworkfortheManagementofMunicipalSolidWaste12WRI.org.cninHongKong,whichincludedbuildingIWMFswithincinerationasthecoretechnologyforfinalwastetreatment.However,the1989whitepaperbroughtaboutnegativepublicattitudestowardsincinerationthatcontinuetobethemajorityviewtoday.Somealsoconsiderincinerationasabandaidsolutiontolargerwasteissuesandanineffectiveuseofpublicfunds.Theseconcernsarecertainlywarranted.Burningwastecouldcauseadversehealthconditions,and,furthermore,solongasvolumescontinuetorise,itisnotsustainableoverthelongterm.Governmentshouldeducatethepublicaboutincinerationtobuildsupportbutnotwithoutcommunicatingitsdisadvantages.Ifincinerationisstilljudgedaviableoptionuponevaluation,thengovernmentshouldseektechnologyandmanagementmethodstomitigateasmuchofthenegativeimpactaspossible.Thismayincludeusingadvancedincinerationtechnologiesthatreducepollutantemissionsfromincineration,complywithstringentemissionstandards,anddonotcauseadversehealthimpacts.SolarEnergyCurrentCapacityOverthepast10years,solarpowersystemshaveexperienceda35percentbuild-outrateduetoheavyinvestmentsandpolicysupportglobally(HydrogenCouncil2021).In2015,HongKong’sphotovoltaic(PV)capacitywaslessthan5MW,involvinganaccumulationofdistributedsmall-scaleprojects.Currently,HongKonghasseveralplannedandconstructedlarge-scalePVsystems.ExamplesincludeHKUST,whichintendstoinstall8,000monocrystallinesolarpanelsgenerating3millionKWhannually;DairyFarmInternational,whichisbuildinga1-million-KWhsolarpanelsystematitsWellcomeFreshFoodCentreinTseungKwanO;HongKongDisneyland,whichisaimingtoinstallmorethan4,500solarpanelstoproduce1.86MWhannually;theSiuHoWanSewageTreatmentWorks,withacapacityof1MW,producing1millionKWhofelectricityannually(builtin2016);anda1MWsolarpanelsystemattheLammaPowerStation(constructedin2013byHKElectric).Thereareothersmall-scalesystemsingovernmentbuildings,schoolcampuses,andprivatebuildings.In2017,governmentbeganaFeed-inTariff(FiT)Schemetoencourageresidentstoinstallprivaterenewable-energy(RE)generatorsontheirproperties.ThisschemeallowsparticipantstoselltheirelectricitytopowercompaniesatHKD3-5/kWh,aroundfivetimestheregularrate(HKEn.d.),butonethatissubjecttoanannualreview.However,therateisfixedfromthedatetheparticipantsentertheFiTschemeeitheruntiltheendoftheprojectlifeoftheowner’sREsystemortheendof2033—whicheverisearlier.After2033,alltheelectricitygeneratedwillbelongtotheREsystemowner.ThisreducesthepaybackperiodandoffersanexcitingincentiveforpeopletoinstallREsystems.Asof2020,therewere13,072applicantstotheprogramand176,200KWpurchasedbygovernmentandutilitycompaniesfromindividualsolarPVarrayowners.TheelectricitygeneratedbyFiTaccountedforlessthan0.01percentofthetotalelectricityconsumptionin2020.PotentialCapacityGovernmentpredictsthatonly1-1.5percentofHongKong’selectricityneedsin2030canbepoweredbysolarenergy.Takingthetotalelectricityconsumptionin2019—44.8TWh—asaframeworkforcomparison,thisistheequivalentof0.67TWh.Yet,otherstudiesoffermuchgreaterestimates.AccordingtoanIEAreport,rooftopsolarPVcanmakeasignificantcontributiontomeetingelectricitydemandincities;thetechnicalpotentialofrooftopsolarPVcouldprovideupto32percentofurbanelectricitydemandby2050.Withfurtherpolicysupportandinvestmentsintothedevelopmentofsolarenergy,aswellasplungingcostsandrisingpanelefficiencies,solarenergycanbecomeevenmorecosteffectivethanotherformsofgenerationbytheendofthedecade.ChallengesandOpportunitiesSolarhasthepotentialtomakesignificantcontributionstothelocalrenewableenergymix;however,thereareobstaclestofindingitsmaximumpotentialascalculatedinthestudiescitedinTable1.Aboutadecadeago,themostsignificantbarriersforsolarenergydiffusioninHongKongwerethehighinitialandrepaircosts,thelongpaybackperiod,inadequateinstallationPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong13space,inadequateserviceinfrastructure,thelackofstakeholderorcommunityparticipationinenergychoices,andlegalandregulationconstraints.Government’sintroductionoftheFiTSchemein2017providedamuch-neededpushforsolarenergydeployment.Someprojectsreportedanaveragepaybackperiodofsixyearsifthecurrentratesremainedconstant,whichspurrednumeroussmall-scaleprivateinvestmentsinsolarequipment(Chan2019).Governmentsaysitwillprovideincentivesuntil2033;however,whathappensbeyondthisyearisunclear.WhiletheFiTSchemehasprovidedsomeincentivesandconfrontedtheissueoflongreturnoninvestment,policysupportdoesnotguaranteetheubiquitousdeploymentofsolarenergyinHongKong.Citywidelandconstraintsstuntcapacityfactorsandtheaveragesizeofinstallations.Furthermore,whiletheestimatedtotalrooftopareaofallbuildingsinHongKongisaround42.6squarekilometres,onethirdofthisisdeemedunsuitableforPVsystems—forinstance,theperimeterzoneofroofsduetolowersolarirradiance,andpitchedroofswithslopesgreaterthan40degrees.ExcludingtheseareasbringsthetotalviablerooftopareaforPVsystemsdownto25.7squarekilometres.Moreover,regulatoryconstraints,suchasthecumbersomeinstallationprocessofPVsystems,createbarrierstoinstallingsolarenergysystemsthroughoutHongKong.Customersmustgothroughtheregulatoryhoopsandinvolvemultipleparties.Theyneed,forinstance,toobtainpermissionfromtheBuildingsDepartmentforconstruction;appointaprescribedregisteredcontractor(PRC)tosubmitaformoutliningtheintendedworks;appointaregisteredelectricalcompanytocommencework;andsubmitageneratingfacilityregistrationtotheEMSD.Lastly,thePRCmustsubmitaformafterthecompletionofworkstotheEMSD.Additionally,installingasolarenergysystemonahigh-riseresidentialbuildingrequiresapprovalofallitsowners,whichisadifficulttaskbecausefewownerswouldwanttopayfortheextracostsinvolved.Therecentintroductionofoneoftheworld’slargestfloatingsolarpanelfarmsinSingaporeisahugestepinthepromotionofsolarenergy.WithSingaporeandHongKongbothexposedtosimilarextremeweatherevents,suchastyphoonsandheavymonsoonrain,thesuccessofSingapore’sfloatingsolarpanelfarmprovidesHongKongSTUDYESTIMATEDANNUALOUTPUT(TWh)IN2030,ASA%OFELECTRICITYDEMANDIN2019LOCATIONOFINSTALLATIONTECHNOLOGYTYPEOFSOLARRADIATIONEMSD(2002)5.94(13.3%)BuildingrooftopsBuildingintegratedPV(BIPV)sDirectnormalirradiancePeng&Lu(2012)5.98(13.4%)BuildingrooftopsMonocrystallinesiliconmodulesDiffusehorizontalirradianceWong(2015)2.43(5.4%)38(84.8%)Buildingrooftops,openspaces-DirectnormalirradianceWongetal.(2016)2.66(5.94%)BuildingrooftopsMono-andpoly-crystallinesiliconmodulesDiffusehorizontalirradianceWWF(2017)3.95(8.8%)Reservoirs-DirectnormalirradianceTable1SummaryofPredictionsonSolarUtilisationOutputin2030asaPercentageofDemandin2019Source:EMSD2002;Peng&Lu2012;Wong2015;Wongetal.2016;WWF2017.14WRI.org.cnwithsomecertaintythatsimilartechnologycanbedeployedinthecitytohelpdealwithsuchnaturaldisasters.Moreover,floatingsolarpanelscouldaddresscapacityfactorissuesinHongKong,raisingthepotentialofsolarenergy.HongKongcanalsofollowinthefootstepsoftheSolarRoadmapforSingapore,preparedbyaconsortiumledbytheSolarEnergyResearchInstituteofSingaporeoftheNaturalUniversityofSingaporefortheSingaporegovernment.Itstatesthattheacceleratedscenariocouldcontributeabout22percent(2030)and43percent(2050)toelectricalpowerdemandaroundnooneveryday.Inthemeantime,governmentcouldimplementtwoprospectivesolarcommunitiesinHongKong—FairviewParkandHongLokYuen—whichhavethecapacitytoproducesubstantialamountsofsolarelectricity.Governmentalsoneedstodeveloppropermanufacturinganddisposalprotocolstolimittheecologicalandcarbonfootprintofsolarpanels.WindEnergyCurrentCapacityHongKonghasthewindenergypotentialtosupplementitsrenewable-energybase.Thereareafewlocationswheretheconditionsareright,namelywherewindpowerdensityisabove200W/m2andthemaximumwaterdepthis30metres.PotentiallocationsforwindfarmsaresummarisedinFigure8.Sofar,HongKonghasonlyasmallnumberofwindprojects,allonshore,withatotalcapacityoflessthan1MW.Themajorityofwindpowercomesfromasingle0.8MWLammaWindturbineoperatedbytheHongKongElectricCompanyLimited.Therearealsoanumberofsmall-scaleprojectswithindividualturbinesoperatingongovernmentbuildingsandnongovernmentstructures.Theseinstallationshavealimitedcapacityof1-1.5KW.Large-scalewindpowersystemsrequirevastareasoflandandmustbelocatedinsparselypopulatedareas,ifnotoffshore.Whiletherearecurrentlynooffshoreorlarge-scalewindpowerstationsinHongKong,severalstudieshaveassessedthesuitabilityofwindfarmdevelopmentinthecity’ssurroundingwaters.In2006,HKEconductedafeasibilitystudyofa100MWoffshorewindfarmwith40setsof2.5MWclasswindturbineunits(HKE2006).Alsoin2006,CLPcommissionedafeasibilitystudyforanoffshorewindfarmwith50turbinesinthesoutheasternwatersofHongKongthathasamaximumoutputof150MW(HKFigure8PotentialSitesforOffshoreWindDevelopmentSource:WongKamSing,2020PotentialAreasSHENZHENNEWTERRITORIESKOWLOONHONGKONGISLANDLANTAUISLANDHongKongShenzhenPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong15OffshoreWindLimited2006).Furthermore,CLPidentifiedseveralareaswhereoffshorewindenergystationscouldbedeveloped,ashighlightedingreeninFigure8.Astechnologyandequipmentassociatedwithwindenergygenerationdevelopsandbecomesmorecost-effective,CLPisplanningtobuilda250MWwindfarm.CLPconsidersoffshorewindenergysystemsavitalpartofHongKong'sfutureenergymixandishopingthatinnovationsinthisareacanhelpgovernmentmeetits2050carbon-neutralitytarget.HKEisalsoseekingtoconstructanoffshorewindfarmsouthwestofLammaIslandintheshortterm.PotentialCapacityGovernmentsaysitisnotcompletelyrulingouttheaforementionedprojectsinthemediumtermandestimatesthattotalpowergenerationfromwindwillamountto660GWh.Otherstudiesofferahigherpotentialcapacitybyassessingthefeasibilityofwindenergydevelopmentinotherlocations.ChallengesandOpportunitiesWindenergyiswellrecognisedasacleanalternativetoconventionalfossilfuel-firedpower.ThoughwindenergydoesnotreleaseairpollutantsandGHGsduringitsoperations,itcanpotentiallybringanadverseenvironmentalimpact,especiallyonlocalecosystemsbypotentiallyreducing,fragmenting,ordegradinghabitatsforwildlife,fish,andplants.Theconstructionofoffshorewindfarmsisverylikelytoaffectmarinemammals.Activitiesofgreatestconcernarepiledrivingandincreasedvesseltraffic.Moreover,aswindturbinesoperate,birdsmigratingthroughtheareamaycollidewithmovingblades,causinghighermortalityrates.Inaddition,thetransmissionofproducedelectricityviacablesemitsanelectromagneticfield,whichcouldaffectthemovementandnavigationofspeciessensitivetothem(Baileyetal.2014).BothHKEandCLPhaveenvironmentalpermitsforwindfarmdevelopmentsandtheyconsidermitigationmeasuresaspartofthepermitapplicationprocess.However,duetothepotentialimpactofwindpoweronwildlife,thepowercompaniesmustcontinuetopayattentiontoandminimisetheirenvironmentalimpact.AsignificantlimitationisthevarioushumanactivitiesinHongKongwatersthatinterferewiththedevelopmentofoffshorewindfarms.Usingall1,659km2ofHongKong’swaters,Li(2000)estimatesthatoffshorewindhastheSTUDYESTIMATEDANNUALOUTPUT(GWh),ASA%OFELECTRICITYDEMANDIN2019LOCATIONCAPACITYOFHYPOTHETICALWINDFARM(MW)ANNUALWINDSPEED(m/s)AVERAGEWINDPOWERDENSITY(W/m2)EMSD(2002)2,630(5.9%)Onshoreruralwindfarms1,500-200Luetal.(2002)0.032(<1%)Offshore-WaglanIslandNA(singleturbine)6.92-Gaoetal.(2014)11,280(25.2%)4offshoresites102.75--Gaoetal.(2019)14,449(32.2%)SouthwestLamma1007.03200Table2SummaryofPredictionsonWindUtilisationSource:EMSD2002;Luetal.2002;Gaoetal.2014;Gaoetal.2019.16WRI.org.cnpotentialtoprovide40–72percentofthecity’selectricityconsumption.However,thetotalseaareaavailablefordevelopmentisreducedafterfactoringintheshareduseofthesewaterswithshipping,gas,electricsubmarinecables,andmuddisposal.Marineconservationandrecreationalareasthatareprotectedfromanyformofdevelopmentalsoneedtobecountedout.Thedemandandsupplymismatchesalsorenderwindenergyalessviablealternative.Electricitydemandishighduringthehotsummermonths(May–September)andlowduringthemildwintermonths(November–April).Yet,theseasonalvariationfromwindpowerproductionisthereverse,sincemoreelectricityisproducedinwinterthansummer.Thismaynotbeatechnicalissueintermsofgridoperationsduetothediversemakeupofthefuelsource,butitremainsafactorforfurtherconsideration.AlthoughHongKong’saveragewindspeedisrelativelymoderate,thecityisfrequentlyaffectedbytyphoons.Thisposesaseriousrisktooffshorewinddevelopment.In2013,TyphoonUsagihittheHonghaiwanWindFarminShanwei,Guangdong,wipingout70percentofitswindturbines(Winn2013).Thisresultedin100-million-yuanworthoflossesandraisedthequestionofwindfarms’abilitytowithstandtyphoons.Asidefrompracticalconstraints,financingisanotherissuetoaddress.Withthehighcapitalinvestmentsneededforwindenergyproduction,governmentandthecity’spowercompaniesmayfacefinancingburdenswithregardtothelong-timepayback,highrisk,andlowreturnfromwindenergyprojects.ConclusionDomesticREisanimportantstepforthepowersectortoachievecarbonneutralitybutdoesnotrepresenttheentiresolution.AsshowninTable3,aggregateddomesticREpotentialcanonlysupply10percentofHongKong’selectricitydemandby2050.Thecommissioned,planned,orpotentialdevelopmentprojectsfordomesticREaresummarisedinTable4.Moreover,themismatchbetweendemandandsupplyalsorenderssolarandwindenergylessviablealternatives.Assuch,windandsolarenergymaynotbeabletokeepupwithdemand.Havingadiverseenergymixmaymitigatesupplyissuesingridoperations,butitcannotbedisregardedaltogether.Energystoragesolutions,suchashydrogenstorage,maybehelpfulinresolvingsupplymismatches.RenewableenergymaynotbethecentralpillarofHongKong’stransitionedlow-carbonenergymix,butithasacrucialparttoplay.Governmentmustalsobroadenthefuelmixoptionthroughregionalcollaborationtoimportrenewableorlow-carbonelectricityfromelsewhere,makingHongKong’sgridcleanerandmoreclimateproofintheprocess.ThepotentialfordomesticREislessthanacademicprojectionsbutexceedstheexistinggovernmenttarget.HongKong’spotentialforrenewableenergyfarexceedsthatofgovernment’s2030targetof3–4percentoftheenergymakeup.However,whetherHongKongcanrealisethistechnicalcapacityforrenewablesremainstobeseen.Iffouroffshorewindfarmsarebuilt,windpowerhasamaximumoutputpotentialof11,280TWhperyear,enoughtomeet25.2percentofHongKong’selectricityneeds.Yetitisunlikelythattheseplanswillbecomeareality,atleastintheshorttomediumterm.Inaddition,thelackofopenspacehinderswidespreadinstallationofonshorewindfarms;theneedtoaccommodateshippingchannels,conservationareas,underseacables,andpowercablelandingpointscreatesotherobstaclesfacinglarge-scaleoffshorewindfarms.Regardingsolarenergy,academicestimatesareoptimisticbutunrealistic.Ifallrooftopsandreservoirsareutilised,themaximumpotentialis9.93TWhor22.2percentofelectricitydemand.Yet,landandspaceconstraintsinHongKongpreventhighestimationsoflocallyproducedrenewableenergy.HongKong’sdenselypopulatedhigh-risebuildingsobstructseveralrooftopsfromreceivingadequatesunlight.Thereisalargebaseofsupportforsolarenergyinthecommunity,andgovernmenthasrespondedtothisbyintroducingtheFiTSchemeandothergrantprograms.However,costsremainhigh,andwithoutmorewidespreadPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong17regulatorychanges,theseeffortswon’tbeenoughtoallowsolartoreachitsrealpotential.Furthermore,currenteffortsareaimedatbuildingsmall-scale,individualPVsystems,whichwillnotleadtothelarge-scalesolarcoveragethatthesestudiesareproposing.Thisstudyestablishedthefollowingscenario,afteracomprehensiveliteraturereviewandin-depthconversationwithlocalandinternationalexperts.TYPEOFENERGY%OFELECTRICITYDEMANDIN2030%OFELECTRICITYDEMANDIN2050Waste-to-energy(WtE)2%3%Solarenergy1%4%Offshorewindenergy1%3%STATUSTYPEOFTECHNOLOGYEXPECTEDELECTRICITYPRODUCTIONGWH%OFELECTRICITYDEMANDIN2019WtECommissionedfor2023Anaerobicdigestion240.05%Commissionedfor2025Thermaltreatmentwithenergyrecovery(MSWincinerator)4801%Planning(beyond2030)Anaerobicdigestion240.05%Planning(beyond2030)Anaerobicdigestion240.05%Planning(beyond2030)Anaerobicdigestion240.05%Planning(beyond2030)Thermaltreatmentwithenergyrecovery(MSWincinerator)4801%Planning(beyond2030)Thermaltreatmentwithenergyrecovery(MSWincinerator)4801%TotalforWtE1,543.53.27%SolarPotentialdevelopment(2030)Solarrooftops4000.9%Potentialdevelopment(2050)Solarrooftops1,3003%Total1,7134.2%WindPotentialdevelopment(2030)Offshorewindfarm(SouthwestLamma)1750.4%Potentialdevelopment(2030)Offshorewindfarm(SoutheasternWaters)4100.92%Potentialdevelopment(2030)Offshorewindfarm(SoutheasternWaters/WaglanIsland)8001.8%Totalforwindenergyproduction1,3983.16%Total4,654.510.63%Table3EstimateofFuturePotentialinThisStudyTable4Commissioned,PlannedorPotentialDevelopmentforDomesticRESource:Authors'estimatesSource:Authors'estimatebasedonliteraturereviewinthisChapter.18WRI.org.cnPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong19FOSSILFUELSWITHCCSIn2020,naturalgascontributed48percentofHongKong’selectricitygeneration,whilecoalaccountedfor23percent.DespiteHongKong’splanstophaseoutallcoalinthefuture,electricitygenerationfromnaturalgaswouldstillproduceworryingamountsofemissions.IfCCStechnologybecomescommerciallyavailable,itcouldabatetheemissionsoffossil-fuelpowerplantswhilemaintainingtheirdispatchablepoweroutputtounderpinlocalreliabilityinaflexiblemanner.CHAPTER320WRI.org.cnUseofFossilFuelsandPotentialforCCSCurrently,HongKonghasfourfossilfuel-firedpowerstationsinoperation–CastlePeakPowerStation,BlackPointPowerStation,Penny’sBayPowerStation,andLammaPowerStation.Theyusecoal,naturalgas,andoil.ThecurrenttotalcapacityofHongKong’scoal-firedpowergenerationis6,108MW.Onlyonepowerstation,CLP’sCastlePeak,isdedicatedtousingcoal.Accordingtotheirpowerdevelopmentplans,theutilitycompaniesareactivelyreplacingcoalwithnaturalgasforpowergeneration.Anestimated1,650MWofcoalgenerationcapacityisplannedforretirementby2025,whileday-to-dayuseofcoalforelectricitygenerationisexpectedtobephasedoutentirelyinthe2030s.TheCastlePeakfacilityisexpectedtobephasedoutbefore2040.Withtwonewlyaddedgas-firedpowergenerationunitsinoperation,thetotalcapacityofgas-firedpowerinHongKongis4,210MW.Thecityusescombined-cyclegasturbine(CCGT)technologyforgas-firedpowergeneration.Basedonthecompanies’plans,gascapacityisexpectedtoincreaseto5,580MWin2030(CLP2021a;HKE2021)Ultra-lowsulphurdieseloilisutilisedatPenny’sBayandLamma,withopen-cycleoil-firedgasturbines(OCGT)usedtogenerateelectricity.TheOCGTunitshavequick-startabilitiesandcapacityflexibility.Theyareusedtomeetloadpeaksandasbackupforemergencyresponsestocontingencies.Thetotalcapacityofoil-firedpowergenerationis1,360MW.HKEproposestoconstructandcommissionuptofournewoil-firedOCGTs,eachwithacapacityofupto130MW,toreplacetheirexistingunitsattheLammafacility(HKE2020).Conventionalfossilfuel-firedpowerplants(withoutCCS)producemorecarbonemissionsthanotherdecarbonisedenergyresourcesandarenotcompatiblewithHongKong’scarbonneutralityvision.Throughcapturing,transporting,andstoringCO2emissions,CCStechnologiescouldabateemissionsfromfossilfuel-firedpowerplantswhilemaintainingdispatchablepoweroutputinaflexiblemanner.ThiswouldbeofgreatvaluetoHongKong,wherefossilfuel-basedpowergenerationislikelytoperformanimportantroleduetolimitedrenewableenergyandlandresources.Globally,therearesituationswhereCCSfacilitiesareappliedtocoal-fired,naturalgas-fired,andbiomasspowerplants(includingWtE)(GlobalCCSInstitute2020).TheAsia-PacificisanemergingregionforCCSdeployment,asmorecountriesareestablishingCCSstrategiesanddevelopingpilotCCSprojects(GlobalCCSInstitute2020).ButensuringsufficientcarbonstoragecapacityisakeychallengeinCCSapplication.StudiesinGuangdonghaveidentifiedsalineaquifersabout100kilometresPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong21offshorethatwouldhaveamplecapacityforcenturiesofstorage.Technically,thiscouldenableHongKongtobuildadecarbonisedpowersystemwithCCS.ChallengesofContinuedUseofFossilFuelsandApplicationofCCSIn1997,governmentdecidedagainstbuildingnewcoal-firedpowerplantsinanefforttoreduceairpollution.Sincethen,gas-firedpowerplantshavegraduallyreplacedcoal.HongKonghasalreadyachievedatargetlaidoutinGovernment’sClimateActionPlan2030+,whichaimed,by2020,fornaturalgastogenerateabouthalfofHongKong’selectricity,withcoalfallingto25percent(HongKongSteeringCommitteeonClimateChange2017).However,fossilfuel-firedpowerplantscontinuetodominateHongKong’spowersector,accountingformorethan70percentofpowergeneration.Replacingcoalwithgashasbothclimateandair-qualitybenefits.Generally,whencomparedwithcoal-firedpowerplants,CCGTpowerplantsemitaroundhalftheamountofCO2,one-thirdtheamountofNOx,andvirtuallyzeroSO2.Table5showsthecarbonandairpollutantemissionsperunitofelectricityoutputinCLP’sfossilfuel-firedpowerplantsin2019.AccordingtoCLPdata,CO2emissionsperkWhfromthegas-firedBlackPointare0.404kg,around60percentlessthanCastlePeak,whichiscoal-fired.ThoughBlackPointemitslesscarbonemissionsandairpollutantsperunitofelectricitythanthecoal-firedpowerplant,italonecannothelpHongKongmeetits2050carbon-neutralitytarget.ReachingcarbonneutralitywithoutapplyingCCStechnologiesrequiresthevirtualeliminationofallfossilfuel-firedpowergenerationinHongKong.Thetransitionfromcoaltogassignificantlyincreasesthecostofunitelectricityoutputduetothehigherassociatedfuelcosts.Thecostofpowergenerationbynaturalgasismorethandoublethatofcoal(CLP2020b).InFebruary2020,CLP’sfuelgenerationcostsperunitofelectricitywerearoundHK$0.70perkWhforgas,comparedwitharoundHK$0.25perkWhforcoal(Jiangetal.2020),indicatinganequivalentCO2mitigationcostofHK$0.78/kgCO2orUS$100/tonCO2.ThereisgrowingrecognitionthatCCSisanintegralpartofaleast-costportfoliooftechnologiesneededtosupportthedecarbonisationofpowersystemsglobally.However,CCSdeploymenthasbeenslow.Currently,onlytwocommercialCCSfacilitiesareinoperationglobally,whicharebothCCSretrofitstoexistingcoal-firedpowerplants.TherearenocommercialCCSprojectsatgas-firedplantsinoperationtoday(GlobalCCSInstitute2020).POWERSTATIONFUELCO2EMISSIONS(kg/kWh)SO2EMISSIONS(g/kWh)NOXEMISSIONS(g/kWh)PMEMISSIONS(g/kWh)BlackPointGas0.4040.010.150.01CastlePeakCoal0.9830.261.080.04Penny'sBayOil1.7190.011.770.03Table5CarbonandAirPollutantEmissionsperUnitofElectricityOutputinCLP’sFossilFuelPowerPlantsin201922WRI.org.cnCosthasbeenidentifiedasthemajorchallengepreventingCCS-equippedpowerplantsfrombeingcommerciallyviable.Thesecostsareassociatedwiththecapture,transportation,andstorageofCO2emissions.Thelevelisedcostsofelectricity(LCOE)fromcoal-andnaturalgas-firedpowerplantsatdifferentcarboncaptureratesshowthatcarboncapturewouldincreasethecostofelectricityoutputperunitby47.7–82.2percent(IEA2020a).Thecostincreaseisdominatedbythecapitalcostofthecapturefacility,usuallyaccountingformorethanhalfofthetotalcostofcapture,asseenfromtheoperatingexperienceofthefirst-generationCCSretrofitplants(IEA2020a).Additionally,theoperatingcostsofCCS-equippedplantsaremuchhigherthanconventionalplantsduetotheefficiencypenaltyrequiredtooperatethecapturefacility.Comparedwithotherdecarbonisedenergysources,suchasrenewablesandnuclear,thecostofelectricityfromCCS-equippedpowerplantsiscurrentlysubstantiallymoreexpensive.EnergypenaltiesareanotherimpedimenttoCCSdeploymentinthepowersector.TopowertheoperationsofCCSfacilities,theenergyuse(andairpollutants)forthesameamountofelectricityoutputisexpectedtoincreasebyaround25percent(IPCC2005).Inaddition,installingCCScannotpreventallCO2emissions;uncapturedemissionsareestimatedtobearound5–15percent(EldardiryandHabib2018).OpportunitiesCarboncapturetechnologiescansupportHongKong’spowertransitiontowardscarbonneutrality.Withoutcarboncapturetechnologies,however,meetingthistargetwouldmeaneliminatingtheuseoffossilfuelsforpowerandswitchingtolocalrenewableenergyandimportedhydrogen.Theseoptionsdonotappeartobefeasibleonalargescaleduetolimitedavailability.Theothersolutionisadditionalimportedelectricityfromregionalrenewableornuclearsources.CCS-equippedpowerplantscanrunforlengthyperiodsasbaseloadplants.Theycanalsoprovideasourceofdispatchable,flexiblecapacitytoquicklyrespondtoemergenciesandhelpHongKongintegrateagrowingshareofvariablerenewableenergyintothepowersystem.TherearenumerousstudiesthatidentifythepotentialoftechnologicalinnovationstoreducethecostofequippingpowerplantswithCCStechnologies.ThecostofCCScouldfallasaresultofscaleandlearningcurveeffects(IEA2020a;DewarandSudmeijer2019).ButCCSisprojectedtobeacost-competitiveoptionpost-2040,andMainlandChinaisn’texpectedtohavelarge-scaleCCSdevelopmentinthepowersectoruntilafter2035.InadditiontoglobaleffortsonCCS-relatedresearchanddevelopment(R&D),strongpolicysupportandmorestringentclimatetargetsarenecessaryforhighmarketCCSpenetration.Ensuringthatallfossilfuel-firedpowerplantsbuiltafter2020areCCS-readycanreducetheriskofcreatingstrandedassets.Oncebuilt,retrofittingexistingfacilitieswithCCScouldbecostlyoreveninfeasible.Duringtheprojectdesignphase,POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong23powercompaniesshouldensurethatthetechnicalrequirementsforCCSareconsideredandmet.TheserequirementsincludereservingspaceforCO2captureequipment,configuringturbinesappropriately,ensuringtheavailabilityofcoolingwaterandtheadditionalfluegaspre-treatmentrequiredbeforeCO2capture.Alsonecessarywillbededicatedaccesstoauxiliarypower.HongKongislocatedinapotentialCCShub.Highqualityandsufficientstoragecapacityareprerequisites,andthereareseverallargesedimentarybasinsinthenorthernSouthChinaSeawithsuitablegeologicalconditionsforCO2storage.ApreviousassessmentindicatedthatCO2storagecapacityintheshelfareaofthePearlRiverMouthBasinis77GtCO2atan85percentprobabilitylevel(Zhouetal.2013).Thisappearstobethemostfavourablestorageareaatpresent.Fromasource-sinkmatchingperspective,thereissatisfactorydistancebetweenHongKong’spowerplantsandthestorageareas.SittinginCCShubsandutilisingsharedinfrastructurecanalsolowertransportationandstoragecosts.GuangdonghasbeenproactivelycarryingoutCCUS(carboncapture,utilisation,andstorage)researchanddemonstrationpilots.InMay2019,ChinaResourcesPower’sHaifengcarbon-capturetestplatform(CCTP),locatedonGuangdong’scoast,beganoperations.TheCCTPconsistsoftwoCCS-equippedcoal-firedpowergenerationunits,withthecapacitytocapture20,000tonnesofCO2peryear.GovernmentshouldproactivelysupportCCSdeployment.Governmentcouldlooktoprovideassistanceintheformofcapitalsupport,publicprocurement,taxcredits,operationsubsidies,andcarbonpricing,aswellasbyenhancingcoordinationwithauthoritiesfromMainlandChinaonCO2storage.Toincreasepublicawareness,governmentcouldcollaboratewithpowercompanies,academics,andnongovernmentalorganisationstoorganiseprogramsandactivitiestofacilitateknowledgesharing,aswellastoraisepublicawarenessandacceptancearoundCCS.24WRI.org.cnPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong25GREENHYDROGENCHAPTER4HydrogenhasgreatpotentialasanalternativeenergysourceinsupportingHongKong’scarbon-neutralitygoal.Theutilisationoflow-orzero-carbonhydrogencanreducethecity’scarbonfootprint,aswellasstrengthenitsenergysecurity,thuscontributingtogreaterclimateresilience.Thepowersectorcouldbenefitgreatlyfromhydrogen’scontributiontogridbalancingandthemanagementofpeakloadissues,therebyenhancingthereliabilityofthepower-sectorsupply.26WRI.org.cnIntroductiontoGreenHydrogenHydrogenhasgainedtractionoverthepastfewyearsasitisanticipatedtobeakeycomponentinthetransitiontoanet-zerocarbonemissionssociety(TimurandTurk2019).Hydrogenitselfisnotanenergysourcebut,ratheracleanchemicalenergycarrierwiththebenefitoffacilitatinglong-rangetransportationwithhighefficiencyandstablestorageoveralongperiodoftime.KeyHydrogenProductionTechnologiesHydrogencanbegenerallyclassifiedintothreecategories,allwithdifferentlevelsofenvironmentalcleanliness:▪Grey:Producedfromfossilfuelsandhighcarbon-emittingsources▪Blue:Producedfromlowcarbon-emittingsources,suchassteammethanereformingwithCCUS,orotherfossilfuels,suchasfeedstockwithCCUS▪Green:Producedfromzero-carbonsources,suchasrenewableenergyviaelectrolysis(aprocesstakingplaceinanelectrolyserwherezerocarbonelectricityisusedtosplitwaterintohydrogenandoxygen)Globally,75percentofhydrogencomesfromnaturalgasreforming;23percentfromcoalgasification;andtheremaining2percentfromelectrolysis(TimurandTurk2019).Greenisthegoalforfuturehydrogenproduction.Whilethehighcapitalandoperationalexpendituresassociatedwithelectrolysersarethemainbarrierstoproducingentirelygreenhydrogen,costsareexpectedtodecrease.Withhydrogenexpectedtobeakeytechnologyinthemovetowardsdecarbonisation,investmentsinresearchanddevelopmentareexpectedtorise.Electrolysersareprojectedtohaveanaverage18percentlearningrate(IRENA2020),whichmeanstherewillbean18percentdecreaseincostsinthelongtermduetotechnologicalimprovementsandgreaterdemandforelectrolysers.Thisalsomeansthat,globally,greenhydrogenisexpectedtobecomemorecostcompetitiveincomparisontogreyandbluehydrogen,duetoincreasedeconomiesofscaleofelectrolysisproduction,asshowninFigure9below.Moreover,thedecreasingcostsofrenewableswillhelpreducecostsforelectrolysisand,thus,lowerthecostsof‘green’hydrogen.Source:Anoutietal.2020.Figure9Cost-CompetitiveProjectionsforGreenHydrogenUS$/kgH2RenewableLCOE(US$/MWh)30-4518-2614-1802.04.54.03.53.02.51.00.51.5GrayGrayGrayBlueBlueBlueGreen(ALK)Green(ALK)Green(ALK)Green(PEM)1.0-2.21.6~3.02.1-3.62.3-381.2-2.31.5-2.81.1-2.01.4-1.81.5-2.41.5-2.70.8-1.30.7-0.9201820302050Green(PEM)Green(PEM)POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong27Accordingtocostprojections,renewablehydrogenproducedbyelectrolysiswillseepromisingcostreductionsandbreakevendynamics,duetopositiveprojectionsregardingmanufacturingscale,learningrates,andtechnologicalimprovements(HydrogenCouncilandMcKinsey&Company2021).Greyandbluehydrogenmaydecreaseincostcompetitivenessbecauseofincreasingcarboncostsfromtheimplementationofcarbonpricingschemes.Globally,low-carbonhydrogencouldbreakevenwithgreyhydrogenby2025–30,subjecttoat-scaleCO2storageandtransportinfrastructure,atanexpectedcostofaboutUS$35–50pertonCO2e,asshowninFigure9(HydrogenCouncilandMcKinsey&Company2021).Carboncostsaresettoincreasegloballyto$300pertonofCO2eby2050.VersatilityofHydrogenDuetothevarietyofsourcesthatcanbeusedforitsproduction—includingnaturalgas,coal,oil,renewables,andnuclear—hydrogenhashighcapacityandflexibilitytoimproveenergysecurity(IEA2020b).Inaddition,itcanbedirectlyusedorconvertedintootherproductswithdifferentpotentialapplicationssuchasammonia,syntheticmethane,andsyntheticliquidfuels.Sinceitactsasanenergycarrier,hydrogenproducedbyelectrolysiscouldbealong-termsolutionthatincreasessystemstabilityandenergyresilience;reducescostsbyflatteningtheresidualloadinapowersystem;providesgridbalancing,powerbackup,andreleasinggridconstraints;andaccommodatesthepeakload(IEA2020b).GrowingIndustryDemandGlobally,hydrogenismainlyusedinthreeareas:oilrefinery,chemicalproduction,andsteelproduction,with80percentofitsglobalconsumptionattributedtorefineriesandammoniaproduction,asshowninFigure11(Tlilietal.2019).HydrogenmayalsobeusedintheSource:HydrogenCouncilandMcKinsey&Company2021.Figure10TimelineofIncreasingCarbonCostsSource:TimurGülandDaveTurk2019.Figure11GlobalHydrogenUsesacrossIndustriesMethanolproduction11%Steelproduction3%Others26%Oilrefining33%Ammoniaproduction27%USDpertonofCO2e20252030204001003503002502001505028WRI.org.cnTowngas8.8%Oilproducts43.0%generationofindustrialhigh-temperatureheat.Withinthebuildingsector,hydrogencanbeblendedwithexistingnaturalgasnetworksordirectlyutilisedaspurehydrogenforavarietyofend-uses,dependingoninfrastructurecapacity.HongKongcouldimportlow-costgreenhydrogenasgreenhydrogencouldthenbeconvertedintoelectricitythroughlarge-scalefuelcellsormixedwithnaturalgasindomesticpowerplants(Anoutietal.2020).Assuch,thepowersectorcouldgreatlybenefitfromhydrogen’scontributiontogridbalancinganditsabilitytomanagepeakloadissues.Newusesforhydrogencanalsobeanticipated,especiallyastherearecurrentlyanestimated228hydrogenprojectsacrossthevaluechainglobally,worthmorethan$300billion,throughto2030(HydrogenCouncilandMcKinsey&Company2021).HydrogenTransportationandStorageOptionsTherearemultipletransportoptionsforhydrogen,includingretrofittedpipelinesandnaturalgasblendingforshorterdistances;shippinghydrogenintheformofammonia,gastanks,orliquefied;ornewandretrofittedsub-seatransmissionpipelinesforlongerdistances.Hydrogenstoragecapacityisalsopromising.Hydrogencanbestoredlongterm,eithercompressedoverground,liquefiedintanks,orundergroundinsaltcaverns,depletednaturalgasoroilreservoirs,andaquifers(Renetal.2020).PotentialofGreenHydrogenUseinHongKongInHongKong,greenhydrogenhasgreatpotentialasanalternativeenergycarrierinsupportingHongKong’scarbonneutralitygoal.CurrentLocalCircumstancesforHydrogenUtilisationCurrently,HongKonguseshydrogenasaconstituentoftowngasinitspowersystem,althoughitisnotgreenorzero-carbon.Towngascurrentlyaccountsforabout8.5percentofthecity’sfinalenergyrequirements(Figure12)(CSD2020a).TowngasisproducedfromnaphthaandnaturalgasunderthecatalyticrichgasprocessmainlyattheTaiPoPlant,inwhichhydrogenoccupies46–52percentofitscomposition(HongKongandChinaGasCompanyLimited2020).Towngasistransmittedthroughundergroundpressuredpipelines,providingenergytomorethan1.9millioncustomers(HongKongandChinaGasCompanyLimited2020).Theutilisationoflow-orzero-carbonhydrogencouldreducethecarbonfootprintofthesesectors,aswellasstrengthenHongKong’senergysecurityand,thus,climateresiliency.However,HongKongislagginghere,becauseitwouldrequireachangeinthemanufacturingprocess,regulatoryrestrictions,financialbarriers,andpolicysupportgaps.MovingHongKongtowardsHydrogenUtilisationPartofthechallengeisthatcurrentsafetystandardsandguidelinesaroundtheusageandhandlingofhydrogenareoutdated.HongKong’sDangerousGoods(General)Regulations(Cap.295,Chapter5)statethatthemaximumquantityofhydrogenpermittedtoenterthecitywithoutalicenseisonecylinder(HongKonge-Legislation1964).Furthertothat,compressedorrefrigeratedliquidhydrogen,aswellasfuelcellcartridges,areonlypermittedinHongKongatthegenerallevelof75unitsandSource:BasedondatafromtheCensusandStatisticsDepartment.Figure12HongKong'sFinalEnergyDemandin2019Electricity47.6%POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong29attheindustriallevelof150units(HongKonge-Legislation1964).Themaximumpackagesizeforfuelcellcartridgesis120ml(HongKonge-Legislation1964).Moreover,hydrogeninametalhydridestoragesystemisnotpermitted.WithregulatoryrestrictionslimitingtheusageofhydrogenasanalternativeformofenergyinHongKong,thecitywillfallbehind.Governmenthaspledgedtoachievecarbonneutralityby2050.Tothatend,ithasestablishedaHK$200million($25.8million)GreenTechFundbasedonrecommendationsfromtheHongKongSustainableDevelopmentCouncil’sreportonmedium-tolong-termdecarbonisation(Low2020).WhileHongKonghasindicatedthatits2030fuelmixwillincludealargerproportionofnaturalgasovernuclearpowerandthatcoalwillgraduallybephasedout,therehasbeennoindicationyetbygovernmentthatitwillimplementhydrogentechnologies(Low2020).Withoutanexplicithydrogenroadmap,HongKongwilllag.Globally,directsubsidiesfromlocalandnationalgovernmentshavehelpedacceleratetheadoptionofrenewabletechnologies(Denmanetal.2021)andenabledasteepannuallearningcurveforthegrowthofrenewableenergycapacity—35percentforsolarPVand30percentforoffshorewindenergy—overthepast10years(HydrogenCouncil2021).Ifgovernmentweretoprovidesimilarsupportintheformofdirectsubsidiesandpromotegreenfundingprioritiesforhydrogentechnologies,HongKongcouldenableasimilarlearningcurveforthegrowthandefficiencyofhydrogentechnologies(Denmanetal.2021).Highcostsassociatedwithhydrogentechnologiescouldalsodecreaseifmeasures,suchastheenactmentofcarbonpricing,wereimplemented(Turneretal.2021).Forexample,acarbonpricecouldaidthetransitiontohydrogen-basedenergyandimprovethecompetitivenessoflow-orzero-carbonemissiontechnologiesmoregenerally.Co-combustinghydrogenwithnaturalgasinHongKong’sthreenewCCGTs—whichareeitherinoperationorcommissionedtobeginoperationswithinthenextthreeyears—mayalsobeaviableoptiontoaidpeakloadmanagementandgridbalancing.Withupgrades,retrofits,andlifeextensions,hydrogencanbeusedinnewerCCGTsandwouldemitzeroSO2,PM,CO2,andNOxemissions.However,emissionlevelsmaybethesameasthatfromcurrentCCGTsifflametemperaturesarenotcontrolledduringcombustion(Campbell2020).Moreover,makinganynewfossilfuel-firedpowerplantbuiltafter2020hydrogen-readywillsupportonshorehydrogenproductionwithinHongKong.Hydrogencanalsobeconvertedfromrenewableenergy.However,asHongKonghaslimitedgreenhydrogenfacilitiesandlandtoproduceitsownrenewableenergy,itwilllikelyhavetoimportsuppliesfromAustralia,theMiddleEast,orMainlandChina.Intheprocessofimportinghydrogen,itwillbeimportanttousehydrogen-basedtransporttechnologies,suchashydrogenfuelcellheavy-dutyvehiclesandshippingvesselstopreventembodiedcarbonemissions.ShippinghydrogenfromrenewableenergyhubsinAustraliaortheMiddleEastwouldcost$9–10/kgH2.Inordertoreceiveimportedhydrogen,HongKongcouldimplementafloatingdocksimilartotheonebeingbuiltinHongKongwatersforreceivingimportedliquefiednaturalgas(LNG)(TimurandTurk2019;Lau2020).IncorporatingHydrogenintoHongKong’sEnergyDemandArangeofenergyscenariosbyotherexternalenergyresearchorganisationspredictthathydrogen-basedenergywillcover7–29percentofglobalenergydemandby2050,asshowninTable6.Takingthesedifferentscenariosintoaccount,weassumethatHongKong’shydrogensupplywithinthetotalenergydemandshouldremainunchanged.However,asgreenhydrogenisstillanemergingtechnology,thereisstilluncertaintyregardingitstechnologicaldevelopmentandutilisationwithinHongKong’sfuelmix.Thisreportexaminestheimpactofgreenhydrogentechnologieswheretheycontributetowards15–30percentofpowergeneration.30WRI.org.cnChallengesandOpportunitiesinAdoptingHydrogenHydrogenhashugepotentialinsatisfyingpowerissuesinHongKong,suchaspeakloads,gridbalancing,naturalgasblending,transport,andenergysecurity.Assuch,governmentmustincorporatehydrogentechnologiesintoitsplantomovetowardsnet-zerocarbonemissions.TheapplicationofhydrogeninHongKongdoesnotcomewithoutchallenges,though.Hydrogenutilisationonitsownreliesonadvancedtechnologies.Inparticular,thestorageandtransportofhydrogenisespeciallydifficult,relativetootherfuels.Apartfromstoringhydrogeninfuelcells,itcanbetransportedingaseousandliquefiedforms,bothwiththeirownadvantagesanddisadvantages.Asagas,hydrogencanbetransportedwithinacompressedgastubetrailerorthroughpipelines.Moreover,hydrogen’sproductioncostsaresometimesconsideredredundantduetoanexistingalternativeenergycarrier:electricity.Thecostofproducinghydrogenbyelectrolysisisalsoparticularlyhighduetothehighcostofelectrolysers,aswellastheelectricalcostsofproducinglow-carbonhydrogen,whichcouldaccountfor60percentofthetotalcost(IEA2020b).InHongKong,duetolandlimitations,itmaybedifficulttoconstructhydrogenproductionandstoragefacilities,aswellasrenewableenergyREPORT/SCENARIONAMEORGANISATIONFORECASTSFORHYDROGENASAPERCENTAGEOFTOTALENERGYDEMANDIN2050DATEPUBLISHEDNetZeroEnergyScenarioInternationalEnergyAgency13%May2021FinalEnergyDemand,ETC2050IndicativeScenarioEnergyTransitionsCommission13%April2021WorldEnergyTransitionsOutlook1.5°CPathwayInternationalRenewableEnergyAgency12%Jan2021NewEnergyOutlook:ClimateScenarioBloombergNEF25%Oct2020EnergyOutlook2020Edition:RapidScenarioBP7%2020EnergyOutlook2020Edition:Net-ZeroScenarioBP16%2020TheRoleofCleanHydrogenintheFutureEnergySystemsofJapanandGermany:GermanScenariosadelphi8-11%Sept2019TheRoleofCleanHydrogenintheFutureEnergySystemsofJapanandGermany:JapaneseScenariosadelphi9-22%Sept2019HydrogenRoadmapEuropeFuelCellsandHydrogenJointUndertaking24%Jan2019TheVisionScenariofortheEuropeanUnion:2017UpdatefortheEU-28Öko-Institute.V20%Feb2018EurogasScenarioEurogas29%n.d.Average2050EUFinalEnergyConsumptionJointResearchCommission10-23%n.d.Table6SummaryofGlobalHydrogenDemandForecastsSource:IEA2021;EnergyTransitionsCommission2021;Bloomberg2020;BP2020;adelphi2019;FuelCellsandHydrogenJointUndertaking2019;Öko-Institute.V2018;Eurogas2020;JointResearchCommission2019.POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong31productionfacilities.Asaresult,governmentwouldlikelyneedtoimportthemajorityofthecity’shydrogenneedstobalanceexcessrenewableenergyproductioninotherpartsoftheworld.PotentialsourcesofhydrogenimportsincludeAustralia,theMiddleEast,andMainlandChina.FromTownGastoCleanEnergyTownGasinHongKongandtheStatusQuoInHongKong,towngasisproducedsolelybytheHongKongandChinaGasCompanyLimited(HKCG).Thecity’sconsumptionoftowngasin2019(8,208.33GWh)was10.25percentofthetotalenergyconsumption.Morethan283,000unitsofgasappliancesweresoldto1.91millioncustomeraccountsthatyear(HongKongandChinaGasCompanyLimited2020).Theresidentialsectoraccountedforabout60percentofconsumption,followedbycommercial(34percent)andindustrial(6percent).Currently,towngasisproducedmainlyfromnaturalgasandnaphthainHongKong,withasmallportionfromlandfillgas.Asforthefinalcompositionofthecity’stowngas,themajorchemicalcomponentsarehydrogen(46.3–51.8percent),methane(28.2–30.7percent),carbondioxide(16.3–19.9percent),smallamountsofcarbonmonoxide(1.0–3.1percent),andnitrogenandoxygen(<3.3percent)(HongKongandChinaGasCompanyLimited2020).TheGHGemissionsfactoroftowngasis3.117kgCO2e/unitinHongKong.5Thismeansthattowngaswasresponsiblefor1.919milliontonnesofCO2eandatleast4.73percentofthecity’stotalGHGemissionsthatyear.Bycomparison,thenaturalgasthatproducesthesameamountofenergyasoneunitoftowngaswouldemit2.498kgCO2e(U.S.EnergyInformationAdministration2021a).6HKCGhasatargettoreducecarbonintensityby30percentfrom2005levelsby2020,shiftingfroma100percentnaphthafuelsupplytoaneardedicatednaturalgassupply,apartfrom5percentfromlandfillgas.TheMovetoCleanEnergyInHongKong,towngasisproducedattwofacilities:theTaiPoPlantandtheMaTauKokPlant.TheprocessofproducingandusingtowngasresultsinconsiderableGHGemissions,buttheseemissionsareavoidablewithexistingelectrificationproductsormoreadvancedhydrogentechnologies.Therefore,aligningwithTowardsaBetterHongKong:PathwaystoNet-ZeroCarbonEmissionsby2050,thisreportrecommendsreplacingtowngaswithzero-carbonelectricityorcleanhydrogen.Approach1:Electrification(zero-carbonelectricity)Thegas-dependentcookinghabitsofHongKongresidentsposechallengesfortheelectrificationofenergyuse.SincecookinginChinamostlyrequiresapowerfulstovetopanfryordeep-fry,residentsprefertousetowngasratherthanelectricityforcookingandwaterheating(TsoandYau2003;Lietal.2014).Thus,electricstovesareuncommon.Ifpeople’scookingpreferencescanadapttoelectricstoves,asidefromreducingtheirrelianceontowngas,thiscouldproducelessheatinkitchens,therebyimprovingworkingconditionsandreducingtheenergyrequiredforairconditioning,aswellaschangingthesourceoffuel.TheHongKongEPSmodelshowsthattowngasandliquefiedpetroleumgas(LPG)consumptioncouldbereducedby82percent,comparedwith2017levels,ifsufficientnear-zerocarbonelectricitysourcesareusedandChinesecookingpreferencesadapt.Apotentialsolutionisagasban,whichwouldreducecarbonemissions.However,sideeffectsshouldbeconsidered:▪Electricstovesandelectricityaremoreexpensivethangasstovesandgas,whichcouldplaceaddedburdensonresidentsandsmallbusinesses.▪Employeesofgascompaniesandrelatedindustriesmaylosetheirjobsorneedtoberetrained.▪Theelectrificationtransitionwouldrequireanexpansionofthepowercapacity.Basedon2017data,electricityoutputwouldneedtoincreaseby22percenttoreplacealltowngasandnon-transportLPG.Thisincreaseissubstantialbutcouldbeachievedwellbefore2050iftheswitchoccurssoon.32WRI.org.cnApproach2:Hydrogen(blueandgreenhydrogen)Hydrogenisadesirableenergyalternative,asitcanbeusedinexistingnaturalgasorgaspipelinesandcanprovideenergytocustomersbypipeline.However,problemswithmassproductionandtransportremain.TheUnitedKingdomprovidesHongKongwithasuitablecasestudyforahydrogenenergytransition,asithasasimilarpreferenceforgas.TheUK-basedNorthernGasNetworks(NGN)seeksashiftfromnaturalgastohydrogen.Theyhaveproposedanalternativeapproachthatwouldrequiremuchsmaller,moremanageableupgrades:Changethefuelusedinthegasnetworktohydrogen.In2016,NGNproposedtheH21LeedsCityGateProject.Itwaslaunchedtoevaluatethefeasibility,frombothatechnicalandeconomicviewpoint,ofconvertingtheexistingnaturalgasnetworkinLeeds,oneofBritain’slargestcities,to100percenthydrogen.TheprojectplanstotakenaturalgasfromtheNorthSeaandconvertittohydrogenusingsteammethanereformers.Thecarbondioxideproducedintheprocesscouldbecapturedandstoredinundergroundsaltcavernstoavoiditsreleaseintotheatmosphere.Thehydrogencouldthenbedistributedingaspipelines.Thehighinitialcostofconstructinghydrogenpipelinesisamajorobstacletotheexpansionofhydrogenpipelinedeliveryinfrastructure.Transportinggaseoushydrogenthroughexistingpipelinesisalow-costoption,butseveralconcernsariseabouttheconversionofpipelinestransportingnaturalgastothosethatcouldtransporthydrogen:thepotentialforhydrogentoembrittlethesteelandweldsofthepipelineandtheneedforcurrentpipelinefacilitiestobereinforcedtocontrolhydrogenleaks(U.S.DepartmentofEnergyn.d.).AstudyfromtheU.S.DepartmentofEnergyNationalRenewableEnergyLaboratory(Melainaetal.2013)alsofoundthat,whenimplementedatrelativelylowconcentrations(5–15percenthydrogenbyvolume),thisstrategyforstoringanddeliveringrenewableenergyappearstobefeasiblewithoutsignificantlyincreasingtherisksassociatedwiththeutilisationofthegasmixtureinend-useequipment.However,thedurabilityofcertainmetaltubesmaybereducedwhentheyareexposedtohydrogenforextendedperiodsoftime,especiallyathighconcentrationsandpressures.Inaddition,theenergydensityofhydrogenisalsoaboutthreetimeslowerthanthatofmethane,whichmeansthat,asthepercentageofhydrogenrises,thevolumeofenergydeliveredthroughthesamepipedecreases.Ingeneral,threemainchallengesremainforHongKong’stowngas-to-hydrogentransition:producingandguaranteeingastablesupplyofzero-carbonhydrogen,transportinghydrogen,andretrofittinggasterminalappliances.ThecleanhydrogenapproachalmosteliminatespossibleGHGemissions,bothintermsofproductionandconsumption,andisundoubtedlytheidealsolutionfromanenvironmentalpointofview.Atthesametime,thehydrogensolutionhasamuchlowerimpactonlocalemploymentsincethehydrogensubstitutionapproachwouldstillrequiretheexistingpipelinesystemandassociatedrepairupgrades,togetherwithamodificationofallend-useappliances.ForHongKong’senergysector,switchingtohydrogenwouldhavesynergieswiththepower-sectortransition,giventheeconomicscaleofthehydrogensupplyandthesharedinfrastructure.TheExpansionofHydrogenacrossIndustriesHydrogenisaversatileresource.Hence,demandisexpectedtoriseacrossavarietyofsectors.Fortransport,whenusedinfuelcells,hydrogengeneratesnoexhaustemissionsandcanhelpreducelocalairpollution,shortenrefuellingtimes,andreducetheaddedweightofenergystoredwithinthevehicle.Fuelcellvehicles(FCVs)canalsooperateatahigherefficiencythancombustionenginesandcanconvertchemicalenergyinthefueltoelectricalenergywithefficienciesofupto60percent.Moreover,foradenselypopulatedcitylikeHongKong,FCVsareinherentlyquietandidealintraffic(Campbell2020).However,theuseofhydrogenintransportwilldependonwhetheritcanbecomeacost-competitiveoptionincomparisontobatteryPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong33electricvehicles.Hydrogenmayalsobeusedmoreextensivelyinshippingandaviation.Asamajortradinghub,hydrogenusageinthesetwosectorswillbeextremelyimportantinreducingHongKong’scarbonemissionsassociatedwithinternationaltrade—currently62percentofthetotal.(Yauetal.2018).Off-gridconstructionsitesmayalsobenefitfromfuelcells.Dieselgeneratorsareoftenusedatoff-gridconstructionsitestopowertheiroperations,producingheavycarbonemissions.However,azero-emissionhydrogenfuelgeneratorcapableofprovidingenoughpowerforanentireoff-gridconstructionsitecouldentirelyremovetheneedfordieselgenerators.Anotherusewouldbehydrogenfuelcellsystems,ratherthandieselgenerators,topowerdatacentresatlargetechnologyorbankingcompanies.It’sbecomingmoredifficulttogainpermitsfordieselgenerators,especiallyatthehyperscalerequiredfordatacentres.Forexample,Microsoftisaimingatcarbonneutralityby2030andisconductingresearchintothelarge-scaleandextendeduseofhydrogenfuelcellsfordatacentres.However,withsomuchuncertaintystillaroundhydrogen-basedenergytechnologies,dieselgeneratorswillbeneededasbackupgenerators.34WRI.org.cnPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong35REGIONALCOLLABORATIONONLOW-CARBONENERGYCHAPTER5HongKongshouldworkwithGuangdongProvinceandaspirefortheGreaterBayAreatoleadeffortsinChinatoachievecarbonneutralityby2050.36WRI.org.cnCollaborativePotentialwithMainlandChinaonLow-CarbonEnergyHongKonglackslocalprimaryenergysources.BothCLPandHKEimportprimaryenergy,whichisthenconvertedlocallyintoelectricityorgasforfinalconsumption(HongKongInstitutionofEngineers2014).ThetotalamountofnaturalgasimportedfromMainlandChinain2020was3.88milliontonnes.Intermsofcarbon-freeelectricityinHongKong,importednuclearenergyfromDayaBayinGuangdongprovidesthelargestshare,providingaboutaquarteroftotalpowerdemand.CLPisconnectedtoMainlandChinathroughitsCleanEnergyTransmissionSystem(CETS),whileHKEdoesnotcurrentlyhavepowerlinkages.Moreover,constrainedbylimitedlandandnaturalresources,HongKongdoesnotboastfavourableconditionsforlarge-scalecommercialisedrenewableenergygenerationtomeetthelocalenergydemand.Inlightofthis,governmentshouldconsiderenteringintojoint-venturepartnershipswithenergygeneratorsinMainlandChinatodecarbonisethecity’spowersystem.Inapublicengagementdocumentissuedin2019regardingadecarbonisationstrategyforHongKong,theSustainableDevelopmentCouncilsuggestedthat,uponthecompletionoftheCETS,HongKongwouldhavethe“capabilityandflexibilitytousemorezero-carbonenergyfromtheChinaSouthernGrid(CSG)ofupto30-35percentofthefuelmix”(CouncilforSustainableDevelopment2019).WerecommendthatGovernmentmonitorpolicyandtechnologicaldevelopmentsinChinapertainingtolow-carbonenergyandproactivelyseekopportunitiestoestablishjoint-ventureprojectstodecarboniseHongKong’spowersystem.ThereshouldbemanyopportunitiestocollaboratewithMainlandChinaonlow-carbonenergybecauseitsenergysectorismovingtowardsdecarbonisationfollowingthecentralgovernment’scallforanenergytransition.Bytheendof2020,power-generationcapacityfromnon-fossilfuelswasabout954GW,accountingforaround43percentofthetotalinstalledcapacity(ChinaElectricityCouncil2021).Electricitygenerationfromnon-fossilfuelswasapproximately2,449TWh,accountingforjustunderathirdofthetotalelectricitygenerationin2020;windandsolarcombinedprovidedaround9.5percent,upfrom3.9percentin2015(ChinaElectricityCouncil2021).Lookingahead,theChinesegovernment’s14thFive-YearPlan(2021–2025)proposesa13.5percentreductioninenergyintensityandan18percentreductioninCO2emissionsintensity(Liuetal.2021).Theplanfurtherproposestoincreasetheshareofnon-fossilfuelenergyintotalenergyconsumptiontoaround20percentin2025.Themainlandisalsocommittedtoachievingover1,200GWinstalledsolarandwindpowercapacity,comparedwith475GWin2020.Afteraseriesofpower-sectorreformsinMarch2015,interprovincialandprovincialelectricitytradingcentreshavebeenestablished,withtheobjectiveoffacilitatingmid-andlong-termtradingandinterprovincialelectricityexchanges.AregionaltradingcentreofnoteistheGuangzhouPowerExchangeCentre,whichcoversinterprovincialtransactionsintheCSGregion.TherearetwomaintypesofinterprovincialtradeinMainlandChina’spowermarket:generatorsreachingdirectpowerpurchaseagreementswithprovincialgridcompanies,andprovincialgridcompaniessellingtoothergridcompaniesinneighbouringprovinces.Althoughopportunitiesexistforcollaborationonlow-carbonenergydevelopment,theHongKongpublicpreferlocalgenerationovergridpurchasesfromMainlandChina(ENB2015).Thelackofsupportforgridpurchasingwasduetolossoflocalcontroloverthepowersector,over-dependencyontheMainland,andlossoflocalemploymentandcareerdevelopmentopportunities.However,importsfromMainlandChinadonotnecessarilymeanasurrenderoflocalcontrol.InthisChapter,wefocusonexploringthepotentialforHongKongofpurchasinglow-carbonelectricityfromtheMainlandthroughnegotiatingpowerpurchaseagreements(PPAs)withspecificgeneratorsunderajointventuremodel.APPAisalegalcontractbetweenapowergeneratorandapowerpurchaser,wherethetwopartiescannegotiatethesaleandpurchaseofenergyonanagreeduponpricestructureforafixedperiodoftime.POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong37Thermalpower,95.5,68%Hydropower,15.76,11%Nuclear,16.14,11%Wind,5.64,4%Solar,7.97,6%OpportunitiesforHongKongtoImportDecarbonisedElectricityDevelopmentofLow-CarbonEnergyinNeighbouringGuangdongProvinceBytheendof2020,Guangdong’sinstalledpower-generationcapacitytotaledaround141GW,ofwhichlocalthermalpower(coal,gas,etc.)accountedforthelargestproportion(67.7percent).Nuclear(11.4percent)wassecondandhydropower(11.2percent)third.Inaddition,windandsolarenergyaccountedfor9.7percent.Asidefromhydropower,othernon-fossilfuels—includingnuclear,wind,andsolarenergy—experienceddifferentlevelsofgrowth.Additionsinnuclearandsolarinstallationswerethemostremarkablein2020.Inadditiontolocalpowergeneration,importedelectricityfromotherprovinces,suchasYunnanthroughthewest-to-eastelectricitycorridorproject,providesabout30percentofGuangdong’spowerdemand.In2018,Guangdongimported192.3TWhofelectricity,ofwhich117.5TWhcamefromYunnan’shydropower.Asidefromincreasinginterprovincialrenewableenergy,Guangdonghasprioritisedthedevelopmentoflocalnuclearandoffshorepowersourcestoachieveadecarbonisedpowersystem.ThisisanopportunityforHongKongtoexpanditsimporteddecarbonisedenergy.ThefirstconsiderationiswhatkindsofagreementswithpowergeneratorsinMainlandChinawouldbringthemostbenefittoHongKong.ThecentralquestionthatGovernmentneedstoaddressishowHongKongcannegotiateandcompetewithcitiesonthemainlandfordecarbonisedenergyresources.Whilethenumberofrenewableandnuclearenergydevelopmentswillincreasesubstantially,energydemandinGuangdongisalsorising,especiallywiththecontinuingdevelopmentoftheGreaterBayArea.Governmentneedstoswiftlynegotiateanagreementwiththecentralgovernmentsothatpowercompaniescanbegindiscussionsonsecuringdecarbonisedenergyforthecity.ForHongKongtobuyenergyfromMainlandChina,whethernuclearorrenewable,thepowercompanieswillhavetoenterintoPPAswiththeCSGorindividualpowergenerators.Wesuggesttwotypesofpowerpurchase:NegotiatingPPAstosecureimportedelectricityfromthemid-tolong-termenergymarket.Mid-tolong-termenergymarketsusedirect-purchasecontractsforbulkenergytospecifythevolumeandpriceofenergytraded(Caoetal.2019).Thesecontractsaresignedthroughpowerexchangecentres,withatimescaleofafewdays,onemonth,oneyear,orevenlonger.Customerspurchasingenergyonthemid-tolong-termmarketwillpaythegeneratordirectlyforenergyandpaythegridcompanyaregulatedfee.ThismeansthatifHongKongistopursuethisoption,thepowercompanieswillhavetopayforenergybasedonanagreedprice,aswellFigure13GuangdongProvince’sInstalledCapacitybySourcein2020(GW)Source:DepartmentofScienceandTechnologyofGuangdongProvince2021.38WRI.org.cnaspayCSGarateperMWhfromindividualpowergenerators.Negotiatingjoint-venturecontractsoverpowergenerationassetsandsupplycontractsforpowerpurchase.Underthisarrangement,partiestothecontract,inthiscaseaHongKongpowercompanyandapowergeneratorinMainlandChina,agreetojointlyinvest,build,andmanageenergyprojects.ThisgrantsHongKongsomedegreeofcontrolovergenerationcapacity.Fortheactualuseoftheelectricitygenerated,supplycontractsalsoneedtobenegotiated.Thejoint-venturecontractmodelhasalreadybeentriedandtestedinHongKongthroughtheDayaBayNuclearPowerStation.CLPisa25percentequitypartneroftheGuangdongNuclearPowerJointVentureCompanyLimited.Italsohasa12.5percentstakeintheDayaBayNuclearPowerOperationsandManagementCompanyLimited,whichisresponsibleforthemanagementofoperations(CLP,n.d.a.).TheshareofnuclearenergythatcanbeexportedtoHongKongisagreeduponinsupplycontracts(CLP2013).ComparedwithPPAsnegotiatedonthemid-tolong-termenergymarket,thejoint-venturecontractplusPPAmodelenablesbettercontrolofgenerationcapacity.ThepowercompaniescanexertagreaterdegreeofinfluenceovertheoperationsofthepowerstationsinMainlandChina,asopposedtobeingthedependentpartyinabuyer-sellerarrangementthroughaPPA.Joint-venturecontractsaremoreacceptabletothepublicastheyallowgreaterautonomyandgovernancetermsoverenergyforHongKong.BuildingonthesuccessofDayaBay,HongKongcanconsiderreplicatingthejointventurecontractmodeltomeetitsfutureenergydemands.Thoughthemodelhasthusfarbeenappliedtonuclearenergy,itcouldalsobefeasiblefornewlarge-scalerenewableenergyprojects.NuclearasaTechnicallyFeasible,CommerciallyViable,andAvailableDecarbonisedOptionThereispotentialforHongKongtoimportmorenuclearenergyfromGuangdongaspartBox1CLPandGuangdongDayaBayNuclearPowerStationDayaBayislocatedinDapeng,asub-districtofShenzheninGuangdongProvince.ThenuclearpowerplantisthefirstofitskindinMainlandChina.Itisoneoftheearliestandlargestjoint-ventureprojectslaunchedundertheOpen-DoorPolicy.CLPhasa25percentstakeinthenuclearpowerstation(CLP,n.d.a.).Thestationproducessome15billionkWhofelectricityperyear,ofwhich70percentisimportedbyCLPintoitssysteminHongKong.In2009,thesupplycontractwasextendeduntil2034.Toensurethatcleanerandmorecost-competitiveenergyisprovidedtoHongKong,DayaBayneedstoincreaseitselectricitysupplytoHongKongfrom70percenttoaround80percentfromlate-2014to2023(CLP,n.d.b.;2021b).ThecostoftheelectricityfromDayaBayin2020wasHK$6,380million(HK$6,456millionin2019).It’sestimatedthatthetotalamountofelectricity(purchasedorgeneratedbyCLP)wouldhavebeenaround12.24TWhin2020(12.01TWhin2019).Thus,theestimatedcostfortheelectricityfromDayaBaywasabout0.521HKD/kWhin2020(0.538HKD/kWhin2019)(CLP2021b).•EquityInterestCLP—25percentGuangdongNuclearInvestmentCompany,Ltd.—75percent•OwnershipGuangdongNuclearPowerJointVentureCompany,Limited•GrossCapacity1,968MW(2x984MW)•CapacityPurchase1,577MW•EstimatedUnitPrice2020:0.521HKD/kWh2019:0.538HKD/kWhPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong39DayaBay-Ling'aoTaishanYangjiangTianwanQinshan-FangjiashanSanmenNingdeFuqingShidaowanofitscleanenergytransition.TheSustainableDevelopmentCouncil,initsreportfollowingthe2019publicengagementonHongKong’sDecarbonisationStrategy,suggeststhatnuclearenergycanbeaviable“transitionalsolutiontoclimatechange”andcanhelpstabiliseorreduceemissionsintheshorttomediumterm(CouncilforSustainableDevelopment2020).China’s14thFive-YearPlanaimsfornucleargenerationcapacitytoreach70GWby2025,whichrepresentsasignificantincreasefrom50GWin2020(StringerandKoh2021).Toputitintocontext,theadditionalpowergeneratedistheequivalenttohaving20additionalnuclearreactors.GuangdongistheleadingprovinceinChinaintermsofnuclearpower.Ithasfournuclearpowerplantsandatotalcapacityof16.1GW.Asof2019,11nuclearpowerplantsaroundHongKongwereeitheroperationalorintheplanningstage.AsidefromDayaBay,LingAoNuclearPowerPlant,withacapacityof3,914MWe,istheclosesttothecity,positionedapproximately50kilometresaway.(WorldNuclearAssociation2021).AnotherfacilityinfocusistheHuizhouTaipinglingNuclearPowerPlant,whichwasapprovedforconstructioninearly2019.Thefirstphaseoftheproject,expectedtobeoperationalin2025–6,willhaveacapacityof2,400MWe(IAEA2021a;2021b).InSeptember2020,Guangdongsetaprovincialinstalledcapacitytargetof18.5GWby2025.TodiversifyHongKong’slow-carbonenergysources,anoptioncouldbetoimportgreatervolumesofnuclearenergyfromthepowerplantsthatwillbeoperationalinthecity’svicinity.Followingthe2011Fukushimanucleardisaster,theChinesegovernmentpledgedtouseadvancedthird-generationnucleartechnologytoenhancesafety.Third-generationnucleartechnologyuseshigh-performanceequipmentandmaterialsandhashigherstandardsinsafetydesign.However,itbringsahighercapitalcost.Analysisshowsthatinthe14thFive-YearPlanperiod(2021–2025),exceptforLiaoningProvince,Figure14DistributionofNuclearPowerPlantsinChinaSource:WorldNuclearAssociation2021.UnderconstructionPlannedOperatingXudabao/XudapuBohaiShipyardHongyanheHaiyangHaixingXianning(Dafan)BailongHuizhouPengzeTaohuajiangFangchenggangChangjiangZhangzhouLufeng(Shanwei)40WRI.org.cnTaishan,80Km,CGN,2019LingAo,50Km,CGN,2002DayaBay,50Km,CGN/CLP,1994Taipingling,100Km,CGNYangjiang,230Km,CGN,2004HongKongtheeconomicsofthird-generationnuclearwillbelesscompetitivethanfossilfuel-firedpowerplants(Songetal.2021).Inthelongterm,withimprovementsinthird-generationnucleartechnology,theLCOEofnuclearpowershouldbecompetitivewithcoalpowerby2030.Moreover,theCO2emissionsreductionpotentialofnuclearpowerisgreaterthancoalpowerwithCCS,whiletheavoidedCO2costsofnuclearpoweraremuchlower(Xuetal.2018).Nuclearsafetyisseenasacrucialpartofnationalsecurityandanimportantareaofdiscussioninenvironmentalprotection.Unlikefossilfuel-firedpowerplants,nuclearpowerplantsdonotproduceairpollutionorcarbondioxideduringtheiroperationalperiods.Majorenvironmentalconcernsinvolvethecreationofradioactivewaste,suchasuraniummilltailingsandspent(used)reactorfuel.Thesecanremainradioactiveanddangeroustohumanhealthforthousandsofyears(U.S.EnergyInformationAdministration2021b).Withthird-generationreactors,nuclearpowerhasbecomemuchsafer(WorldNuclearAssociation2020).OffshoreWindasaPromising,EconomicallyEffective,andAvailableOptionOffshorewindpowerisafeasibleandattractiveoptionwithsubstantialpotentialforGuangdong.TheestimatedoffshoreenergypotentialinGuangdong(1,584.4TWh)is2.8timesitselectricitydemand(561.0TWh)andis35.9timesHongKong’selectricitydemand(44.1TWh)(Shermanetal.2020).Bytheendof2020,Guangdonghadabout1GWofgrid-connectedinstalledoffshorewindcapacityand8GWofcapacityunderconstruction(ChinaSouthernPowerGrid2021).Thiswashalftheprovince’sgoalof2GWinstalledcapacityby2020initsoffshorewindpowerdevelopmentplan(2017–2030).Guangdong’sSeptember2020ActionPlanforCultivatingNewEnergyStrategicEmergingIndustrialClusterssetaprovincialtargetof15GWforinstalledoffshorewindby2025.Italsoplansforwindpowertoreachgridparityinthesameyear,meaningthatwindpowerneedstobecomeasorlessexpensivethancoalandothermoreconventionalsourcesofelectricityby2025.ThiswouldgoalongwaytohelpingGuangdongreachitstargetof30GWinstalledcapacityby2030.OffshorewindenergyprojectshavethepotentialtointerconnectwithHongKong.AnexampleistheGuishanOffshoreWindfarm,whichbegangeneratingpowerinMarch2018.Withaninstalledcapacityof198MW,itcurrentlysuppliespowertoafewsmallislandsinHongHong’svicinity,aswellasZhuhaicityonthemainland.ConnectionisbysubmarinecableanddistributedFigure15LocationofNuclearPowerPlantsClosetoHongKongSource:NationalNuclearSafetyAdministrationn.d.UnderconstructionOperatingPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong41througha110kVstep-upsubstation(ZhuhaiMunicipalGovernment2018).TheGuishanOffshoreWindfarmisimportantbecauseitislocatedamere20kilometresfromHongKongInternationalAirportonLantauIsland.Thispresentsapromisingopportunityforinterconnectionsthroughsubmarinepowercablestobothpowercompanies.However,aPPAbetweenHongKongandtheowners(SouthernOffshoreWindPowerJointDevelopment)isunlikelyatthisstage.Despiteitsideallocation,thecapacityofthiswindfarmisalreadybeingusedbyneighbouringislandsandZhuhai.TheGuishanOffshoreWindFarmwassetupasapilotprojectforGuangdongduringthe12thFive-YearPlanperiod(2011–2015).Asprovincialauthoritieshavesteppeduptheircommitmenttodevelopingrenewableenergy,it’slikelythatsimilarprojectswillbeannouncedinthenearfuture.GovernmentandthepowercompaniesneedtomonitorthedevelopmentofrenewableenergyprojectsinGuangdongsoastoseizeopportunitiesfornewrenewableenergyinterconnections,whetherthroughaPPAinthemid-tolong-termenergymarketorthroughnegotiatingajointventurewithasupplycontractarrangement.5.3.ChallengesContingencyArrangementsHongKongpridesitselfonthereliabilityofitspowergrid,withbothpowercompaniesboastingover99.99percentreliability.ItisessentialforHongKongtohavebackupgeneratorsorreservemarginsforgenerationthatcankickinduringanemergency.Localbackuppowersuppliesalreadyexist.WithinCLP’sportfolioofpower-generationfacilities,Penny’sBayPowerStationservesasasupportfacilitythatcanbestartedinjust12minutes.Withacapacityof300MW,itcanactasabackupincaseofinterruptionsorintimesofpeakdemand(CLP2021b).RegardingHKEpowerassets,theoil-firedopen-cyclegasturbineunitsatHKE’sLammaPowerStationaredesignedforpeak-loppingandmeetinganyemergencyoperationalrequirements.Morereservecapacitymaybeneededinthefuture.Thiswillbedeterminedbythreeprimaryfactors:▪Increasedrelianceonrenewableenergy:Thevariablenatureofrenewableenergymeansthatevenwithsophisticatedbatterystoragetechnologysomeuncertaintiesandsupplyfluctuationsmayexist.Withasignificantlylongerlifespanandeasierscalabilitythanlithiumionbatteries,flowbatteriesareapromisingstoragetechnologythatcanprovideflexibility.However,Figure16GuangdongProvinceOffshoreWindPowerPlanningSite2017—2030Source:GuangdongDRC,2018OffshoreshallowwaterareaOffshoredeepwaterareaHONGKONG42WRI.org.cntheyareyettobeutilisedinHongKong’spowersystemduetohighcapitalcosts.▪IncreasedrelianceonMainlandChina:FuturesourcesofenergywilllikelycomefromMainlandChina,consideringthelandandresourceconstraintsinHongKong.ThisreliancepotentiallycompromisesHongKong’senergyindependence,giventhatpartofitsenergysupplywouldbeoutofthecity’scontrol,andpowerpurchasewouldbesubjecttopricesofferedbyMainlandentities.▪Escalatingthreatsposedbyclimatechange:Hazardsassociatedwithclimatechangewillposeincreasingriskstoenergysecurity.Extremeweather,suchastyphoonsandstormsurges,aswellassecondaryweatherevents,likelandslidesandflooding,candisruptpowergenerationandtransmission,leadingtofluctuationsinthepowersupply.Forexample,MacausufferedfromwidespreadblackoutsduringTyphoonHatoin2017.Itspowercompany,CompanhiadeElectricidadedeMacau,statedthatitselectricitysupplyfromMainlandChina(whichprovides80percentofthecity’sneeds)wasinterruptedduetothetyphoon,andsomeofitslocalpowersupplyfacilitiesweredamagedbyfloods(MacauPost2017).Theimpactofextremeweathereventswillonlybecomemorefrequentandintenseovertime,sothereneedtobeflexibleoptionsthatcanlimitpoweroutagesandhelpmaintainresilience.Morediversityinthelocationofmainlandgenerationplants,aswellasmultipleanddirecttransmissioncorridorstoHongKong,canhelpmitigatetheserisks.AnothersolutionistoenhancereservecapacityinHongKong.Thepowercompaniescouldkeeppowerstationsthathavereachedtheirendoflifeasbackupgenerationfacilities,onlyfiringthemupwhenabsolutelynecessary.Havingmorecontingencyoptionsinplacewouldbepreferablefromanenergysecurityperspective.TransmissionInfrastructureHK’sexistingtransmissionconnectionswithMainlandChinaAtpresent,CLPislinkedtoMainlandChinathroughitsCleanEnergyTransmissionSystem(CETS).CLP’spowerimportscomefromtwosources:▪DayaBayNuclearPowerStation.Since1994,CLPhasbeenconnectedtothemainlandbyadedicatedlinktoDayaBayinGuangdong.Thestation,poweredbytwopressurisedwaterreactors,produces15billionkWhofelectricityperyear,ofwhicharound70–80percentisshippedtoHongKong(CLPn.d.b.).▪ChinaSouthernPowerGrid(CSG):CLPalsohasthecontractualrighttouse600MWfromPhase1oftheGuangzhouPumpedStoragePowerStation.Thestationisapumpedstorageplantforpowertransfer,wherehydrotechnologyisusedtostoreCLP’senergygeneratedbyotherpowerstationsintheCSG(CLP2020a).Whennecessary,CLPcanreleaseitsenergyfromstorage.TheCSG’spowersystemisinterconnectedwithHongKongthroughfour400kVlines.Therearealsoseven132kVlinesthatareusedtoexportelectricitytoloadcentresinGuangdong(EB2015).In2018,governmentapprovedtheenhancementoftheCETS,whichisexpectedtobecompletedin2025.Theenhancementsentailreplacing160kilometresofoverheadtransmissionlinecircuitstoincreaseoveralltransmissioncapacityby900MW(Wong2019).AccordingtoaCLPpressrelease,thisprojectwillnotonlyenhancetransmissioncapacityandreliability,butwillalsoincreaseflexibilityforincreasedimportsofzero-carbonenergyinthefuture(CLP2018).ConnectionsbetweenHongKongandMainlandChinaGovernmentsintheGreaterBayAreaappearwillingtoenhanceandexpandtheirelectricitytransmissionnetworks.InOutlineDevelopmentPlanfortheGuangdong-HongKong-MacaoGreaterBayArea,thereisaChapteronthedevelopmentofanEnergySecurityProtectionSystem(HongKongConstitutionalandMainlandAffairsBureau2019).ThisChapterdescribestheneedtostrengthenenergystorageandtransportsystems,ensurethe“safeandstablesupplyofenergytoHongKong,”andexplore“waystoimprovetheelectricitytransmissionnetworksandgaspipelinesfromGuangdongtoHongKong.”POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong43IfHongKongistoimportalargerproportionoflow-carbonenergy,therewillneedtobefurtherupgradestotheexistingtransmissioninfrastructure.CLP’scurrentupgradetotheCETS,whichwilladd900MWofcapacity,ismostlikelyinsufficient.In2015,governmentsuggestedthatnewpowerinterconnectionsfromCSGcouldbebuiltthroughsubmarinecablecircuits,linkingtoCLPinNewTerritoriesEastandtoHKEonHongKongIslandEast(EB2015).However,thisdoesnotescapetheissueofthegrowingenergydemandinShenzhen,whichtakesupmuchofCSG’scapacityandthuslimitsnewphysicalconnections.CLPandHKEarecognisantofthisconstraintandfurthernotethat,evenifanewconnectionwaspossible,theprocesswouldrequireatimelineofatleast10years.Anotherissue,intermsofinterconnectionsbetweenCSGandtheHongKongpowergrid,istheinterconnectionsbetweenCSGandHKE.Currently,HKEisnotimportinganyelectricityfromthemainland,insteadrelyingsolelyonlocalpowergeneration.In2014,attheHongKongInstitutionofEngineersAnnualSeminar,arepresentativefromHKEremarkedthatreliabilitywasalargeconcernbecauseHKEandCSGarenotcurrentlyinterconnected.IfHKEweretoimportelectricityfromthemainland,electricityconsumersonHongKongIslandmighthavetorelyonasingletransmissionpathfortheirrenewableenergyneedsthroughtheCLPnetwork(HongKongInstitutionofEngineers2014).WhetherHKEshouldbeconnectedtoCSGthroughCLPisanideadeservingfurtherconsiderationandrequiringdeeperreflectionaboutthestructureoftheSCA.ItisequallypossibleforHKEtoindependentlyconstructapowercablefordedicatedrenewableenergygenerationsitesornuclearpowerplantsinMainlandChina.Thiswould,however,require8to10yearsandextensivenegotiationsandinvolvemanylogisticalchallenges.IfHKEwantstoexplorethepossibilityofimportingfromMainlandChina,perhapsatthesametimethatCLPwantstoaddfurthercapacityforzero-carbonimports,theprocessneedstostartnow.Article26oftheSCAcallsforcooperationbetweengovernmentandthecompaniesinafutureinterconnectionstudy.Thisstudy,whichisyettobepublished,isexpectedtoconsiderthe“detailedarrangementsforstrengtheningtheinterconnectionbetweenMainlandChinaandHongKong.”Itaimstoinvestigate“thetechnicalfeasibility;theimplicationstotheoverallperformanceofthepowersupply,includingsafety,reliability,tariffs,andenvironmentalperformance;efficiencyofthepowersystem;costandbenefittoconsumers;andtheimpacttothecompanies.”ThestudyisespeciallyinterestedinGuangdong,asopposedtoMainlandChinaingeneral,astheprovince’sproximitytothecitymakestheinterconnectionmorefeasible.ImportingPowerfromMainlandChinaSupplyreliabilityHongKonghasoneoftheworld’smostreliablepowersystems.Thisislargelybecauseitiscontrolledbytwopowercompanies,includingitspowergenerationplants,infrastructurenetworks,andpowerassets.BelowisatablecomparingthereliabilityofthepowersupplyofHongKongandotherurbanareassuppliedbyCSG.AsthesupplyreliabilityofCSGdiffersfromcitytocityandbyarea(ruralorurban),thepointofcomparisontakenisanaveragereliabilityratein50majorcitiesacrosstheCSGnetwork.HKE(2020)CLP(2020)50CITIESUSINGCSG’SSUPPLY(ChinaElectricityCouncil,2020)Reliability(%)CLP(2020)>99.99599.931Poweroutage(minutes)1.4460Table7TheSupplyReliabilityofHKE,CLP,andCSGSource:HKE2020;CLP2020.44WRI.org.cnCSGhasextensiveexperienceinlong-distancetransmission:Thecompanytransmitspoweracrossfiveprovincial-levelregionsinChina—Guangdong,Guangxi,Yunnan,Guizhou,andHainan.ItalsoexportselectricitytoMacaoandcountriessuchasVietnam,Laos,andMyanmar(ChinaSouthernPowerGridn.d.).Notwithstandingitsexperience,theCSG’sextensivetransmissionnetworkmeansthatthereisagreaterpossibilityforcascadingblackoutsacrosstransmissionlines.ConnectingtheHongKonggridwitharelativelylessreliablepowersupplythroughalongtransmissionnetworkthatmaybesubjecttoadverseweatherconditionsandaccidentscouldcreatehigherreliabilityrisksforthecity.Thedifferencebetweenoneminuteandonehourofpoweroutagesisnotnegligible.Incomparison,buildingadedicatedcircuitwithaspecificpowerstationislikelytobemorereliable,asitiseasiertomonitoroneassetandoneinfrastructurenetworkthantoensurethereliabilityofanentirepowergrid.TherehavebeenpositivesignsthatCSGiscommittedtoincreasingitsreliabilityandresilienceagainstnaturaldisasters.Between2018and2022,CSGisinvestingover170billionyuantoimprovethedisaster-preventioncapacityofthegrid,andithasalsocommittedtoreducingpoweroutagesincentralurbanareastolessthan30minutesperyear(Zheng2019).Chinaisalsoactivelydevelopinganultra-high-voltageAC-DCpowergridconnectingallsixregionalgrids.HongKongshouldpaycloseattentiontotechnicalandinfrastructuraleffortstoimprovereliability(Fairley2019).7Furthermore,accordingtotheGreaterBayAreaOutlineDevelopmentPlan,thereareplanstoimproveenergystorageandtransportsystems.Thesedevelopmentsarecrucialindeterminingthefuturefeasibilityofconnectingwiththemainland’spowergrid.Anotherkeycomponentofreliabilityismaintenance,especiallyintheeventofanemergency,suchasanaturaldisaster.Thisisadefiniteconcernfornuclearenergy,especiallywithaccidentsinrecentmemory,mostprominentlyinJapanin2011,asmentionedearlier.Safetystandardsinnuclearpowerarecontinuallyrising,though.TheTaipinglingNuclearPowerPlant,currentlyunderconstruction,isbasedonChina’slocalHualongthird-generationpressurisedwaternuclearreactorstandards.Incaseofanemergency,theplantcanautomaticallyshutdownfissionreactionsandcooldownthereactorcorestosafelevelswithin72hourstoavoidameltdown(AsiaTimesStaff2019).Forrenewables,reliabilitycouldbecompromisedinthecaseofextremeweather,suchastyphoons.Forwindenergysystemsinparticular,violentwindscouldcreatesignificantstressconditionsontheturbines,affectingtheirbladesandtransmissionsystems.Currently,technologyisbeingupgraded.TheV117-4.2typhoon-resistantturbine,originallydevelopedbyVestasWindSystem,willbedeployedattheAkitaNoshiroOffshoreWindFarmProjectinJapanandisexpectedtocommenceoperationsin2022(MHIVestasOffshoreWind2020).Theturbinewillbeabletowithstandwindspeedsofupto57m/s,or205.2km/h,whichisapproximatelythewindspeedofasignal8typhoon.Whenwindspeedsexceed30m/s,thewindturbinewilltypicallystopgeneratingpowerandwilltransitiontoamodetowithstandhighwinds(Wood2020).Theseinnovationsneedtobeontheradarofgovernmentandthepowercompaniestoensurethatpowerinfrastructureremainsrobust.CompetitionforenergyresourcesCompetitionforenergyresourcescancompromiseelectricitysupplyreliabilityinHongKong.ManycitiesintheGreaterBayArea,includingHongKong,sharesimilarobjectivesinrelationtopower.Asidefromensuringenergysecurity,manyhavealignedthemselveswithprovincialdecarbonisationtargets.Therefore,itislikelythatalllocationswillbecompetingforthesamecarbonenergysources.Governmentneedstoweighitsoptionsforzero-carbonenergyassoonaspossibletosecureenergyforthecity.Itshouldalsoremainopen-mindedaboutimportingenergyresourcesfromelsewhere,especiallyifitiscost-effectiveandreliable.RegulatoryChallengesHongKongdoesnothavetheauthoritytoregulatetheoperationsofgeneratorsandnetworksinMainlandChina.ThismakesitdifficultforPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong45governmenttobeabletoexerciseadministrativeoversightandensurethatsafetyandreliabilitystandardsareharmonised.ItisunlikelythatguaranteeingthepowersupplytoHongKongisahighpriorityforCSGorthecentralgovernmentwhendiscussingregulatorychanges,whileitislikelythatlocaloperatorswillnotbeinvolvedinhigh-leveldiscussions.ThismayleadtounfavourableregulatorychangesforHongKong.CostsBuildinginterconnectionswithMainlandChinawillenableHongKongtousemorecosteffectiveandlow-carbonenergyresources;however,itwillbringadditionalcapitalcosts.Thecostincreaseswillmainlycomefromtheconstructionandmaintenanceofcablenetworksforlong-distancepowertransmissionandupgradesinexistingtransmissionnetworkstoensurethesecurityofenergysupply.CostsmayalsocomefrommaintainingbackupgeneratorcapacityinHongKongintheeventofcascadingblackoutsalongtheCSGpowertransmissionnetwork.TheHongKongGovernment,inits2015consultation,stateditsconcernregardingthepossibilitythatthecitymightbecomeacaptivebuyerinthepowermarket(EB2015).ThiscouldpotentiallybethecaseifHongKongconnectsdirectlytotheCSGgrid;asenergydemandgrows,thecitywillhavetocontinuetorelyonthegridandacceptmainlandprices.However,ourrecommendedmeansofcollaborationwiththemainlandcouldmitigateconcernsaboutHongKongbecomingacaptivebuyer.IfHongKong’spowercompaniescansignPPAswithspecificpowerplantsandformjointventureswithpowergenerators,intheory,theywillhavealargerswayinthenegotiationprocessanddiscussionsaboutpricestability.ArelativelysuccessfulagreementthathasbeenconcludedistheMemorandumofUnderstandingbetweentheNationalEnergyAdministrationandtheHongKongSpecialAdministrativeRegionGovernmentontheSupplyofNaturalGasandElectricitytoHongKong.Itfacilitatesandprotectsastablesupplyofnuclearenergyandnaturalgasintothecity(ChinaNationalEnergyAdministrationandHongKongSpecialAdministrativeRegion2008).Moreover,aPPAisamedium-tolong-termhedgingstrategytoreducepricevolatility.PublicOpinionTheHongKongpublicisworriedabouttheincreaseduseofnuclearenergy.SixmonthsafterthenuclearaccidentinJapan,asurveywasconductedinHongKongtogaugepublicopinionontheissue.Atthetime,inSeptember2011,only15percentofthosesurveyedbelievedthatHongKongshouldincreaseitsimportsofnuclearenergyby2020(FriendsoftheEarthetal.2011).Abouthalfthoughtthatthecity’snuclearpowersupplyshouldremainunchanged,andaquarterfeltitshoulddecrease.Sixty-onepercentofrespondentsthoughtthatthefuturedevelopmentofthepowersectorshouldinsteadprioritiserenewableenergy.Morespecifically,HongKongresidentsappeartobemostconcernedaboutthethreatsposedbypowerplantsclosetothecityinthecaseofanuclearincident.VoicesareespeciallyprominentinviewofthemanypowerplantsthatGuangdongisconstructingorplanningtoconstructalongitscoastline,especiallythosethatliequiteclosetoHongKong.WhiletheDayaBayNuclearPowerPlanthassurvivedseverallarge-scaletyphoonsinrecentyears,suchasMangkhutin2018,therearestilllingeringconcernsthatanaturaldisasteronthemainlandcouldaffectlivelihoodsandevensurvivalinHongKong.Disruptionsfromstormsurgesandsealevelriseswillonlyintensifywithclimatechange.Toassuageconcerns,governmentmustmaintainconstantcommunicationwiththeGuangdongauthoritiesregardingtheperformanceofnuclearpowerplantsandensurethatHongKongisprotectedasmuchaspossiblefromfuturepotentialthreats.GovernmentandthepowercompanieswillneedtocommunicatetoHongKongresidentstheexactnatureofanyPPAandkeepthediscussionprocesstransparent.TheremustbeextensiveplansonhowHongKongcanretaincontroloveritspowersector,andgovernmentmustalsoconductmultipleroundsofconsultationsatdifferentstagesofthedecision-makingprocesstoensurethegreatestdegreeofinclusion.46WRI.org.cnPARTIIINET-ZEROPATHWAYSPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong47PATHWAYSTOANET-ZEROEMISSIONSPOWERSYSTEMCHAPTER6ThisChapterexaminesthepossiblepathwaystoanet-zerocarbonpowersystemby2050whilemeetingfutureenergydemandandimprovingtoday’slevelsofenergysecurity.InordertocomparevariouspathwaysandunderstandtheirimpactonHongKong’spowersystem,weevaluatetheeconomicimpact,environmentalimpact,healthimpact,andenergydiversityofeachone.Basedontheseassessments,togetherwithadditionalstakeholderconsultations,weexplorefivepathwaysthatcouldhelpachieveadeepdecarbonisedpowersystemforHongKongby2050.48WRI.org.cnFiveScenariosforPotentialEnergyMixesScenarioSettingBasedonananalysisofthefeasibility,opportunities,andchallengesoftheseavailabletechnologiesinChapters2through5,andthroughroundtablesandone-on-onemeetingswithstakeholders,wedevelopedfivescenariostodemonstratedifferentcombinationsofavailableoptions.Thesedecarbonisationscenariosweredevelopedbasedonthefollowingcriteria:▪GHGemissionsfrompowersystemswillbenetzero(ornearzero)by2050,andtheairpollutantswillbesignificantlyreduced.▪ThepowersystemiscapableofmeetingthepowerdemandinHongKong.▪Theproposedenergyoptionmustbecredibleandplausible,inaccordancewithlocalpoliciesandexpertjudgements.WethencomparedtheimpactofthesescenarioswithCO2emissions,cost,airpollutantsandhealthincidences,andenergydiversity.Inthisanalysis,weassumethatexistingpowerplantswilloperateuntiltheendoftheirlifecycle,andthecoalthatisroutinelyusedtogenerateelectricitywillbephasedoutby2030.Aftertheretirementofexistingpowerplants,newpowerplantswillneedtobebuiltinordertoincreasethepowersupplyandmeetsteadilyincreasingpowerdemand.Localrenewableenergy,includingwaste-to-energy,willbeutilisedatitshighestpotential,whichis10percentforallscenarios,basedonourevaluationinChapters2–5.Keyfeaturesofeachscenarioarereflectedineachscenariotitle:▪Scenario1—NaturalGas:Thisscenario’senergymixisclosesttothecurrentsituation.Itconsistsof25percentimportednuclear,65percentnaturalgas,and10percentlocalrenewables.Asaresult,CCSmustbeinstalledforthepowersystemtoachievethecarbon-neutralitytarget.TheoffshoreLNGterminalbeingconstructedinHongKongwaterswillfurtherimproveHongKong’slong-termnaturalgassupplystabilitybydiversifyingsupplysourcesandwillenableprocurementofnaturalgasatcompetitivepricesfromtheglobalmarket(CLPn.d.c).▪Scenario2—RenewableEnergy:Theshareofimportedrenewableelectricity(mainlyoffshorewindpower)by2050willincreasesignificantlyfromzeroto30percent;whereastherestoftheenergymixwillconsistof35percentnaturalgaswithCCS,25percentimportednuclearpower,and10percentlocalrenewableenergy.ThisisdependentontheconstructionofoffshorewindfarmsinHongKong’seasternwaters.▪Scenario3—Nuclear:Theshareofimportednuclearenergywillincreasefromthecurrent28percentto50percentby2050;whereastherestoftheenergymixwillconsistof30percentnaturalgaswithCCS,10percentimportedrenewableenergy(offshorewindpower),and10percentlocalrenewableenergy.ThisscenarioassumesthatgreaterinterconnectionsandjointventuresbetweenHongKongandMainlandChinawillbepursuedforgreatersharesofimportednuclearenergy.▪Scenario4—Diversity:Energysourcesaremostdiversifiedinthisscenario,andhydrogenisanimportantemergingnewenergysource.Thepower-generationmixin2050willcomprise15percenthydrogen-basedenergy,35percentnaturalgaswithCCS,25percentimportednuclear,15percentimportedrenewableenergy(offshorewindpower),and10percentlocalrenewableenergy.Inthisscenario,hydrogenwillpresumablybeimportedfromAustralia,theMiddleEast,orMainlandChina.▪Scenario5—Fossil-Free:Inthisscenario,HongKongwillbepoweredby100percentnon-fossilfuelsourceswithoutCCS.Thepowergenerationmixin2050willcomprise60percentimportednuclear,30percentlocalhydrogen-basedpower,and10percentlocalrenewableenergy.Assumptionsonimportednuclearandhydrogenaresimilartoscenarios3and4.Thepowergenerationcompositionforeachscenarioduring2025–2050issummarisedinFigure17.POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong49CalculationoftheLevelisedCostofElectricityTheunitcostofelectricitygenerationinthefivescenariosiscomparedusingthelevelisedcostofelectricity(LCOE)andsystemcosts.TheLCOEisanestimateoftherevenuerequiredtobuildandoperateageneratoroveraspecifiedcostrecoveryperiod.Itcanbeconsideredasthebreakevenpointforanelectricalpowerstation;thatis,theinterestrateatwhichfuturecashflowsarediscountedusedincalculatingLCOEis3percent.Bypresentingabreakevenpoint,theestimatedLCOEdoesnotcapturethepermittedreturnrateonnetfixedassets,whichis8percentinthecurrentSCA.TheparametersusedincalculatingtheLCOEofeachtechnology(exceptforhydrogen)aredrawnfromtheIEAWorldEnergyOutlook2020’sassumptionforChinaandadjustedbasedonconsultationswithlocalexpertsandotherrelevantstudiesaccordingtoHongKong’slocalconditions.ThecostofelectricitygeneratedfromhydrogeniscalculatedbasedontheviewthatH2turbineswouldhavesimilarconstructioncostsaswellassimilaroperatingexpenses(OpEx),andsimilarefficiencytoCCGT(GoldmanSachs2020).FuturefuelcostestimatesarefromBloombergNEFandtheHydrogenCouncil.Systemcostsrefertotheexpenseofintegratinganindividualpowerplantintoanexistingpowersystem,includinggridcosts(linkedtogridreinforcementandextension),balancing,andprofile(Samadi2017).Apowersystemwithmorevariablerenewableenergywouldneedmoredispatchableelectricitygenerationcapacityandbackupcapacity;asaresult,itwillhavehighersystemcosts.CalculationofAirPollution-RelatedDeathsToassessthehealthimpactcausedbyairpollution,astandardapproachistofirstestimatethechangeintheground-levelconcentrationofvariouspollutantsunderdifferentscenariosandthenestimatetheassociatedhealthimpact,suchasprematuremortalityandvariousrespiratorydiseases,usinganepidemiologicalconcentration-responsefunction.Basedonthese,factorssuchasthecostofmedicines,inpatienttreatment,andlostworkinghourscanbeaggregatedtocomputethetotaleconomicloss.Inthisreport,weusedasimplifiedapproachtocalculatethecostofhealth-relatedincidentswiththefactorsappliedintheEnergyPolicySolutions’latest3.0versionandfocusedexclusivelyonprematuremortalitiesFigure17EvolutionofthePowerGenerationMixAssumedacrossScenariosSource:Authors’assumptionsforthescenarioanalysis.Powergeneration(GWh)020,00060,00010,00050,00040,00030,000203520452050203020402025203520452050203020402025203520452050203020402025203520452050203020402025203520452050203020402025SolarPVWastetoenergyImportedREOffshorewindImportednuclearHydrogenCoalOnshorewindNaturalgaswithoutCCSNaturalgaswithCCSNaturalgasRE+Fossil-freeDiversityNuclear50WRI.org.cncausedbyairpollution,asprematuremortalityrepresents97percentofthemonetisedcostofemissionsinHongKong(EnergyInnovationn.d.).WefirstestimatedthenumberofprematuremortalitiesineachscenarioandthenmultiplieditbyalocalisedValueofStatisticalLifeforHongKong—evaluatedat23.6millionHKDperstatisticallife(in2019HKD)—toestimatethetotaleconomiclossesduetopollutantemissionsinthedifferentscenarios.EvaluationofEnergyDiversityThesecurityofsupplyfromtheelectricitysystemisanotherimportantdimensioninevaluatingscenarios.Thedecarbonisedpowersystemalsobringsnewuncertaintiestothesecurityofthesystem,suchasthegrowingpenetrationofnon-dispatchablecapacity,whichcouldincreasetheriskofsupplyinterruptions.MaintainingthesecurityofHongKong’spowersystemisamongthehighestpriorities.Thelowdiversityofpowergenerationoptions,ageinginfrastructure,andinadequategenerationcapacitycanleadtoavulnerablepowersystem.Inthisreport,energydiversityismeasuredusingtheShannon-Wienerdiversityindex,whichisfrequentlyusedtomeasuresecurityofsupplyandelectricitygeneration,reflectingthediversityofthesystem(Johanssonetal.2012).EvaluationofImpactsonClimate,Economy,Environment,andHealthintheFiveScenariosTocomparethecost-effectivenessofthedifferentscenarios,weexaminethecostimpact,environmentalimpact,andhealthimpactforeachone.ClimateImpact:CO2EmissionsFromtheperspectiveofcumulativeemissions,scenarioswithahighershareoffossilfuelshavehigheremissions,andthosewithahighershareofnuclearandrenewableenergieshavelessemissions.Althoughdifferentroutesleadtothesamegoal,thecumulativeemissionsundertheNaturalGasandFossil-Freescenarioswillbequitedifferent—50milliontonnesofFigure18CumulativeCO2EmissionsunderDifferentScenariosSource:CalculatedbytheprojectteamNuclearscenarioDiversityscenarioFossil-freescenarioRE+scenarioNaturalgasscenarioCumulativeCO2emissions(Mto)2025202020502030203520402045010015035030020025050POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong51CO2(seeFigure18).Theriseintemperaturesbroughtaboutbyclimatechangeisaffectedbycumulativeemissions.Inthisrespect,theNuclearandFossil-Freescenariosdeliversubstantiallyearlierandenablelargercutsinemissionsthantheotheroptions.AlthoughallpathwaysaredesignedtohelpHongKongachievenet-zeroemissions,theannualemissions-reductionpotentialvariesacrossscenariosovertime.CO2emissionswillbezeroby2050onlyundertheFossil-Freescenariobecauseallsourcesarefromnon-fossilfuelenergyby2050.Otherscenarioswillstillhaveresidualemissionsthatneedtobeoffsetbyforestcarbonsinksorbypurchasingoffsetcredits.TheNaturalGasscenariowillhavethelargestdemandinthisregard—1milliontonnesofCO2emissionsin2050becauseoftheenergypenalty8anduncapturedemissionsofCCS.Figure19showstheannualCO2emissionsundereachscenario.UndertheNaturalGasscenario,therateofdeclineinemissionsfromthepowersectorwillgraduallyincreasefrom2036becauseweassumethatCCSwillnotbeapplieduntil2036,andtheapplicationofCCStechnologywillbeimplementedthroughstepsfromthepilottolarge-scaleapplication.TheNuclearandFossil-Freescenariosassumethattheuseofimportednuclearenergywillbeincreasedto60percentofthetotalelectricitydemandby2035,soemissionswilldropsignificantlyin2035.EconomicImpact:CostofElectricityOurestimatedaveragetotalLCOE(includingsystemcosts)by2050intheFossil-FreeandNuclearscenariosaresimilar,at0.68and0.72HKD/kWh,respectively,closetothecurrentLCOElevel,at0.65HKD/kWh.ThetotalLCOEisestimatedtobehigherintheNaturalGas,RE+,andDiversityscenarios(approximately0.78-0.87HKD/kWh),whichismuchhigherthanthecurrentlevel.ThecostsofgreenhydrogenwillhaveanimpactontheaverageLCOEinhydrogen-relatedscenarios,namelyDiversityandFossil-Free.TheprojectedaverageLCOEestimatesarehighlysensitivetotheunderlyingdataandassumptions.Thefuturedeliveredcostsofhydrogenarehighlyuncertainatthisstageduetotheearlydevelopmentofgreenhydrogengenerationtechnologiesandglobaltransportationinfrastructure.ThisiswhyLCOEandcumulativecostsfortheDiversityandFossil-Freescenariosarearangeinfigures20and21.ThedeliveredcostsofhydrogenSource:Calculationoftheprojectteam.Figure19AnnualCO2EmissionsunderDifferentScenariosNuclearscenarioDiversityscenarioFossil-freescenarioRE+scenarioNaturalgasscenarioAnnualCO2emissions(Millionsoftonnes)2025202020502030203520402045010252015552WRI.org.cnNote:CostsfortheDiversityandtheFossil-Freescenariosareshownasarange—includingahighestlevel,alowestlevel,andanaveragelevel—becausehydrogentechnologiesareappliedinthesetwoscenariosandthereisgreatuncertaintyinthecostofhydrogen.TheparametersusedincalculatingtheLCOEofeachtechnology(exceptforhydrogen)aredrawnfromtheIEAWorldEnergyOutlook2020’sassumptionforChinaandadjustedaccordingtoHongKong’slocalconditions;thecostofelectricitygeneratedfromhydrogeniscalculatedbasedontheviewthatH2turbineswouldhavesimilarconstructioncosts,similarOpEx,andsimilarefficiencytoCCGT(GoldmanSachs2020).FuturefuelcostsareestimatedbyBloombergNEFandtheHydrogenCouncil.Source:CalculatedbytheprojectteamFigure21ProjectedCumulativeCostsofElectricityacrossScenariosHKD/KWh$0.50$1.10$7.00$1.00$0.60$8.00$0.90RE+scenarioFossil-freescenarioDiversityscenarioNuclearscenarioNaturalgasscenario2020LCOEasareference0.650.870.780.720.770.610.990.970.810.68Note:CostsfortheDiversityandFossil-Freescenariosareshownasarange—includingahighestlevel,alowestlevel,andanaveragelevel—becausehydrogentechnologiesareappliedinthesetwoscenariosandthereisgreatuncertaintyinthecostofhydrogen.TheparametersusedincalculatingtheLCOEofeachtechnology(exceptforhydrogen)aredrawnfromtheIEAWorldEnergyOutlook2020’sassumptionforChinaandadjustedaccordingtoHongKong’slocalconditions;thecostofelectricitygeneratedfromhydrogeniscalculatedbasedontheviewthatH2turbineswouldhavesimilarconstructioncosts,similarOpEx,andefficiencytoCCGT(GoldmanSachs2020).FuturefuelcostsareestimatedbyBloombergNEFandtheHydrogenCouncil.Adiscountrateof3percentisused.Source:Calculatedbytheprojectteam.Figure20ProjectedAverageUnitCostsofElectricityacrossScenariosMillionHKDin2019500,000800,000600,000750,000550,000650,000700,000RE+scenarioFossil-freescenarioDiversityscenarioNuclearscenarioNaturalgasscenario658,940640,267618,394640,672599,514678,739678,767618,394614,740POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong53areestimatedtorangebetween14.9and52.0USD/MMBtuby2030;and11.2and39.0USD/MMBtuin2040(BloombergNEF2020;HydrogenCouncilandMcKinsey&Company2021).Withhydrogencostingmore,theDiversityandFossil-Freescenarioswouldbelesseconomicallycompetitive,withanaveragetotalLCOErespectivelyof0.97and0.99HKD/kWhby2050;thisis20–46percenthigherthantheestimatedaveragenumbers.Withalowercostofhydrogen,theeconomicfeasibilityoftheDiversityandFossil-Freescenarioswouldbesignificantlyimproved,makingtheFossil-Freescenarioverycompetitiveintermsofcost.CumulativecostsaresimilartotheLCOEanalysis.Insummary,basedonexistingtechnologicalcostprojections,scenarioswithagreaterproportionofnuclearwouldbemoreeconomicallyfeasibleforHongKong;thosewithahigherratioofemergingtechnologies,suchasCCSandhydrogen,wouldbelesscompetitive.Note:EmissionsareestimatedbymultiplyingelectricitygenerationpertechnologybyemissionsperkWh.Theemissions’factorsforexistingfossilfuel-firedpowerplantsaredrawnfromtheCLPInformationKit.Source:CalculatedbytheprojectteamFigure22CarbonDioxideandAirPollutantEmissionsperUnitofElectricityOutputinVariousPathwaysEnvironmentalandHealthImpacts:AirPollutantsandHealthIncidencesInadditiontocarbondioxide,airpollutionisamajorindicatorwhenmeasuringtheenvironmentalimpactofparticularpowergenerationfuelmixes.EmissionsofairpollutantsareestimatedbymultiplyingelectricitygenerationpertechnologybyemissionsperkWh.Usingrenewablesandgreenhydrogenforpowergenerationandincreasingimportednucleardemonstratesignificantenvironmentalbenefits,sincetheyreducetheneedtoburnlocalfossilfuels.TheuseofCCScouldlargelyreducecarbondioxideemissionsfromlocalfossilfuelcombustion,butenergypenaltiesfromtheoperationsofcarboncapturewouldincreaseairpollutantemissions—suchasSO2,NOxandPM—imposingamoredirectimpactonlocalairqualityandpublichealth.AsshowninFigure22,undertheRE+andNuclearscenarios,thehighPM2.5/SOx/NOxemissionsperunitCO2emissionsperunitelectricity(g/kWh)000.505000.100.150.403000.454000.050.200.250.301000.35200CO2(g/kWh)PM2.5(g/kWh)SOX(g/kWh)NOX(g/kWh)NaturalgasscenarioFossil-freescenarioDiversityscenarioNuclearscenarioRE+scenario202042930161611454WRI.org.cnSource:Calculatedbytheprojectteam.Source:Calculatedbytheprojectteam.Figure23AnnualAirPollutantEmissionsacrossDifferentScenariosFigure24CumulativePowerGeneration—CausedAirPollution-RelatedDeathsinVariousPathwaysfrom2021to2050NuclearscenarioDiversityscenarioFossil-freescenarioRE+scenarioNaturalgasscenariotonnestonnestonnes2025202520252050205020502020202020200005004,00016,00040012,0002002,0004,0003003,0008,0001001,000NuclearscenarioDiversityscenarioFossil-freescenarioRE+scenarioNaturalgasscenario0100prematuremortality200300400500AnnualPM2.5emissionsAnnualSOxemissionsAnnualNOxemissionsPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong55Source:Calculatedbytheprojectteam.Figure25EvolutionofEachScenario’sShannon-WienerDiversityIndexratioofimportednuclearorrenewableenergyforpowergenerationwouldmostlyeliminateairpollutantemissions;undertheFossil-Freescenario,airpollutantemissionsperunitofelectricityoutputby2050willbeclosetozero.Ourresults(Figure23)showthattheNaturalGasscenarioisthepoorestperformerintermsofreducingairpollution-relateddeaths.Overall,shiftingawayfromtheNaturalGasscenariocansavearound1.5-2.9billionHKD,basedon2019prices.EnergyDiversificationIntheshortterm,asshowninFigure25,inallscenarios,theenergydiversityofHongKong’spowersystemisexpectedtodropbefore2030duetotheincreasingrelianceonnaturalgasforelectricitygeneration.Inthelongterm,allscenarios,exceptNaturalGasandFossil-Free,demonstratesignificantimprovementinthediversificationofHongKong’spowersystem,comparedwithtoday’slevels.ItisworthnotingthatHongKong’sutilitycompaniesarealsoconsideringincreasingnaturalgasterminalsandimportingnuclearpowerfromdifferentnuclearpowerplantstoreducetheirdependenceonasinglesource,whichcouldbenefitHongKong'senergydiversity.ConclusionsThisChapterexaminestheperformanceofthefivescenariosintermsofcost,airpollution,health,andenergydiversity.Table8showsthatthefivescenariosperformdifferentlyagainstthesecriteriaandnosinglescenariooutperformstheothersinallaspects.WelayouttheseoptionsfortheHongKongGovernment’sconsiderationtowardsachievingits2050carbonneutralitygoal.Intermsofclimatemitigation,theNuclearscenariohasthelowestcumulativecarbonemissionsbecauseitinvolvesaone-timeswitchtoalarge-scaledecarbonisedenergysource.TheFossil-Freescenariopresentsapathwaywiththesecond-leastcumulativecarbondioxideemissionsandwillleadtonet-zerocarbonemissionsby2050.TheRE+,Nuclear,andDiversityscenarioswillallbringcarbondioxideemissionsin2050tolessthan5percentoftoday’slevels.TheNaturalGasscenariohastheNuclearscenarioDiversityscenarioFossil-freescenarioRE+scenarioNaturalgasscenarioSWI202520202050203020352040204500.800000.600000.400000.200001.000001.800001.600001.200001.4000056WRI.org.cnTable8ComparisonofDifferentScenariosTECHNOLOGYYEARNATURALGASSCENARIORE+SCENARIONUCLEARSCENARIODIVERSITYSCENARIOFOSSIL-FREESCENARIOShareoftechnologiesin2050NaturalgaswithCCS65%35%30%35%-LocalRE10%10%10%10%10%ImportedRE-30%10%15%-Nuclear25%25%50%25%60%Hydrogen---15%30%EvaluationCriteriaFeasibility—technologicalmaturityNoforCCSNoforCCSNoforCCSNoforCCSandhydrogenNoforhydrogenEconomiccompetitiveness(rankedbyavg.LCOEin2050)$$$$$$$$$$$$$$$CarbonandairpollutantemissionsHighMediumLowMediumLowAssociatedhealthconcernsHighMediumLowMediumLowLowMediumMediumHighLowhighestcumulativeemissionsbecauseitusesfossilfuelsmorethantheotherscenarios,aswellastheenergypenaltiesfromtheuseofCCS.Fromatechnicalreadinessperspective,allthescenariosrelyatdifferentlevelsonthedevelopmentofearly-stagetechnologies,suchasnaturalgas-firedpowerplantsequippedwithCCSandgreenhydrogen,whicharestillnotcommerciallyviable.Thisposeshighertransitionuncertainties.TheNaturalGasandDiversityscenariosrelyonthesetechnologiesfor50–65percentofthetotalpowergenerationmix,andtheRE+,Nuclear,andFossil-Freescenariosrelylessonthesetechnologies—between30and35percent.Intermsofcost-effectiveness,increasingimportsofnuclearenergycouldhelpHongKongachieveitscarbonneutralitygoalwhileavoidingthehighercostsassociatedwithearlydevelopmenttechnologies.Basedonexistingresearchandestimatesforthefuturecostofvariousdecarbonisedpower-generationtechnologies,uncertaintymainlycentresonthefuturepriceofgreenhydrogenandCCStechnologies.Basedonthecurrentprojectionforthetechnologies,theNuclearandFossil-Freescenariosperformbettereconomically.ItisevidentthatbothrenewablesandnuclearenergyhavegreatpotentialforHongKong’sfuturedecarbonisation.Whilerenewablesarecleaner,moreenvironmentallyconscious,andNote:$representsthelowestcostcomparedwiththeotherscenarios;$$$$$representsthehighestcostcomparedwiththeotherscenarios.Source:Scenariosenergymixin2050areauthors’assumption,evaluationcriteriaarecalculationresultsoftheprojectteam.POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong57morepubliclyaccepted,nuclearshouldnotberuledoutasanimportantoptionforthecity,givenitsreliabilityandthatit’sarelativelymaturetechnology.Theseoptionsarenotmutuallyexclusive.Instead,governmentandthetwopowercompaniesshouldconsiderawiderdiversificationofthecity’sfuelmixandsourcesofpowersupplytoday,inordertowardagainstfuturesupplydisruptionsandheightentheenergysecurityinpreparationforadverseevents.Domesticgas-firedplantswithCCScouldprovidelocaldispatchableelectricitysourcesandwouldavoidmostcarbonemissions.However,highcostsarehinderingthisoptionfromenteringmainstreamuseintheshortterm.Inthelong-run,however,costsareexpectedtodropwithglobalandregionalR&Deffortsontechnologicaldevelopmentandincreasinginvestmentinbuildinginfrastructureforcarbontransportandstorage.AhighdegreeofrelianceonCCSfordeepdecarbonisationmaydelayHongKong’spowertransformation,leadingtohighercumulativecarbonemissionsandadversehealthbenefits.Also,duetoenergypenalties,theassociatedNOxandSO2emissionswouldstillhavenegativeenvironmentalandhealthimpacts.Currently,poweringthebaseloadusinggreenhydrogenischallengingduetolimitedsuppliesandhighfuelcosts.SuccessfullyutilisinghydrogeninHongKong’spowersectordependsonglobaleffortsingreenhydrogentechnologydevelopmentanddeployment.Inthelong-run,hydrogen-basedenergycanplayanimportantroleinHongKong’spowersystem,includingprovidingbackuppower,meetingpeakdemand,andservingasameansoflong-termenergystorage.Thedeliveredcostsofhydrogencouldlargelyaffectthepower-generationcostsofelectricityinHongKong.58WRI.org.cnPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong59RECOMMENDATIONSIntheHongKongClimateActionPlan2050,governmenthaspledgedtoincreasetheshareofrenewableenergy(waste-to-energy,solar,andoffshorewind)inHongKong’sfuelmixto7.5–10percentby2030andto15percentgraduallythereafter.Governmenthasfurthercommittedtoconsiderregionalcooperationthroughoffshoreprojectsandjointventurestowardsthelarge-scaledevelopmentofnuclearandgreenhydrogen.Theevaluationofthesetechnologicaloptionsinthisreportcaninformgovernment’splanningandimplementationofthesetargets.CHAPTER760WRI.org.cnBuildingonouranalysisofdecarbonisedtechnologyoptionsforHongKong,thisreporthasofferedseveralpossiblepathwaystowardsanet-zeropowersystem.Asgovernmentconsidershowtodecarbonisethecity’spowersystem,whichcouldbethroughoneofthefivescenariosordifferentcombinationsofthem,italsoneedstorevisitpossiblepathwaysfromtimetotimetokeepinlinewithtechnologicalandmarketdevelopments.Inanycase,atpresent,itiscriticalforgovernmenttoactambitiouslyanddecisivelytowardsacarbon-neutralpowersystem.Anydelaywillleadtoacarbonlock-in,whichwilleventuallyleadtolargercumulativeemissionsandjeopardiseHongKong’scarbon-neutralityvision.ItwillalsohamperHongKong’sleadershipasoneoftheworld’smostadvancedcitiesandanimportantinternationalfinancialcentre.Wemakethefollowingrecommendationsforimmediateimplementation.Wecalltheseno-regretactions.Regardlessofwhichpathwaygovernmentchooses,itshouldconsidertheserecommendationsforimmediateimplementation.Recommendation1:Scale-updomesticwindandsolarenergy.Manystudies(seeChapter2)indicatethatHongKong’srenewableenergypotentialismuchgreaterthanthecurrentgovernmenttargetof3–4percentoftotalenergyconsumption.Thispaperestimatesittobeashighas10percent.Regardlessofwhichpathwayischosen,governmentshouldutilisedomesticrenewableenergyresourcesasmuchaspossible.Todoso,werecommendthefollowingactionsoverthenext12to24months:ConductanewstudywiththepowercompaniestocomprehensivelyexamineHongKong’srenewableenergyresources.WhiletherehavebeenotherstudiesonrenewableenergyinHongKonginthecontextofsolarPVsystemsortheFiTscheme,noneareascomprehensiveastheEMSD’s2004StudyonthePotentialApplicationsofRenewableEnergyinHongKong.Basedontechnologicaladvancementsinthepast20years,governmentshouldnotonlyrenewthisresearch,butconductPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong61morefeasibilitystudiesintosomeofthestalledorearmarkedprojects.Giventheupwardtrendinsolarandwindtechnologyefficiency,governmentshouldconductanannualreviewofHongKong’srenewableenergypotentialandcostandbusinessmodelandupdateitsrenewable-energytargetsaccordingtothelatestdevelopmentsinrenewabletechnology.Incentiviserenewableenergyinvestmentandpromoteaninnovativeapplicationmodelandbusinessmodel.Since2018,theGovernmentGreenBondProgrammehasprovidedfundingforgreenpublicworksprojects.Governmentshouldintroducemorefinancialincentives,suchasfiscalandtaxationmechanisms,toencouragebothutilityandnon-utilitycompaniestodeveloprenewableenergyalternatives.Governmentcouldalsoconsidersubsidisingtheinitialcostsofrenewable-energydevelopment.Recommendation2:Furtherscaleupwaste-to-energyfacilities.WtEtechnologyoffersasolutiontoaddressbothwastemanagementandGHGemissionissues.Whilstreducingthegenerationofwaste,HongKongshouldoptimisetheutilisationofWtE,whichisaninvaluabledomesticrenewableresource.ToscaleupWtEinHongKong,werecommendthatgovernmentconsiderthefollowingactionsoverthecoming12to36months:UseSCAstorampupWtEdevelopment.GovernmentmayincludeaWtEtargetintheSCAsastheirstatutorydutyandrequestbothpowercompaniestodevelopWtEfacilitiesintheirplantsites.Forinstance,CastlePeakandLammaIslandcanbepotentialsitesfortwoorthreemoreincinerators.EnhancepublicawarenessofWtEfacilities.Inclusivedecision-makingiskeytoimplementingWtEinHongKong.Muchofthepublicbacklash,whichresultedfrompreviouseffortstopushforincinerations,camefromthefailuretoconsultwithresidentsneartheproposedsites.Governmentshouldproperlyaddressresidents’concernsaboutairpollution,odours,andworsenedenvironmentalqualitybyincreasingthetransparencyoftheconstructionprocessandbyofferingreal-timeairqualitymonitoring.Recommendation3:ExploreopportunitiesforregionalcollaborationonrenewableandnuclearenergydevelopmentwithMainlandChina.Constrainedbylandandnaturalresources,HongKongdoesnothavefavourableconditionsforlarge-scalerenewableenergydevelopment.OneoptiontohelpwithdecarbonisingHongKong’spowersystemistoexpandtheimportofrenewableandnuclearenergyfromMainlandChina.BuildingnewnuclearpowerplantsandoffshorewindprojectsaretopofGuangdong’senergydevelopmentagendaandcouldprovideopportunitiesforHongKongtoincreaseitsimportedcleanenergyviaregionalcollaborations.Currently,nuclearenergyfromtheDayaBayNuclearPowerPlantinGuangdongprovidesthelargestsourceofzero-carbonelectricity,whichisaroundaquarterofthetotalpowerdemandforHongKong(CLP2021b).Tofurtherexplorethisoption,governmentshouldconsiderthefollowingactionsoverthenext12to24months:ExplorethefeasibilityofimportingrenewableandnuclearenergyfromGuangdong.Inadditiontotechnicalfeasibility,itisimportantthatcentralandprovincialauthoritiesonthemainlandunderstandthepotentialforHongKongtoimportgreatervolumesofzero-carbonelectricityfromMainlandChina.ThisexplorationshouldseekmechanismsthatcanmaximisetheagencyoflocalpowercompaniestopreventHongKongfrombeingacaptivebuyer.Governmentshouldactivelyseekopportunitiestoestablishjoint-venturepartnershipswithpowergeneratorsinanarrangementsimilartoCLP’scurrentpartnershipwithDayaBay.ExplorethefeasibilityofgreaterinterconnectionforHongKongwiththeChinaSouthernGrid.ComplementingtheaboverecommendationtoimportmorerenewableandnuclearenergyfromGuangdong,62WRI.org.cninterconnectionbetweenHongKongandtheChinaSouthernGridisessential.Governmentshouldexplorethefeasibilityoflong-distanceinterconnectionsandpotentialroutesforpowercables.Itisvitaltoengagewiththepublictoseektheiropinionasthiscanleadtobetterinformedandcomprehensivedecisions.Recommendation4:Explorethepotentialofusinglarge-scalegreenhydrogen.Withhydrogenbecominganimportanttechnologyinrealisinganet-zerocarbonsociety,ithashugepotentialinsatisfyingHongKong’speakloadandgrid-balancingissues,aswellasensuringitsenergysecurity.However,hydrogenutilisationstillhasalotofchallenges.Forexample,storageandtransportareespeciallydifficult,andthecostsassociatedwithproducinggreenhydrogenarealsoparticularlyhigh.Assuch,governmentshouldconsiderthefollowingactionsoverthenext12to24months:Establishacross-agencytaskforcetodevelopagreenhydrogenstrategyforHongKong.Thetaskforcemustfocusonalong-termstrategyforthelarge-scaledeploymentofgreenhydrogeninHongKong.Thisstrategyshouldalsoincludeaquantitativeriskassessmentandahazard-and-operabilityanalysisofhydrogentechnologies,includingsafehandlingofhydrogen,standardsinhydrogenpurity,andverifiablecertificationforlife-cycleGHGemissions.Thetaskforceshouldincluderepresentativesfromgovernmentanddifferentbusinesssectorsacrosstheentirevaluechainofgreenhydrogenproduction,transport,andutilisation.Buildingonthisrecommendation,inthenextthreetofiveyears,governmentmayconsider.Encouraginggreenhydrogentechnologydevelopment.Incentivescouldincludeprovidingsubsidiesforgreenhydrogenresearchanddevelopment,enactingcarbonpricingtoallowgreenhydrogentobecomemorecost-competitiveandfacilitatingpublic-privatepartnershipsbetweengovernmentandCLP,HKE,orpropertydevelopers.Governmentmayalsoconsiderfacilitatingregionalpartnershipswithpotentialgreenhydrogenexporters,suchasMainlandChina,Australia,andcountriesintheMiddleEast.Inaddition,itisimportanttoconductananalysisonmattersrelatedtohydrogenimports,suchasmonitoringglobalpricechangesandassessingthefeasibilityofusingafloatingimportandstoragedock,similartoHongKong’snewLNGfloatingdock,forhydrogen.Recommendation5:Enhancegridbalancingtoaccommodateabroaderenergymix.Gridbalancingbecomesmorechallengingasahigherpercentageofsupplymovestomultiplesourcesofenergy,includingnuclear,wind,andsolarenergy.HongKongneedstolookatalloptions,includingbetterinterconnectionswithinHongKong,enhancedinterconnectionwiththeChinaSouthernGrid,andanincreasedstoragecapacity.Governmentshouldconsiderthefollowingactioninthenext12to24months:POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong63Carryoutadetailedstudywiththepowercompaniestoidentifymeasurestoenhancegridbalancing.Thismayincludenewinvestmentsinalternativesourcesofsystemreliabilityandflexibilityinresponsetotheshiftfromadispatchablegeneration-dominatedpowersystemtoonewithmorerenewablepower.Tobalanceelectricitysupplyanddemand,especiallywithmorerenewableenergy,HongKong’spowersystemwillneedmoreflexibility,whichcanbeprovidedbyamixofsupply-anddemand-sideoptions,includingflexibleconventionalgeneration,newtransmission,andmoreresponsiveloads.Recommendation6:ExplorethepossibilityofCCStechnologydeployment.ThereisgrowingrecognitionthatCCSisanintegralpartofaleast-costportfoliooftechnologiesandisneededtosupportthedecarbonisationofpowersystemsglobally.WithoutCCS,meetingHongKong’scarbon-neutralitytargetmeanseliminatingtheuseoffossilfuels(Fossil-FreeScenarioinChapter6).CostremainsthebiggestchallengeinpreventingCCS-equippedpowerplantsfrombeingcommerciallyviable.Thisconsistsofcostsrelatedtocapturing,transporting,andstoringCO2emissions.Whilealarge-scaledeploymentofCCSisstilluncertain,webelieveHongKongshoulddothefollowinginthecoming5to10years:Ensurethatallfossilfuel-basedpowerplantsbuiltafter2020areCCS-ready.Oncebuilt,retrofittingexistingfacilitieswithCCSwouldbeverycostlyoreveninfeasible.Duringtheprojectdesignphase,powercompaniesshouldensurethatthetechnicalrequirementsforCCSareconsideredandmet.TheserequirementsincludereservingspaceforCO2capturingequipment,configuringtheturbine,ensuringtheavailabilityofcoolingwaterandtheadditionalfluegaspre-treatmentrequiredbeforeCO2capture,aswellasdedicatedauxiliarypowersystems.GovernmentcouldalsorequireproposalsfromCCS-readypowerplants.ActivelyengageintheregionalCCSdevelopmentprojects.HighqualityandsufficientstoragecapacityareprerequisitesforCCSdevelopment.Fromasource-sinkmatchingperspective,thedistancebetweenHongKong’spowerplantsandthestorageareasisdeemedreasonable.WhilethefuturedevelopmentofCCSisstilluncertain,governmentandtheutilitycompaniesshouldstarttoactivelyengageinregionalCCSdevelopmentprojects,includingthoseinGuangdong.ThiswillhelpensurebetterplanningforfutureCCSdeployment.Recommendation7:IncreasetheelectrificationofHongKongsociety.Althoughthisreportfocusesonreducingemissionsinthepowerindustry,45percentofHongKong’sfinalenergydemandisstillsatisfiedbyfossilfuels.Hence,thedecarbonisationofpowerneedstobeconsideredinconjunctionwithelectrification.GovernmentshouldpromoteelectrificationinHongKongalongsideitsdecarbonisationofthepowersystemtobreakdependencyonfossilfuelsandcutcarbonemissions.Detailedrecommendationsregardingtheelectrificationofthetransportandbuildingsectorscanbefoundinotherreports.Onlythroughaholistic,whole-societyapproachcanHongKongachievecarbonneutralitybefore2050.64WRI.org.cnPOWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong65ANNEXSCENARIOSETTINGSCENARIOASSUMPTIONSONTHETECHNOLOGYADOPTIONINADDITIONTOTHEEXISTINGPLANNEDCAPACITYNaturalGasScenarioNaturalgasBuildnewCCGTplantsby2031toreplacetheretiredcoal-ﬁredpowerplants.CCSwillbegraduallyappliedby2035.ImportednuclearMaintainthecurrentlevelofimportednuclearpowerinthetotalelectricitymix.RE+ScenarioImportedREStarttoimportREfor10percentofthetotaldemandin2031andachieve30percentintheearly2040s.NaturalgasBuildnewCCGTpowerplantsattheendof2040s.CCSwillbegraduallyappliedby2035.ImportednuclearMaintainthecurrentlevelofimportednuclearpowerinthetotalelectricitymix.NuclearScenarioImportedREStarttoimportREfor10percentofthetotaldemandin2031.NaturalgasReduceNGpowerplantusecomparedtocurrentcapacitylevel,andinstallnewcapacitybytheendof2040s.CCSwillbegraduallyappliedby2035.ImportednuclearDoublethecurrentlevelofimportednuclearpowerby2035.DiversityScenarioImportedREIncreaseimportedREto10percentin2030,achieve15percentin2040,andthenmaintainthislevel.NaturalgasReduceNGpowerplantusebetween2030and2037,installnewcapacityby2040.CCSwillbegraduallyappliedby2035.ImportednuclearMaintainthecurrentlevelofimportednuclearpowerinthetotalelectricitymix.GreenhydrogenStarttousehydrogenin2035andgraduallyincreaseitsusetoachieve15percentby2050.Fossil-FreeScenarioNaturalgasReduceNGpowerplantusebetween2031and2050.GreenhydrogenStarttouse‘green’hydrogenin2035(co-combustioninCCGT)andgraduallyincreaseitsusetoachieve15percentby2050.ImportednuclearIncreaseimportednuclearto60percentofthetotalpowerdemandby2034.TableA-1Scenariosetting66WRI.org.cnTECHNOLOGYYEARLIFETIME(YEARS)CAPITALCOST($/KW)aCAPACITYFACTOR(%)a,dANNUALO&MCOST($/KW-YR)aHEATRATE(BTU/KWH)a,b,cFUELCOST($/MMBTU)c,fLEVELIZEDCOSTOFENERGY(HKD/KWH)SYSTEMCOSTS(HKD/KWH)hCoal2019407003030110063.80.5090.045Coal2030407003030110063.80.5090.045Coal2040407003030110063.80.5090.045CCGT201940560572077427.70.7490.045CCGT203040560572059867.70.6670.045CCGT204040560572057837.70.6550.045CCGT+CCS2019402200507069647.70.9520.045CCGT+CCS2030402100507068247.70.9360.045CCGT+CCS2040401800506068247.70.8950.045Solar2019257901012341200.50.2Solar2030255201012341200.3650.2Solar2040254501012341200.330.336Windonshore20192512202130341200.4290.209Windonshore20302511802228341200.3890.209Windonshore20402511402328341200.3640.345Windoffshore20192530003275341200.6910.209Windoffshore20302519203855341200.3890.209Windoffshore20402516404450341200.2930.345Nuclear201960260080120103402.30.4260.045Nuclear203060275080120103402.30.4320.045Nuclear204060250080120103402.30.4220.045WTE2019782.630.045TableA-2Techno-EconomicParameters1POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong67TableA-2Techno-EconomicParameters2Sourcesandkeyassumptions:aIEA2020,WorldEnergyOutlook'sassumption—StatedPoliciesScenarioforChina:lifetime,capitalcost,capacityfactor(nuclearandonshorewind),annualO&M,heatrate(for2030and2040).bEPSHongKong:heatrateforexisting(2019)coalandnaturalgaspowerplant.cFossilfuelcostsarebasedonHKE’sfuelpricein2017(HKE2019).dCapacityfactor:solarandonshorewindpowerestimatesbasedonGuangdongProvince;coalandgasarebasedonHongKong’slocalpowerplants.eIEA'sCCGTparametersforH2gasturbine,asGoldmanSachsreportpointsout,H2turbineswouldhavesimilarconstructioncosts,similarOpEx,andsimilarefficiencytoCCGT(Gandolfietal.2020).fH2priceisbasedonBNEFandHydrogenCouncil(BloombergNEF2020;HydrogenCouncilandMcKinsey&Company2021).gLCOEforWtEisdrawnfromHongKongEPS.hSystemcostsaredrawnfromTheSocialCostsofElectricityGeneration—CategorisingDifferentTypesofCostsandEvaluatingTheirRespectiveRelevancewithCurrencyExchange(Samadi2017).Source:IEA2020;HKE2019;Gandolfietal.2020;BloombergNEF2020;HydrogenCouncilandMcKinsey&Company2021;Samadi2017.TECHNOLOGYYEARLIFETIME(YEARS)CAPITALCOST($/KW)aCAPACITYFACTOR(%)a,dANNUALO&MCOST($/KW-YR)aHEATRATE(BTU/KWH)a,b,cFUELCOST($/MMBTU)c,fLEVELIZEDCOSTOFENERGY(HKD/KWH)SYSTEMCOSTS(HKD/KWH)hWTE2030782.8210.045WTE2040782.7880.045Hydrogen-gasturbine2030405606020598622.31.0940.045Hydrogen-gasturbine2040405606020598616.70.8240.045Hydrogen-gasturbine–lowerfuelcost2030405606020598614.90.7530.045Hydrogen-gasturbine–lowerfuelcost2040405606020598611.20.580.045Hydrogen-gasturbine–higherfuelcost20304056060205986522.4630.045Hydrogen-gasturbine–higherfuelcost20404056060205986391.8650.04568WRI.org.cnENDNOTES1.HongKong2050IsNow,aHongKong-basedplatformforeduca-tion,collaboration,andactionontheclimatecrisis,seekstoinspireambitioustarget-setting,inducebehaviouralchange,andmobilisecollectiveactiontowardsacarbon-neutralHongKong.Formoreinformation:https://www.hk2050isnow.org/.2.Thereport,TowardsaBetterHongKong:PathwaystoNet-ZeroCarbonEmissionsby2050,canbefoundathttps://www.wri.org.cn/en/report/2020/06/Hong-Kong-2050-Policy-Report-EN.3.InHongKong,towngasisproducedfromnaphthaandnaturalgas.Itsmajorcomponentsarehydrogen,methane,carbondioxide,andasmallamountofcarbonmonoxide.Moreinformationcanbefoundathttps://www.emsd.gov.hk/en/gas_safety/gas_safety_tips_to_users/types_of_domestic_fuel_gases_and_their_properties/.4.TheHongKongEnergyPolicySimulator(HongKongEPS)isaversionoftheEnergyPolicySimulator,https://www.energypolicy.solutions/,anopensource,system-dynamicscomputermodel.TheEPScanestimatetheeffectsofvariouspoliciesonmanyindicators,suchasemissions,ﬁnancialmetrics,electricitysystemstructure,deploymentofdifferenttypesofvehicles,aswellasmanyotherdata.TheHongKongEPSwasdevelopedin2020.Formoredetailedinformationinregardstothemethods,data,andresults,pleaseseetherelatedpublication,“HongKongEnergyPolicySimulator:Methods,Data,andScenarioResultsfor2050,”https://www.wri.org.cn/sites/default/ﬁles/Hong%20Kong%20EPS_Final20191220.pdf.5.ThecarbonintensityoftowngasproductioninHongKongis0.564kgCO2e/unitoftowngas,andthecarbonintensityoftowngasusageis2.553kgCO2e/unit.AccordingtoHKCG,oneunitoftowngas=48MJ,and1TJ=1,000,000MJ.AccordingtoHKCarbonEmissionEstimationGuidelines(2010),burningoneunitoftowngaswillproduce2.549kgCO2,0.0446gCH4,0.0099gN2O.(Thecarbonemissionfactoris2.553kgCO2e/unit;takingproductionintoconsideration,itis3.117kgCO2e/unit.)6.Theaveragecarbondioxidecoefficientofnaturalgasis0.0549kgCO2percubicfoot(EIA2019c).Onecubicfootofnaturalgascouldprovide1,000BTU'senergy,whichis1.055MJ.So,48MJofnaturalgasbrings2.498kgCO2e.7.Forinstance,theStateGridhasdeployedaﬁbre-opticcontrolnetworkthatautomaticallyrebalancessupplyanddemandandcanboostlinevoltagewithin200millisecondsofavoltagedrop.Thisnetworkallowsdeliveryofhydropowertooperateatitsdesignedcapacitymorereliably.8.Energypenaltyisdeﬁnedasthefractionoffuelthatmustbededi-catedtoCCSforaﬁxedquantityofworkoutput.REFERENCESadelphi.2019.TheroleofcleanhydrogeninthefutureenergysystemsofJapanandGermany.https://www.adelphi.de/de/system/ﬁles/me-diathek/bilder/The%20role%20of%20clean%20hydrogen%20in%20the%20future%20energy%20systems%20of%20Japan%20and%20Germany%20-%20Study.pdf.Anouti,Y.,R.Kombargi,S.Elborai,andR.Hage.2020.TheDawnofGreenHydrogen:MaintainingtheGCC’sEdgeinaDecarbonizedWorld.PwC.https://www.strategyand.pwc.com/m1/en/reports/2020/the-dawn-of-green-hydrogen/the-dawn-of-green-hydrogen.pdf.AsiaTimesStaff.2019.“China’sGuangdongtoHave26NuclearReac-tors.”AsiaTimes,January17,2019.https://asiatimes.com/2019/01/chi-nas-guangdong-to-have-26-nuclear-reactors/.AccessedJune13,2021.Bailey,H.,K.L.Brookes,andP.M.Thompson.2014.“AssessingEnvi-ronmentalImpactsofOffshoreWindFarms:LessonsLearnedandRecommendationsfortheFuture.”AquaticBiosystems10(1):8.doi:10.1186/2046-9063-10-8.BloombergNEF.2020.HydrogenEconomyOutlookKeyMessage.https://data.bloomberglp.com/professional/sites/24/BNEF-Hydrogen-Economy-Outlook-Key-Messages-30-Mar-2020.pdf.BP(BritishPetroleum).2020.EnergyOutlook2020Edition.https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/energy-outlook/bp-energy-outlook-2020.pdf.Campbell,R.J.2020.HydrogeninElectricity’sFuture.https://fas.org/sgp/crs/misc/R46436.pdf.Cao,Y.,R.Lin,B.Liu,Z.Meng,andD.Wetzel.2019.“TrackingChina’sProvincialSpotMarketDesigns:2019.”RockyMountainInstitute.https://rmi.org/insight/tracking-chinas-provincial-spot-market-designs/.Ac-cessedAugust5,2021.Chan,A.2019.“HongKongGovernment’sFeed-inTariffPlanforRenew-ableEnergyHasBeenPopular—butSomeResidentsBemoanCost,ConfusionandSafetyRisks.”SouthChinaMorningPost.https://www.scmp.com/news/hong-kong/health-environment/article/3018484/hong-kong-governments-feed-tariff-plan-renewable.AccessedJune14,2021.ChinaElectricityCouncil.2021.2020NationalPowerIndustryStatisticsOverview.https://www.cec.org.cn/upload/1/editor/1611623903447.pdf.ChinaNationalEnergyAdministration,andHongKongSpecialAdmin-istrativeRegion.2008.“MemorandumofUnderstandingbetweentheNationalEnergyAdministrationandtheHongKongSpecialAdministra-tiveRegionGovernmentonSupplyofNaturalGasandElectricitytoHongKong.”https://www.enb.gov.hk/sites/default/ﬁles/en/node66/P200808280188_0188_44075.doc.AccessedAugust5,2021.FuelCellsandHydrogenJointUndertaking.2019.HydrogenRoadmapEurope.https://www.fch.europa.eu/sites/default/ﬁles/Hydrogen%20Roadmap%20Europe_Report.pdf.ChinaSouthernPowerGrid.2021.“In20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.Wemustaddresstheseurgent,globalchallengesthisdecade.OurVisionWeenvisionanequitableandprosperousplanetdrivenbythewisemanagementofnaturalresources.Weaspiretocreateaworldwheretheactionsofgovernment,business,andcommunitiescombinetoeliminatepovertyandsustainthenaturalenvironmentforallpeople.OurApproachCOUNTITWestartwithdata.Weconductindependentresearchanddrawonthelatesttechnologytodevelopnewinsightsandrecommendations.Ourrigorousanalysisidentifiesrisks,unveilsopportunities,andinformssmartstrategies.Wefocusoureffortsoninfluentialandemergingeconomieswherethefutureofsustainabilitywillbedetermined.CHANGEITWeuseourresearchtoinfluencegovernmentpolicies,businessstrategies,andcivilsocietyaction.Wetestprojectswithcommunities,companies,andgovernmentagenciestobuildastrongevidencebase.Then,weworkwithpartnerstodeliverchangeonthegroundthatallevi-atespovertyandstrengthenssociety.Weholdourselvesaccountabletoensurethatouroutcomeswillbeboldandenduring.SCALEITWedon’tthinksmall.Oncetested,weworkwithpartnerstoadoptandexpandoureffortsregionallyandglobally.Weengagewithdecision-mak-erstocarryoutourideasandelevateourimpact.Wemeasuresuccessthroughgovernmentandbusinessactionsthatimprovepeople’slivesandsustainahealthyenvironment.ABOUTHONGKONG2050ISNOW“HongKong2050IsNow”galvanisescollectiveactioninscience,media,businessandpolicytowardsacarbon-neutralHongKongby2050.ThisinitiativeofCivicExchange,WorldResourcesInstitute,andtheADMCapitalFoundationaimstobuildabroad-basedcollectiveplatformfordrivingactioninHongKonginresponsetothe2018IntergovernmentalPanelonClimateChange(IPCC)reportonGlobalWarmingof1.5°C.Accordingtothatreport,withouturgent,large-scaleaction,globalwarmingislikelytoreach1.5°Cabovepre-industriallevels,withpotentiallysignificantanddangerousconsequencesfortheworld.Webelievethatadecarbonisedcityispeople-centric,morelivable,healthierandsuccessful.That’swhatwewantforHongKong.ABOUTCIVICEXCHANGECivicExchangeisanindependentHongKongpublic-policythinktankestablishedin2000withavisiontoshapealivableandsustainableHongKong.Itsmissionistoengagesocietyandinfluencepublicpolicythroughin-depthresearch,dialogue,andthedevelopmentofpracticalsolutions.Withresearchcoveringfourareas—environmental,economic,social,andgovernance—CivicExchangehasbeenrankedamongthetop50environmentalthinktanksintheworldbytheLauderInstituteattheUniversityofPennsylvaniasince2011.74WRI.org.cnPHOTOCREDITSCover699pic.com;pg.i699pic.com;pg.ii699pic.com;pg.ivWikimedia/RehmanAbubakr;pg.ixPhotofrompartner;pg.ivWikimedia/RehmanAbubakr;pg.xSHL;pg.x,xiPhotofrompartner;pg.xiWikimedia;pg.xiiDanielMonteiro;pg.6699pic.com;pg.8Flickr/42902413@N00;pg.18Unsplash/UntitledPhoto;pg.20Wikimedia;pg.22Unsplash/MohammadIdrees;pg.23Wikimedia;pg.33Flickr/183909573@N06;pg.34Unsplash/YuanYang;pg.46Unsplash/KenCheung;pg.58Unsplash/FungLam;pg.60Photofrompartner;pg.62Unsplash/SpencerChow;pg.64Unsplash/KitKo.POWERINGACARBON-FREEHONGKONG:PathwaysTowardsaNet-ZeroEmissionsPowerSystemforHongKong75EachWorldResourcesInstitutereportrepresentsatimely,scholarlytreatmentofasubjectofpublicconcern.WRItakesresponsibilityforchoosingthestudytopicsandguaranteeingitsauthorsandresearchersfreedomofinquiry.Italsosolicitsandrespondstotheguidanceofadvisorypanelsandexpertreviewers.Unlessotherwisestated,however,alltheinterpretationandfindingssetforthinWRIpublicationsarethoseoftheauthors.Copyright2021WorldResourcesInstitute.ThisworkislicensedundertheCreativeCommonsAttribution4.0InternationalLicense.Toviewacopyofthelicense,visithttp://creativecommons.org/licenses/by/4.0/76WRI.org.cnWRICHINARMK-M,7/F,TOWERA,THEEASTGATEPLAZA,#9DONGZHONGSTREET,BEIJING,CHINA,100027PHONE:861064165697FAX:861064167567WWW.WRI.ORG.CN

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