Submission to the Environment Committee For Friday July 20, 2007. CB(1) 2163/06-07(01)

Much has been made of China Light and Power’s plans to create an LNG terminal at
the South South Soko Island location. On one side, there is concern for Hong Kong’s
environmental heritage, on the other, concern for Hong Kong’s economic
advancement.

In an ideal world, energy would be harnessed and expended efficiently and without
externalities, such as pollution and animal displacement. The fact is that every
exhaling person on the planet is contributing to the level of CO2 in the atmosphere.

Hence, we live in a world of better or worse, not yea or nay. There seems to be little
disagreement with the statement that in our current situation, use of LNG is vastly
superior to use of coal. Hence we consider the variety of means by which we can
provide for our energy demands.

It should be clear in this debate that the security of Hong Kong’s energy future is
paramount to all other considerations to maintain a vibrant economy and create
advancement opportunities for the people of Hong Kong.

Hong Kong is a vibrant modern city with unique energy needs. Our high rise culture
means half of our city is reserved for country parks (or vice versa). However, it also
means that energy reliability is crucial. It is hard to imagine the state of the city given
a power black out like the one that had parts of Quebec, Canada out of power for up to
6 weeks during the massive ice storm of 1998.

The impact of today’s decisions will ultimately be borne out by our future selves –
economic and environmental.

Environmental Heritage? Economic Heritage.
While protestors have stressed the importance of co-habitation of various species of
dolphin, our economic future must be weighed in the balance.

The Hong Kong government’s primary role is to ensure an environment where living
standards can be improved in an environment that allows the citizens of Hong Kong
to choose what that living standard looks like – not one dictated by government
responding to environmental pressure groups.

Energy is the fundamental driver of any economy, from fire based tribal societies to
today’s energy hungry modern economies. Hong Kong has a good track record of
providing cheap energy to its people. Cheap? Measured by its prodigious use in our
air conditioned and bright-light mad city, it can’t be a scarce commodity. Our
consumption patterns give lie to its relative cheapness in society. Hong Kong people
like their energy, and they like it cheap.

Alternatives?
Given the over-bearing importance of our energy security, alternatives should be
considered only if they will form a key part of a viable future strategy.

Energy from China
The Lion Rock Institute has previously stated it is “broadly in favour of a competitive
market” [for energy in Hong Kong]1. Hong Kong does currently source almost 30%
of its energy from China’s nuclear energy industry, albeit through one of the
monopoly providers.

That being said, there seem to be no current plans in China to provide new capacity
dedicated to Hong Kong, especially given our neighbours’ massive – and growing –
energy requirements and current infrastructure issues that still see massive use of dirty,
private diesel generators to compensate for inadequacies in the Guangdong power grid.
That being said, firms have made statements about intent to sell to Hong Kong,
including Sinopec and CNOOC. However, these offers cannot be considered reliable
until they have been closed and the wide variety of technical details has been finalized.

These options fit into the category of ‘some-day, maybe’ solutions that could be part
of future energy needs.

It seems inevitable that power generated in China will, at some point, be a larger part
of Hong Kong’s power supply. However, that day is not today.

1 Work, Andrew A Submission on Concerns Raised by Proposals Contained in the Stage II
Consultation on the Future Development of the Electricity Market in Hong Kong The Lion Rock
Institute. Friday, March 31, 2006

Black Point
The Advisory Council on the Environment decided that Black Point, the other shortlisted
potential site for the LNG terminal was less preferable to the South Soko Island,
and, in their words, “the Black Point option should be ruled out due to risk
concerns2.” The scope of such assessments is outside of the expertise of The Lion
Rock Institute and we must defer to the committee on this matter. The World
Wildlife Fund has given their opinion that dredging by the Shenzhen government may
change that level of risk in the future3. However, given the authority of the Advisory
Council, it seems that today’s public resistance to environmental considerations at
South Soko Islands today would be minute compared to a plan that contravened safety
considerations raised by the Advisory Council.

Renewable Sources – Where’s the Market?
A wind farm needed to supply Hong Kong would require a land area much bigger
than Hong Kong itself. NIMBY4 considerations would make finding a suitable
location here almost impossible. Solar energy is so expensive that there seems to be
no group, private or public, considering it as a viable alternative.

Interestingly, all current ventures investigating renewable energy sources are derived
from the two monopoly power companies themselves. Opening the market to new
players would allow environmental groups an option other than just saying no to
development.

Allowing groups like WWF and Friends of the Earth to enter the market would
increase contestability in the market. It would allow them to raise investment and
then charge people the elevated rates for ‘green’ energy. Indeed, the French power
company EDF allows patrons to choose to pay higher rates for energy from renewable
sources.

Furthermore, Greenpeace and Friends of the Earth, both active and well-funded in
Hong Kong, have launched Enercoop in France to allow people to choose energy
from non-CO2 emitting sources. Patrons will pay from 30-40% for the privilege,
according to Patrick Behm, head of Enercoop5. Hopefully they will be able to
investigate a market oriented solution like this in Hong Kong.

2 Confirmed Minutes of the 139th Meeting of the Advisory Council on the Environment held on 12
February 2007 at 2:30 pm
3 World Wildlife Fund Press Release: Black Point is a viable option for CLP’s LNG terminal (9 Jan
2007)
4 Not In MY Backyard
5 Boselli, Muriel. French Co-Op to Offer Homes Eco-Friendly Power. Reuters. June 20, 2007.

That being said – the people of Hong Kong will not wait in the meantime. Our energy
needs must be met in the real near term, as well as the potential long term.

In Summary:
– The security of Hong Kong’s energy future is paramount to all other
considerations to maintain a vibrant economy and create advancement
opportunities for the people of Hong Kong.
– While various environmental groups in Hong Kong are admirable in their
devotion to animals, there seems to be little consideration on their part for
our near term economic heritage and people.
– Assuming all environmental impact mitigation measures are dutifully
carried out by CLP, a strong case for an alternative to supplying Hong
Kong’s future energy needs must exist to justify vetoing South Soko Island.
There is no viable option in our near term future.
– Future deregulation of the market may allow green alternatives to flourish in
the future. For now, however, this is a ‘some-day, maybe’ option – not one
that will answer the needs of Hong Kong’s people in the near or medium
term.

Thank you for your consideration and continued work serving Hong Kong.
By and On Behalf of:
Andrew Work
The Lion Rock Institute