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2016-09-20 19:05:00
Government approves construction of new gas-fired generating unit by Hongkong Electric
Government approves construction of new gas-fired generating unit by Hongkong Electric


    The Government today (September 20) announced that the Executive Council has approved the construction of a new gas-fired generating unit by the Hongkong Electric Company, Limited (HKE) to implement the 2020 Fuel Mix.

    The Government announced during the public consultation on the Future Development of the Electricity Market in March 2015 that, as part of its measures to meet the pledged environmental targets for 2020 (i.e. to reduce the carbon intensity by 50-60 per cent by 2020 compared to 2005; and to reduce the emissions of sulphur dioxide by 35-75 per cent, nitrogen oxides by 20-30 per cent and respirable suspended particulates by 15-40 per cent by 2020 compared to 2010), local electricity generation by natural gas should be increased to around 50 per cent of the total fuel mix for electricity generation by all power companies in Hong Kong with effect from 2020 (the 2020 Fuel Mix Target).

    To meet the 2020 Fuel Mix Target, HKE needs to install and operate a new gas-fired generating unit for electricity generation at the Lamma Power Station Extension. The new gas unit will be a combined cycle gas turbine with an installed capacity of 380MW. While the new gas unit will take several years to build before it can be commissioned in 2022, HKE will keep an existing gas unit in service, which was originally scheduled for retirement in 2020, until the new gas unit is commissioned in 2022 as an interim measure for meeting the 2020 Fuel Mix Target. Under the HKE's proposal, its gas generation ratio will increase from the current 34 per cent to 50 per cent in 2020 and 55 per cent by 2022, meeting the Government’s fuel mix and environmental targets.

    The total estimated capital expenditure (CAPEX) of the new gas unit is about $4.1 billion while the life extension of the existing gas unit will incur no additional CAPEX but only reasonable operating and maintenance expenses. Of the $4.1 billion CAPEX, $568 million will be incurred over the remaining period of the existing Scheme of Control Agreement (SCA), which will expire on December 31, 2018. As a result, the total CAPEX as approved in the HKE's 2014-18 Development Plan will increase from $13 billion to $13.6 billion.

    The impact on the HKE's tariff will be about 0.2 per cent for 2017 and 0.3 per cent for 2018. The full tariff impacts beyond the current SCA period will depend on a number of critical factors which remain uncertain at this stage, including the permitted rate of return in the next SCA which is under negotiation, operating costs, sales volume, fuel prices and future movements in the Tariff Stabilisation Fund and the Fuel Clause Recovery Account. The Government will make great efforts in striking a balance between achieving the emission cap target and relieving the impact of the electricity tariff on the public.

    "HKE's proposal will help the Government achieve the 2020 Fuel Mix Target of increasing the use of gas to around 50 per cent of the total fuel mix for electricity generation. This will enable the Government to meet its pledged environmental targets for 2020. With less reliance on coal-fired generation, the emission of air pollutants from coal-fired generation can be reduced significantly. This will improve air quality and reduce respiratory diseases. In addition, the reduction in carbon emission will make a positive contribution to combating climate change," said a government spokesman.

Ends/Tuesday, September 20, 2016
Issued at HKT 19:05

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