Modelling of the Hong Kong Power System by 2030

Abstract: Hong Kong is a semi-autonomous region of the People’s Republic of China. As a former British colony on the South China Sea, it enjoyed early exposure to international trade. Hong Kong now features a developed liberal economy largely based on financial services. It is also densely populated and features little indigenous energy resources. Currently, its power sector is 75% reliant on imported fossil fuels, with the remaining 25% being imported from a nuclear power plant in Mainland China. Renewables mostly consist in small-scale innovative pilot projects or embedded solar systems. For these reasons, the region faces strong challenges with respect to air pollution, energy autonomy, dependence on fossil fuels and exposure to climate change. Although Hong Kong is under the Nationally Determined Contribution of the People’s Republic of China, it has the competence to design its own energy policy. It recently adopted a climate action plan aiming at bringing the share of gas-fired power up to 50% of the mix by 2030 (against 27% in 2015) while bringing coal-fired power down to 25% (against 48% in 2015), as well as setting the framework for renewables to develop. This study focuses on period 2016-2030 and uses the Long-Range Energy Alternatives Planning (LEAP) tool to model the power system in the region. Possible scenarios are developed to assess the economic and environmental impacts of enhancing clean electricity generation and energy security on the future electricity system. “Business as usual” (BAU) extends the current trends with respect to socioeconomic indicators, energy demand, new power plants, and power plant retirements. “Climate action plan” (CAP) studies the trajectory proposed by the Government. “High renewables share” (HRS) explores how much renewables Hong Kong could incorporate in the power generation mix. “Fossil-free electricity” (FFE) questions how much more local resources Hong Kong would need for a fossil-free power system. Finally, “No reliance on Mainland China” (NRMC), explores the dependence of Hong Kong on Mainland China by modelling a hypothetical cut-off from supplies of power and fuel. Results shows that Hong Kong is well on track to meet its policy commitments, partly because they are rather conservative and lacking ambition. It is also established that there is sufficient area for renewable resources (solar PV, offshore wind, and waste-to-energy) to account for up to 30% of power supply – particularly in the current context of decreasing power demand. The low level of penetration of renewables is found to be caused by a lack of incentives to utility companies rather than a space constraint. Regarding energy security, a trade-off is found between energy independence and environmental sustainability; Hong Kong will soon have to choose between covering its energy needs global LNG markets, or maintaining imports of low-carbon nuclear power from the Chinese mainland. The cost-sustainability trade-off is also discussed. Scenario “Climate action plan” is found able to abate greenhouse gas emissions by 2% with respect to “Business as usual” while costing 3% more on the period of interest. However, the more ambitious “High renewables share” is found to abate greenhouse gas emissions by 10% while costing 22% more than “Business as usual”.