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Richard Lancaster1 July 2008

A Sustainable Future for Energy

Presentation to SPCC Conference

1

Electricity in our daily lives

“Electricity is fundamental to the way we live. Without electricity the whole fabric of society would start to break down.”Les Moseley Centre for Disaster Management, UK

2

Electricity Supply ChainFuelis imported from overseas

GenerationPower stations convert fuel into electricity

TransmissionElectricity is transmitted through high voltage lines and converted to lower voltage at substations

Distribution

“We believe that electricity exists because the electric company keeps sending us bills for it, but we cannot figureout how it travels inside wires.”Dave Barry American Humourist

It is then distributed through lower voltage distribution lines

System OperationsMonitor the system and ensure that supply and demand of electricity remain in balance

Customer ServicesElectricity is enjoyed by 5.5 million people

3

Electricity is different from other commodities

• Electricity is fundamental to modern life • Electricity has no readily available substitute • Electricity cannot be stored economically• Electricity supply and demand must be kept in balance at all times or the

system will fail and there will be blackouts• Investments in electricity assets are costly and need to be continually

maintained• Electricity investments can take a decade to build and have lives of

several decades

4

Hong Kong’s Electricity Industry is Unique• Hong Kong is one of the most densely populated

cities in the world with 6,300 people per square km. Small disruptions to the power supply affect large numbers of people

• Hong Kong is 100% dependent on imported energy

• Hong Kong is an international finance centre with 50% of the population living or working above 15th

floor

Highest Net Energy Importers*% of commercial energy use, 2004

1 Hong Kong 100

2 Singapore 99

3 Moldova 98

4 Jordan 96

5 Lebanon 96

6 Morocco 94

7 Israel 92

8 Jamaica 88

9 Ireland 87

10 Belarus 86

11 Portugal 85* Source: The Economist Pocket World in Figures 2008 Edition

5

48%

29%

7%

16%

Oil / Naphtha / Natural Gas

Natural Gas

Coal

Source: Hong Kong Energy Statistics 2006 Annual Report

Nuclear

Electricity Production

Fuel for transportation, towngas, industrial and

other uses

Hong Kong’s Primary Energy Needs

• Fuel for electricity generation and electricity imports account for almost 70% of all energy consumed in Hong Kong

• Hong Kong’s total energy requirement is higher than that of Demark, New Zealand, Ireland or Peru

6

Energy Sources and their Characteristics

Natural gas/ LNG* Lowest-emitting fossil fuel

* Needs infrastructure to transport –pipeline or carrier

* Relatively recent technology

developments have increased demand

Renewable(eg wind, solar etc)* Emissions free

* Requires significant natural resources and landarea

* Inconsistent availability –requiring back-upgeneration from fossil-fuel

Coal* Abundant supply

* Comparatively lower cost

* Higher-emitting fossil fuel

Nuclear* Lower-emitting fuel than coal and gas

* High initial capital cost

* Low fuel cost

* Waste and decommissioning needcareful management

Oil* Relatively lower emissions

than coal but more than natural gas

* Comparatively higher cost

* Increasinglyscarce supply throughout the world

7

Global Energy ChallengeHow to provide energy necessary for social and economic development, yet avoid serious environmental impacts?

8

Reliability of Electricity Supply

• Hong Kong has one of the most reliable electricity systems in the world

Supply interruption frequency(Average number of interruptions per customer per year)

Supply interruption duration(Average minutes of interruptions per customer per year)

9

Overseas Blackout Experiences – 2003

10

China - January 2008Half of China 31 provinces suffered from their worst even power crisis caused by heavy snow

11

• Electricity tariffs account for 1.9% of monthly household expenditure

• Hong Kong’s electricity tariffs among the lowest in major metropolitan cities

020406080

100120140160180200220240

Kuala

Lumpur

Taipei

Shanghai

Jakarta

Vancouver

Shenzhen

CLP Pow

er

Seoul

Singapore

Sydney

Tokyo

Paris

Wellington

Lisbon

Madrid

London

Luxembourg

Brussels

Am

sterdam

New

York

Rom

e

Berlin

Regulated market

Competitive market

Remarks: Comparison based on annual domestic consumption of 3,300 kWh.

Residential Tariff, HK cents/kWh (as of July 2007)

Affordability of Electricity in Hong Kong

12

Affordable and Accessible Electricity for Asia

Taiwan

Australia

India

China

Taiwan

Australia

India

Thailand

China

India

China

AUSTRALIA –Population – 20 millionElectricity access (2005) – 100%GDP per head (PPP) - $29,600

CHINESE MAINLAND –Population – 1,296 millionElectricity access (2005) – 99.4%GDP per head (PPP) – $5,400

HONG KONG –Population – 6.8 milionElectricity access (2005)– 100%GDP per head (PPP) – $24,400

Hong Kong

INDIA -Population – 1,079 millionElectricity access (2005) – 55.5%GDP per head (PPP) – $2,800

Energy prices are international. Affordability and access to electricity are key issues for many Asian countries.

13

Environmental Performance in Hong Kong

Nuclearat Daya Bay

Natural Gasat Black Point

Total Emissions Reduction 1990-2007

NOx

SO2

PM

Total Electricity Demand

74%

57%

76%

82%

0.0

50.0

100.0

150.0

200.0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

ProjectsC

ompletion

Year

Tota

l Em

issi

ons

(kilo

tonn

e

Secured EnviroCoal

supplyFast Depleting Gas Reserve Completion

of LNG Terminal & Castle Peak

Retrofit

14

Coal 48%

Gas 23%

Nuclear 29%

Mainland China*

Coal78%

Hydro 16%

Nuclear 2%Gas

1%Oil3%

Europe*

Others 4%

Nuclear 29%

Gas 19%

Oil 4%

Coal 29%

Hydro, 15%

* Percentages quoted for fuel combination are 2004 figures Source: International Energy Agency

Japan*

Others 2%

Gas 23%

Oil 12%

Coal 27%

Nuclear 26%

Hydro 10%

North America*

Oil 5%

Gas 17%

Nuclear 18%

Hydro 13%

Others 3%

Coal 44%

CLP(2007)

Others

Fuel Diversification – Fundamental for Energy Security

• A balanced fuel mix is important for supply reliability, stable prices and environmental performance

15

CLP’s Current Environmental Initiatives

• Promoting Energy Conservation and Energy Efficiency

• Meeting 2010 emissions reduction targets set by Hong Kong – Guangdong governments

• Increasing use of ultra-low sulphur coal

• Installing additional emissions control equipment

• Bringing in liquefied natural gas (LNG)

• Renewable Energy Development

• Voluntary target of 5% of generating capacity from renewable energy sources by 2010

• Climate Vision 2050

• Comprehensive set of Initiatives and targets to reduce CO2 intensity

16

Energy Efficiency and Conservation

• Making our own operations energy efficient

• Electricity tariff designed to promote energy conservation

• Community-wide energy conservation programmes:

• Sharing expertise in energy efficiency and conservation with customers:

• Energy audits

• Promoting energy efficient equipment

17

Ultra Low Sulphur Coal

In 2006, CLP consumed ~10% of the world’s entire production of ultra low sulphur coal to meet 2/3 of its total coal requirement

Annual World Coal Production ~ 4,200 million tonnes

Ultra Low Sulphur Coal0.1 - 0.2% Sulphur

99%

18

Controlling Emissions from Castle Peak Power Station

• Essentially installing a 12-storey vacuum cleaner into an operating power station

• Some work can only take place during low demand season (i.e. winter)• After several years progress, phased completion starts in 2009• Upon completion, emissions of SO2 and NOx will reduce significantly

19

Natural Gas is Crucial to Reliable Electricity Supply and Clean Air• Black Point Power Station (2,500MW) is one

of the largest gas-fired power stations in the world, using natural gas for a decade

• Natural gas contributes 25% of Hong Kong’s electricity supply, addressing electricity needs of about 2 million people

• The existing gas supply to Black Point is from the Yacheng gas field near Hainan Island

• Yacheng gas field will deplete early next decade at the rate needed to meet 2010 emissions targets

• A safe, secure, reliable and robust long-term replacement is urgently needed to refuel Black Point and increase the use of natural gas

20

Environmental Benefits of LNG Further Annual Reduction in Emissions Achievable*

SO2 NOx Particulates CO2

20,000 tonnes(43%)

10,000 tonnes(35%)

748 tonnes (40%)

3 million tonnes(17%)

* The emissions estimation is calculated based on the 2005 average coal results.

1. Air Quality Improvement

2. LNG is also the fastest and the most economic way to significantly reduce CO2 emissions in Hong Kong

50%

100%

150%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015CO

2 %

of 1

990

leve

l

Coal 25%

LNG 50%

Nuclear 25%

Coal 75%

Nuclear 25%

CO2 emissions without the use of LNG

CO2 emissions with the use of LNG

21

CO2 (carbon dioxide) NOx (nitrogen oxide)

Coal 100

Oil 80

Natural Gas 57

Coal 100

Oil 71

Natural Gas 20-37

Natural gas produces no

particulates & SO2

What is LNG?

LNG is natural gas cooled to -162oC

• Changes to a liquid, colorless, odorless and non-toxic

• Reduced to 1/600th of its former volume

• Transported at atmospheric pressure in insulated tanks on ships

• Natural gas is an abundant resource found all over the world and the cleanest fossil fuel available for power generation

22

Worldwide Gas Reserves

White: where the lights are on, satellite imageryBlue Red : Gas resources, with increasing size (USGS)

Source: Program on Energy and Sustainable Development, Stanford University

23

How to Transport the Gas

24

The LNG Supply Chain

Natural Gas Field

Receiving Terminal

Liquefaction Terminal

Marine Transportation

LNG Storage Tank

(for temporary storage)

Black Point Power Station

(for power generation)

Natural gas via pipeline

Sendout LNG by pump

Regasification

25

The LNG Receiving Terminal Project

Marine facilities including a berth, jetty and unloading arms

2 LNG Storage Tanks (with provision for a third tank if needed)

Vaporisers to warm LNG back to its gaseous form

Project lead time : 4 years for construction from time of Government approval

26

Nuclear Energy

• Nuclear power offers the potential for very significant emissions reductions• Technical development could substantially address many of the current

concerns with nuclear power • Nuclear programmes of the future need not be judged in terms of the past

0

200

400

600

800

1000

1200

CoalThermal

LNG CCGT Wind Nuclear

CO

2 em

issi

ons

(g o

f CO 2/

kWh)

Life Cycle CO2 Emissions analysis

Data Sources: Central Research Institute of Electric Power Industry

47%

27

Opportunities• Little hydro and biomass resource

• Some reasonably good wind resource available but mainly at hilltops

Constraints• Country Park Ordinance

• Urban areas

• Hong Kong Aviation Height Restrictions

• Wild Animal Protection Areas

• Sites of Special Scientific Interest

• Gazetted Bathing Beaches

• Seawater Intake Points

• Residential and Commercial Premises

• Disneyland Resort Height Restrictions

One big challenge: lack of land resource

Renewable Energy Resources in Hong Kong

28

Proposed Offshore Wind Farm Feasibility Study

Location• South Eastern Waters of Hong

Kong• ~9 km east of Clearwater Bay

peninsula

Capacity• Up to 200MW offshore wind

farm (~1.5% of Hong Kong’s electricity capacity)

29

CLP’s Regional Renewable Energy PortfolioShandong Changdao, 27.2MW (45%)Shangdong Weihai I, 19.5MW (45%)Jilin Shuangliao, 49.3MW (24.5%)Guangdong Nan’ao, 45MW (25%)Shandong Rongcheng, 48.8MW (24.5%)Australia Woolnorth Bluff Point, 65MW (50%)Australia Woolnorth Studland Bay, 75MW (50%)Australia Cathedral Rocks, 66MW (25%)Shangdong Weihai II, 49.5MW (45%)Jilin Datong, 49.5MW (24.5%)Shandong Guohua, 6 x 50MW (24.5%)Guangdong Hailing Island, 22.1MW (32%)India Khandke, 50.4MW (50%)India Samana, 100.8MW (100%)India Saundatti, 82.4MW (100%)Hong Kong offshore wind feasibility study

Guangdong Huaiji, 105.6MW (84.9%)Sichuan Jiangbian, 330MW (65%)

Australia concentrated solar photovoltaic pilot, 2MW (100%)

WindWind

In operationsUnder construction

Shangdong Boxing, equivalent to 14MW (79%)

SolarSolarHydroHydro BiomassBiomass

30

Biomass in Northern China Boxing Biomass Combined Heat and Power Plant in Shandong (equivalent to 14 MW)

CLP’s first greenfield biomass projectStraw-fired combined heat and power generator

• Electricity – supplies to provincial grid

• Steam – supplies to local paper mills

• Fuel: cotton stalk• Fuel to be collected from local farmers

(renewable energy supply)

(replaces small coal-fired steam boilers)

(new source of income for farmers)

31

Concentrated Solar Technology in Australia

Sunlight concentration by the heliostat-receiver tower (central receiver) set up

[Source: SolarPACES]

Development phase• 2MW pilot plant by 2009• 154MW by 2013

CLP investment• HK$49 million for a 2MW pilot plant• HK$1.9 billion for the complete 154MW project in northern

Victoria, providing electricity for 45,000 familiesDevelopment potential

• deploy the technology into the Asia-Pacific Region in next 10 years

3232

Climate Change – A Global ProblemIncreasing global average temperature

Rising sea levels

More frequent and severe storms and heat waves

Droughts in some places and flooding in others

Extreme Weather

DroughtRising sea levels

Melting ice cover

3

These threaten the basic elements of life for people around the world – access to water, food production, health and use of land and the environment.

3333

Rise in world’s temperature• >0.5oC until now

• at least another 0.5oC expected in coming decades

The weight of scientific opinion tells us that the world faces the challenge of adapting to serious and irreversible climate changeif global average temperature rises exceed 2 to 3 degrees.

Rise in world’s temperature >2-3oC

Current level of GHG430ppm CO2 equivalent

Climate Change – A Global Challenge

Scenario:> 550ppm CO2 equivalent

34

Stabilising CO2 Emissions in Hong Kong

Data Source: EPD and Company data

0.000

5.000

10.000

15.000

20.000

25.000

1990 1995 2000 2005 2007

Mill

ion

Ton

CO 2

Other Hong Kong*

Fuel SwitchCoal -> Nuclear

Fuel SwitchCoal -> Gas

Limited Gas Supply, Fuel SwitchGas -> Coal

Remarks: * CO2 from other Hong Kong sector reported by EPD was updated to 2005 only+ For data beyond 2010, emission factor of 2007is used for reference and the gas consumption in fuel mix is assumed to be 50%

Beyond 2010+

CLP

Fuel SwitchCoal -> Gas

3535

Each wedges represents 1 billion tons per year reduction in carbon emissions

Energy Efficiency & ConservationShifting to Low Carbon FuelsCarbon Capture & StorageNuclear PowerRenewable EnergyForestry & Agricultural PracticesAlternative Transportation

A number of technological solutions can be implemented in parallel to achieve emissions reductions in the electricity sector.

Stabilising CO2 Emissions Globally Calls for Changes in our Way of Doing Business

There is no single solution. Combination of all “wedges” is required

3636

75% reductionin order to help stabilise CO2 concentrations below 550ppm, a goal to be achieved internationally by all parties concerned

CLP’s Climate Vision 2050

3737

CLP’s Initiatives To Achieve Vision 2050

Energy Efficiency & Conservation

Renewable Energy Natural Gas Nuclear Clean Coal

38

Meeting energy needs and having a better environment requires sustained and collective effort from every sector of the community

• We need to keep all energy options open – there is no single solution to the world’s energy and climate change challenges

• All countries are different – no single approach will work equally well in every region

• Long term stability, predictability and a clear energy policy will help encourage the investment needed for cleaner energy solutions

• Considerable time will be needed to reduce carbon emissions globally. A sense of urgency must be applied

• Energy conservation and efficiency is an area we can all contribute