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"Less fossil fuels means less carbon”

Committed to reducing up to 36 percent of its carbon emissions by 2030, Hong Kong, the fourth most densely populated region in the world, is facing a number of unique challenges. Yet the solutions being developed here, says Richard Lancaster, CEO of CLP Holdings, can be used throughout Asia’s urban centers.

By Justus Krüger

There’s a reason Hong Kong is called the world’s tallest city: With 7 million people on little more than 1,000 square kilometers, Hong Kong, one of the most densely populated regions worldwide, was bound to have the most skyscrapers. Breathtaking as that skyline might be, however, Hong Kong’s lack of space is also a challenge to power generation and reducing the carbon footprint – a challenge compounded by the fact that the city also lacks natural energy resources. The Siemens Magazine sat down with Richard Lancaster, Chief Executive Officer of CLP Holdings (CLP), to talk about the new gas turbine being added to its Black Point Power Station, as well as developing solutions for power generation and sustainability in Hong Kong – and beyond.

Mr. Lancaster, Hong Kong is unusual in many ways. Is that reflected in the city’s current energy situation too?

Richard Lancaster: There aren’t many cities that have Hong Kong’s characteristics. One thing to consider is that in Hong Kong, we operate under “one country, two systems.” This means that Hong Kong is a part of China and has a high degree of autonomy. We have our own energy policy in the city, which may be different from that of the mainland.

Given that we are a city in a small area, we have no natural energy resources. Everything has to be imported into Hong Kong. We have very limited land and a population of 7 million people living in “high-rise” buildings. We don’t have much need for heating, but we have need for air-conditioning. All in all, we have a unique set of circumstances here. When it comes to our energy choices, our energy mix and the solutions that we develop in Hong Kong really reflect our geography and our lack of energy resources. So we have perhaps fewer choices than many other cities have. 

How does a densely populated city like Hong Kong meet the challenge of having limited space to build sites for power generation?

Power plants in Hong Kong tend to be very large. This is to make the most efficient use of the available land. In addition, Hong Kong is importing about one third of its electricity from Guangdong Province in mainland China. The remaining two thirds are generated here in Hong Kong.

What implications does this have on the city’s energy mix?

One implication is that renewable energy is not a major part of the energy mix in Hong Kong. The main challenge isn’t the technology – the technology is available. The challenge is access to land, and that is very scarce in Hong Kong. We only have 1,100 square kilometers of land here. Under these circumstances, residential accommodation is the priority. So even if we have some space available, the priority of the government is to find additional space for housing. That’s why we have to look for other solutions. 

So what’s the right economic and ecological approach for sustainable power generation in Hong Kong?

We have a suite of tools that we’re looking at, and smart technology to manage demand is an important part of it. In addition, our 2020 carbon reduction targets will see us move to 50 percent natural gas, 25 percent nuclear and 25 percent coal. When this is reached, CLP will then add even more gas capacity, which will enable us to close down one of our two coal-fired power plants.

As a next step, the government is launching a public consultation in the second half of 2018 to look at what the city’s targets should be for 2030 and beyond. With regards to energy sources, for Hong Kong the options really are how much gas we use and how much nuclear power we import from Guangdong Province. 

That doesn’t mean we’ve forgotten about renewables. As part of the new Scheme of Control Agreement – the contract with the Hong Kong government – we’ll be introducing feed-in tariffs for renewables that might make it possible for schools, universities and others who have larger areas at their disposal to put solar panels on their rooftops, and we’ll buy the power from them at a fixed rate. So even on a small scale, we can encourage innovative solutions for renewable energy in a dense urban environment. 

"The shift from coal to gas will cut carbon emissions by 50 percent." says Richard Lancaster, CEO of CLP.

You said smart technology – in other words, digitalization – is an important part. What role is it playing?

Digitalization is giving us two broad categories of benefit. One is that we can make our operations better, cheaper and faster. We can provide better levels of service to customers, we’re better at predicting problems and more effective in how we deliver our power and how we operate our plants. That is one basket of benefits.

The other one – and this is connected to our energy mix and our carbon targets – is demand-side management. With smart meter technology, we can now have up-to-date information on how customers are using energy. If we can get our customers to slightly adjust their behavior on days when we’re seeing a peak in power demand, then we can lower that demand, and that means we can avoid the need to build additional generating capacity.

We’ve never been able to do that in the past. But now, with smart meters and communication devices, we can let our customers know when we would like them to reduce demand, and we can offer them financial incentives. So we can say to you, if you save a unit of electricity, we’ll pay you ten times what we would otherwise charge you for that. It’s a big financial incentive. We can afford to do that because the benefits we get in avoiding the need to build more capacity are quite substantial. 

Is it possible to quantify how big a difference that makes in terms of power consumption and energy mix?

Let me give you an example: We’re currently constructing a 550-megawatt combined cycle power plant at our Black Point Power Station here in Hong Kong – one of the largest gas-fired plants in the world. The new unit will be operational by 2020, and by 2023, we’ll have an additional unit of the same type in place. So we’ll be adding about 1,100 megawatts of gas-fired capacity. While this is quite a bit, it isn’t enough to phase out our 1,400-megawatt coal-fired plant.

But we’ll also be using smart technology, which helps us better manage demand. The application of this smart technology will yield savings of about 300 megawatts. As a result, we’ll be able to decommission an entire coal-fired plant with a capacity of 1,400 megawatts. The gains from smart technology close the gap between our 1,100 megawatts of new gas capacity and the 1,400 megawatts being generated at the coal-fired plant. So we’ll be able to decommission no less than 50 percent of our coal capacity within the next five years. It’s a big step. The shift from coal to gas will cut carbon emissions by 50 percent.

Hong Kong increases natural gas into its local energy mix to reduce the city’s carbon footprint.

 

The new turbine that you are putting in place in Black Point is a Siemens SGT5-8000H heavy-duty gas turbine. Why is it a good choice in thiscontext?

The plant we’re building is one of the most efficient plants of its type in the world. And that will mean that our whole portfolio is more efficient, which means we’re using less fuel and therefore producing less carbon emissions.

Are the energy solutions developed here relevant to other urban centers in the region?

Cities in this part of the world tend to be quite different from those in Europe, North America or Australia, where people often live in individual houses and they’ve got a large roof over their heads. Some of the technologies that may work well in a European city just can’t be applied to a city in China or India.

Hong Kong is a densely populated city with increasing urbanization, and with that urbanization occurring in Asia where 40 percent of the world’s population live, I think a model of a densely populated high-rise city will be one that we’ll see replicated all through China and India and other parts of Southeast Asia. So, I think the solutions that we generate in Hong Kong to reduce carbon will provide a good example, a good model for other high-rise cities in the Asian region.

 

Talking about convergence and integration in Asia, the Chinese Belt and Road Initiative continues to make headlines. Does CLP’s business lock in with this?

Because we went from having a business concentrated on Hong Kong and then China to one that was spread throughout Southeast Asia, we began our own initiative in the 1990s, building power infrastructure throughout Asia 20 years before the Belt and Road Initiative. We also have our own links to the Central Asian Belt because we have gas supply coming from Turkmenistan through a 9,000-kilometer-long pipeline that ends at Black Point Power Station.

Where the power industry is moving to, however, is not just building power generation, but also strengthening the transmission links with Asian countries. We’re working with Chinese state-owned enterprises (SOE) to share some of our experience moving into new markets. For example, we’re partnering with China Southern Grid for transmission projects in India, and we’re working with them in Vietnam on two projects. So on a small scale, we’re able to work with some of the SOEs. From our point of view, the Belt and Road Initiative is just business as usual. It’s what we’ve been doing for the past 20 years.

Justus Krüger is a journalist based in Hong Kong.
Picture credits: Hans Sautter