Flagship fashion - Hong Kong Institute of Certified Public Accountants

Hong Kong’s only functioning
wind power turbine,
Lamma Winds, is often
barely visible from nearby
islands because of the smog.
The single turbine averages 100 kilowatts a
day, barely an eighth of its capacity, and an
insignificant proportion of the city’s energy
demand – unsurprising for a city that is part
of a country still highly reliant on fossil fuels.
The figures are gloomy. Nonrenewable
energy sources account for more than 90 percent
of China’s energy consumption, according
to World Bank data. China’s total energy
use rose 7 percent in 2011, the fastest annual
pace in four years, according to the National
Bureau of Statistics. (The global average is
an increase of just 1.6 percent according to
BP, the British energy giant.)
Nonrenewable energy is dirty energy,
which means China’s air is likely to get worse.
Premier Wen Jiabao announced in March
that the government would stop its “blind”
expansion of wind and solar industries,
which have grown sharply in recent years.
Instead, Wen claimed, Beijing would focus
efforts on developing nuclear and hydroelectric
power.
“The economics of these renewable energy
sources are still relatively less attractive
than that of the fossil fuels,” says Artie Ng, a
fellow at Hong Kong Polytechnic University’s
public policy research institute and a member
of the Hong Kong Institute of CPAs.
It is likely Beijing no longer saw the value
of paying a premium for electricity produced
from solar and wind. Developers of solar
projects get paid a minimum of 1 yuan per
kWh and wind power plants receive 0.61
yuan per kWh, while coal fired power plants
receive just 0.30 to 0.40 yuan, according to
Bloomberg New Energy Finance.
Although Wen’s announcement might
not mark an about-face on renewable energy,
it does mean – for the short term at
least – China will import more fossil fuels
as it develops alternative renewables like
nuclear and hydropower. According to a report
in March by the China Electricity Council,
China’s coal fired power output totalled
$113.9
Nuclear
3,825.32 billion kWh in 2011, up 14.8 percent
from a year earlier. Coal still accounts
for about 70 percent of China’s energy needs,
according to most estimates. Meanwhile,
the share of nonfossil energy consumption
– including solar, wind, nuclear and hydroelectric
power – of total energy use in China
declined 0.3 percent from 8.6 percent in
2010 to 8.3 percent in 2011, according to the
National Energy Administration.
“Coal, which is currently the most affordable
fuel for electricity generation, will inevitably
continue to be a part of the immediate
energy supply strategy for most developing
countries,” says Mark Takahashi, chief financial
officer of CLP Group.
Perhaps in anticipation of the policy
change, solar power producers had already
seen government subsidies withdrawn, and
a number of Chinese manufacturers have
collapsed or are in financial trouble and are
seeking buyers. Meanwhile, wind power lost
a lot of credibility when reports showed that
energy generated was wasted due to lack
of connectivity with the national grid – the
$94.8
Conventional coal
Figures are based on research by the Energy Information Administration in the United States and represent the
total cost of building and operating a generating plant over its life cycle. In reality, there could be variations in costs
based on local factors such as the cost of labour and fuel and government incentives at the time. The data excludes
energy from oil because the administration expects no new petroleum-fueled plants to be built in the future.
May 2012 33