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Hong Kong and renewable energy - or rather, lack of

Discussion in 'Energy, Environment, and Policy' started by DITB, Jun 17, 2014.

  1. DITB

    DITB Charged.hk co-founder

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    In Denmark, where the population is 5.6 million, the wind power capacity is 850W for each person. In Hong Kong, with 7.2 million, it is 0.1W - in other words, 7700 times more wind power pr person in Denmark, compared to Hong Kong.

    Hong Kong has a deadline today of where the power should come from - Natural Gas, coal or "Electricity from China":

    Deadline is 18th June. Share your views on future fuel mix

    As long as electricity isn't taxed appropriately at the source of production, clean air and solar cannot (yet) compete with dirty coal and oil.

    But what are the costs of polluting? Not the costs to the individual consumer, but the cost to the entire world. Dirty air, higher CO2, rising oceans, flooding, storms and draughts.

    How can we go about to change this, other than making renewable energy cheaper than fossil fuel, even without dirty air taxes?
     
  2. Robert.Boston

    Robert.Boston Model S VIN P01536

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    Much thought has been given to your last question. The solutions that have been implemented have a wide range:
    • Renewable Portfolio Standard mandate: central planners set a minimum % of energy that comes from renewable sources. Renewable energy suppliers then compete to win a slot in that RPS program. The downside: potentially unlimited cost.
    • Capped spending: I know of one utility that procures renewable power using a budget. It says, "we're willing to pay $xx million extra for renewables." It then buys as much of the cheapest renewable energy tendered to it as that budget can afford. The downside: with no guarantee of quantity, renewable project developers may not be willing to spend the money on pre-development of projects to get to the stage where they can be bid.
    • Carbon adder: In the procurement process, the purchaser assigns a penalty to tendered generation based on its carbon intensity. This penalty only affects the bid evaluation; it's not a carbon tax per se. This approach has the efficiency of a carbon tax without the hassle of dealing with payment streams. Procurement officers are generally familiar with the idea of penalties/bonuses in procurements, so this can work mechanically.
    • Carbon tax: Generation pays a tax per ton of CO2 emitted; power importers are charged an import tariff to match the tax. Such a tax would typically require extensive legislative approval and raises many issues regarding distribution of the tax receipts.
     
  3. DITB

    DITB Charged.hk co-founder

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    As I have seen taxes applied, they are added to the end consumers bill, whether it's a private entity (like a household), a company, government body etc.

    This means that for each kWh, the same carbon taxes are applied, no matter where the electricity comes from. Charging a full CO2 tax on wind turbine electricity is madness and unjust.

    Like water from the tap, if there are more sources joining one network, the stream at the consumer cannot be differentiated as to what origin it is. Hence, all sources, from the dirtiest coal to the cleanest of wind/solar/water, are charged exactly the same taxes. The effect is on the consumer to spend less, yet there is no effect on the production side of things, no incentives for the electricity producers towards a cleaner energy.

    To support renewables, subsidies and guaranteed rates are introduces, so at first, a subsidy of some kind is given (for wind/solar etc), then later on, the usual carbon/pollution/consumption taxes are applied. Instead of this "minus-plus" operation, go straight to the source.

    I know it requires a major change, yet the only way to go about this is to change the flow of energy in the system to be gross prices, after any carbon/pollution tax is applied. The only tax applied at consumer level would be sales tax and network usage fees, as applicable.

    The entire network, or networks, of electricity distribution, should gather those taxes at the source, so the coal power plant has to pay the tax to the relevant body, before that electricity even enters the grid. This is a penalty for producing something dirty. When all producers, from coal to wind, are taxed at the source, the flow in the grid has a gross price, fair for all. No subsidies are required, no further "Incentives" to be responsible. If that tax was anywhere close to "fair", coal would be diminished into just about nothing, over a short period of time. Natural gas would survive for a while, at least the gas not based on fracking.

    Sorry if I am repeating myself - I need to make a graphic to illustrate the point. It's really quite simple, yet hard to explain.
     
  4. Robert.Boston

    Robert.Boston Model S VIN P01536

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    The tax you're describing, DITB, isn't a carbon tax but a power use tax. Such a doesn't send any signal to change investment in generation, but may be effective in reducing demand, encouraging energy efficiency, etc.. Everywhere with a true carbon tax, it is paid by polluters, who then have a financial incentive to reduce carbon emissions. Take a look at the US Regional Greenhouse Gas Initiative rules, if you'd like a nice, simple, no-loopholes example.
     
  5. DITB

    DITB Charged.hk co-founder

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    If it is indeed working that way, it's very beneficial. I have never had to pay an electricity bill in the USA.

    It is not a "power use tax", but a tax placed on the production type.

    Coal = maximum tax, wind = no tax (just network fees, applicable to all), and the rest in between.

    The problem is that in those networks I am aware of, electricity is traded in the grid, before any taxes. All taxes are applied as the electricity exits the grid, onto the consumers, while no tax is applied at the source, as the electricity enters the grid.

    It might not work like that all over the world, but if you take Europe as an example - electricity is moved across borders, and traded at before-tax prices. Unless all countries in the same group of networks agree to an at-source carbon/pollution tax, it won't work - and as it is now, taxes are applied locally.

    While coal power might be able to offer a market price about a third of that of wind power, there is no calculation of the derived costs - in terms of pollution, health costs, CO2, weather changes such as flooding, storms, draughts etc.

    Coal power entities can laugh at renewable energy and say it's "too expensive", while they at the same time foul the nature with sod, filling our lungs with micro particles, blasting off CO2 and other baddies.

    "Cost" is more than just the direct price to retrieve and burn fossil deposits, it's also all the side effects.

    Again, for this to be fair, taxes must be moved from the exit point of the grid, to the entry point.
     
  6. Robert.Boston

    Robert.Boston Model S VIN P01536

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    @DITB, wow, this is a screwed-up taxation scheme. The RGGI scheme in place in the northeast and mid-Atlantic region of the US taxes carbon emissions directly, so it effectively taxes power at the entry point.

    If you had competitive retail electricity markets in Hong Kong, it could solve the problem by buying power from the lowest after-tax cost sources. (I'm assuming that there's some sort of source-tagging mechanism that would allow a retailer who buys from wind farms rather than coal plants to pay a different tax.)
     
  7. DITB

    DITB Charged.hk co-founder

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    That would be a great solution. Unfortunately, it's not looked at that way, I'm afraid, not in those markets I am aware of. The scheme you are talking about sounds like the right approach to have.
     

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