ISE24/15-16

• Solar power^{1Legend symbol denoting Solar energy has two categories, including solar photovoltaic and solar thermal. The former, through photovoltaic modules or commonly known as solar panels, transforms sunlight into electricity or solar power. The latter converts the heat of sunlight into thermal energy.} has become more cost-competitive in recent years because of rising supply of solar photovoltaic ("PV") modules and supportive government policies. During 2010-2015, the global installed capacity of solar power has increased nearly five times to 227 gigawatts as PV system price dropped by a cumulative 60%.^{2Legend symbol denoting The cost of solar photovoltaic systems throughout its lifecycle has fallen by around 60% between 2010-2015, according to International Energy Agency.} New solar investment of various kinds also leaped by 12% to US$161 billion (HK$1,248) in 2015, outperforming other forms of renewable energy.^{3Legend symbol denoting Total renewable energy investment amounted to US$286 billion (HK$2,217 billion) in 2015, 56% of which being on solar PV systems. See UNEP Global Trends in Renewable Energy Investment 2016.} Although solar power supplies just 1% of global electricity consumption at present, the International Energy Agency has envisaged that the ratio could double to 2% by 2020, and surge further to 16% by 2050.
• In Hong Kong, solar energy meets roughly 0.1% of total electricity demand. Yet a study funded by the Central Policy Unit and released in 2015 shows that if PV panels are installed on suitable rooftops of 233 000 buildings in the territory, solar power could potentially supply 5.9% of local electricity consumption in 2012.^{4Legend symbol denoting The study commenced in 2013 and lasted for 16 months. The electricity figures cited in the study report was based on 2012 data.} Despite this potential, the number of PV systems in Hong Kong is considered to be very small and most of them are installed on public buildings and facilities for demonstration purpose.^{5Legend symbol denoting Based on publicly available data from the Electrical and Mechanical Services Department, it is roughly estimated that the total capacity of existing solar PV installations in Hong Kong is between 3 MW to 4 MW.}
• At the meeting of Panel on the Environmental Affairs on 23 May 2016, some members were concerned that Hong Kong was lagging behind overseas cities in harnessing solar power to help achieve the target of 50%-60% carbon intensity reduction below 2005 level by 2020. This issue of Essentials reviews solar power policies in Seoul and Singapore where solar power has grown significantly in recent years.

Solar power policy in Seoul

• In the wake of the Fukushima nuclear accident and a widespread power outage in South Korea including Seoul in 2011, the Seoul Metropolitan Government ("SMG") embarked on an energy transformation campaign known as "One Less Nuclear Power Plant" ("OLNPP") in April 2012. A key objective of the campaign is to reduce energy usage^{6Legend symbol denoting Energy usage covers not just electricity but also oil products such as diesel or petrol l for vehicles, and gas fuel such as natural gas.} by 2 million tons of oil equivalent, which is roughly equivalent to the annual output of a nuclear plant in 2014. It also intended to raise the self-sufficiency ratio of electricity supply from 3% to 8%, partly through increased usage of renewable energy.
• The "Make Seoul a City of Sunlight" project is a core part of the campaign, trying to convert Seoul into a "huge solar power plant" through creation of a large number of small-scale solar generation projects scattered around the city. The policy target was to expand solar PV capacity by 14 times in less than three years to 320 megawatts ("MW") by 2014, primarily through the installation of rooftop solar PV systems on 10 000 buildings across the city.
• Below are the key measures introduced by SMG for development of solar PV systems in Seoul:
  
  

  (a)	Attracting investment from energy companies: Apart from its own investment, SMG has entered into memoranda of understanding with Korean energy companies which have committed to the provision of at least 700 billion won (HK$4.8 billion) funding for solar projects. In return, the energy companies obtain long term operating rights of the projects and can earn saleable certificates7Legend symbol denoting In this case, the companies can obtain renewable energy certificates under the national policy of renewable portfolio standard, and sell the certificates to other parties which have to meet emission reduction obligations. The policy affects 17 major power companies each with at least 500 MW generation capacity. The companies are also required to meet progressive annual quota on renewable energy. for the power produced;
  (b)	Renting out unused public sites: To ease space shortage for solar projects, SMG has leased out at least 26 idle public facilities such as rooftops of water treatment plant at concessionary rate to encourage privately-funded projects which have a combined capacity of 23 MW;
  (c)	Government subsidy and loan: SMG has introduced its own feed-in-tariff8Legend symbol denoting Seoul introduced its own feed-in-tariff scheme in 2013, a year after the central government scrapped a national feed-in-tariff scheme in favour of renewable portfolio standard scheme. As at 2015, about 140 parties, individuals, businesses and cooperatives, have signed up such scheme. scheme as an extra economic incentive for small solar projects below 50 kilowatts ("kW") since 2013. Project operators are subsidized at a rate of 50 won (HK$0.35) per kW for one hour generated for a period of up to 5 years. SMG also provides loans to any eligible solar PV system of up to 150 kW at a preferential rate of 1.75% per annum;
  (d)	Seoul Solar Map: An online map displaying the development potential of solar PV systems on building rooftops has been created since 2013, which is alleged to have prompted more building owners to install PV systems. SMG also streamlined the licensing procedure for solar power plants from 60 to 30 days; and
  (e)	Solar Power Generation Citizens' Fund: Each Seoul citizen can take part in funding solar projects under government-backed citizen funds, and earn a fixed annual return by subscribing up to 100 million won (HK$690,000) to each of the funds with a total amount of 50 billion won (HK$345 million).9Legend symbol denoting There is a guaranteed return of around 4.2% in the each of the first three years.

• By mid-2014, the OLNPP campaign exceeded the energy consumption reduction target, resulting in an annual saving in terms of reduced oil import worth of up to US$2.8 billion (HK$21.7 billion). In terms of electricity consumption alone, Seoul has departed from the national trend of persistently rising consumption. Between 2011-2014, Seoul's electricity consumption fell by 4%, which was in contrast with 4% nationwide increase during the same period.
• SMG also made significant progress in the "City of Sunlight" initiative, with installed solar generation capacity growing by three times, from 22 MW in 2011 to 84 MW in 2014. This increase outpaced the respective two times nationwide growth during the same period. However, it still fell short of the target of 320 MW, allegedly due to lack of suitable sites, insufficient financial incentives and generally cheaper electricity.
• That said, the above initiatives still brought Seoul international honours for its contribution in energy conservation and carbon reduction, including the Green Energy Award by the C40 Cities Climate Leadership Group in 2014, and recognitions from the United Nations and WWF in 2013-2014.
• In 2015, SMG rolled out Phase 2 of the OLNPP campaign, with a specific target to double the PV installation in Seoul to 200 MW by 2020. Other additional measures include expanding rooftop solar PV installations in schools from 30 in 2014 to 230 by 2018; installing 40 000 mini PV power plants at the verandas of domestic households by 2018; and increasing the capacity cap of the feed-in-tariff subsidy from 10 MW to 20 MW.

Solar power policy in Singapore

• The Singapore government considers solar power as the "most promising" and "relevant" form of renewable energy in the country, as compared with wind or hydro power because the country is geographically close to the equator. In 2014, it announced a solar generation capacity target of 350 MW by 2020, representing 5% of peak electricity demand in that year and a five-fold increase over the existing solar PV capacity.
• Despite this policy target, the Singapore government has been reluctant to introduce energy subsidies such as feed-in-tariff to promote solar development as they are incompatible with the established market and principle which aims to ensure that energy is "correctly" priced, without distortion in "price signal" for efficient allocation of resources.
• Over the past years, the Singapore government has also positioned the country as a global leader in solar energy technologies and their applications, and has attracted a cluster of solar manufacturers, developers and operators based in Singapore. To achieve its 2020 solar target, the following measures have been introduced in recent years:
  
  

  (a)	Solar power in public housing: The Singapore government has begun tapping into the huge potential of the rooftop of public buildings including some 5 500 public housing blocks to provide 200 MW solar PV capacity. This is realized through the "SolarNova" project launched by the Economic Development Board since 2014. Under this project, buildings with different or smaller solar PV potentials are grouped together. Private solar companies can then bid to finance, install, and operate solar PV systems on all these buildings. In return, they can enter into a long term power sale agreement with users in these buildings at a rate lower than the retail electricity tariff. By end 2015, two tenders involving 116 MW capacity have been awarded;
  (b)	Innovative business models: Singapore-based solar companies with different business focuses have been trying new business models to meet unique demands. First, the solar leasing model enables building owners without enough financial resources to install PV systems on rooftops. Under this model, they can invite solar developers to build and own the PV systems, and then operate and sell the solar power to these users under a long term contract. Secondly, large volume power users (mainly business firms) can purchase solar energy in bulk through suppliers owning PV systems elsewhere and having valid retail licence in power supply. This helps overcome the constraint of PV system capacity of the rooftops of their own buildings, enhancing transferability of solar energy across different buildings. By end-2015, at least 12 MW has been installed under this model. Thirdly, building owners can also raise funds from the crowdfunding platform10Legend symbol denoting There were two examples of demonstration projects that successfully raised funding via a newly set up crowdfunding platform for the rooftop solar PV systems for commercial and residential properties in Singapore. dedicated to renewable energy projects, through which investors can be rewarded with regular payout afterwards; and
  (c)	Active solar research and development: Singapore intends to become a leader in solar power generation in a densely populated urban environment, and eventually an exporter of the know-how. To this end, the Economic Development Board supported the establishment of Solar Energy Research Institute of Singapore for research in application of solar energy in 2008. In addition, the Public Utilities Board is currently conducting a feasibility study on installation of solar panels on the surface of the 10 reservoirs. The study commenced in November 2015 and was expected to last for nine months.

• In spite of its small proportion in electricity consumption, solar power has been growing by leaps and bounds in Singapore. During 2010-2015, the number of solar PV installations has surged by almost eight times to 942 in 2015, resulting in a 16-fold increase in the installed solar capacity to 46 MW over the same period.

Prepared by CHEUNG Chi-fai
Research Office
Information Services Division
Legislative Council Secretariat
13 July 2016