Hong Kong, like all other major international cities, relies on electricity to underpin its sustained economic development. Electricity supply in Hong Kong has always been provided by the private sector and since the 1960s, the Government has entered into Scheme of Control Agreements separately with the investor-owned power companies, CLP Power Hong Kong Limited and the Hongkong Electric Company Limited.

These 15-year agreements provide the framework for ensuring continued reliability in power supply over the years, at reasonable cost. The agreements enable the Government to protect the interests of consumers while at the same time provide incentives for the two companies to continue long-term investment and improve plant efficiencies to ensure reliable and safe supply of electricity to their clients.

As you may all be aware, the current Scheme of Control Agreements will expire in 2008 and Government will consider possible arrangements for the supply of electricity in Hong Kong henceforth.

Reliablity in power supply at  99.99%

Hong Kong is a densely populated and highly compact society with innumerable high-rise buildings. It is no surprise that reliability in electricity supply is the lifeline for our ever bustling economic and social activities. And reliability in supply in Hong Kong, maintained at 99.99% in the past three years, is comparable to the highest standard of other top world cities.

The existing interconnections between Hong Kong Electric and CLP Power, CLP Power and Guangdong Province serve to provide mutual emergency backup, spinning reserve sharing and economic energy transfers to enhance Hong Kong's overall supply reliability.

I believe most of us have watched the harrowing scenes in New York, Toronto and London, during the major power failures which occurred in August and, more recently, the major power failures spanning across country boundaries in Scandinavia and Southern Europe.

Detailed investigations are under way into each of these cases and it is important that experts, such as yourselves, would be apprised of why and how they happened, and more importantly, how they could be prevented in future.

For us in Hong Kong, these latest incidents overseas illustrate yet again why we have to proceed carefully in considering the future shape of our electricity supply market and why ensuring high standards in reliability and safety in electricity supply should continue to be the Government's primary objective and top priority.

Opportunities, challenges ahead

Electrical power plays an increasingly pivotal role in every sector of the community, be it for meeting the demand for better quality of life or matching the rapid pace of commercial and industrial development.

Today, computers and sophisticated industrial equipment are much more sensitive to disturbances and distortion of the power supply than previously was the case. Any interference such as voltage variation, even for a fraction of a second, will give rise to nuisance tripping and cause much inconvenience to customers.

Customers nowadays therefore have much higher expectations and demand high standards in quality and reliability of electricity supply than they did decades ago. Indeed problems of power quality, including stability, voltage and frequency variations, as well as a "clean" waveform free from distortion, are increasingly becoming the focus of international attention.

Saving energy a Government priority

Here in Hong Kong, although we have a good record with regard to reliability in our electricity supply, no one is complacent. The Government consistently encourages the two power companies to adopt innovative technologies for generation, transmission and distribution of electricity to improve the security of power supply and operational efficiency.

The power companies are also encouraged to promote good energy management practice and the use of energy-efficient equipment for saving energy both in the workplace and at home.

As in other economies, we in Hong Kong watch closely the rapid development of new energy technologies, including renewable energy, and see how we might benefit from it.

The private sector is taking up the challenge in this area and we welcome initiatives in undertaking an increasing number of pilot studies on the application of renewable energy technologies such as photovoltaic and wind-power generation.

The Government will examine the potential of increasing interconnection capacity between the two power companies in considering the future development of our electricity supply market beyond 2008. Different market options will be explored, considered and reviewed against our benchmark of providing reliable and safe supply to customers at reasonable prices.

Secretary for Economic Development & Labour Stephen Ip gave this address at the opening of the 6th International Conference on Advances in Power System Control, Operation & Management