October 18, 2009

• <More on Compact fluorescent lamps (CFL, 慳電膽)>

  There has been fervent discussions on the impact of the $100 cash voucher for CFL on electricity tariff. See Kursk and Fongyun.

  I quickly note my thoughts on this subject.

  Due to time constraint, I can only write in English. I may translate it into Chinese in a couple of days. I collect the facts on this cash voucher program on a piecemeal basis (source 1, 2)

  1. Could the voucher induce a more widespread substitution of 鎢絲燈泡 with CFL?

  My tentative answer is, NO.

  Existing evidence of degree of popularity of CFL is scarce in HK. One thing really perplex me is, if these estimations are correct (e.g. this one by greenpeace), the existing monetary benefits for households’ switching to CFL from incandescent light bulbs (i called ILB for simplicity, 鎢絲燈泡) has been tremendous, even without the $100 voucher.

  The purpose of this CFL program is to induce people to substitute ILB with CFL. You simply do not want people to install more CFL lighting with the voucher since CFL is less, but not totally free of, environmental pollution. For that, the program already fails to meet this criteria, since it does not discriminate a substitution from ILB to CFL (which is pro-environment) and additional CFL (which is against-environment). So instead of protecting our environment, the program gives a bad incentive for polluting our environment.

  In this estimation by EMSD (government department, so their estimates are the most reliable), the savings for 8,000 hours of lighting is $2,800 (100 watts bulb, $0.9 per/ kwh). I have no idea on whether 8,000 hours are large or small, but in most of our time at home (5 hours per day excluding sleeping, 365 days per year), you can save about $2,800 for each 5 years for each bulb which is not very small.

  
  So I guess for those who are not using CFL instead of ILB, given such large existing benefits, the additional $100 voucher is not going to induce them to switch. Unless, these people are not known of this monetary benefits. But then, if people are not informed for this fact, is cash voucher (instead of education, publicity etc.) be a more effective way?

  For those existing user of CFL, this cash voucher is purely a transfer from whoever – I have no idea whether it is electricity company or electricity user themselves – to these users. They will use these CFL anyway, and the voucher is a gift of $100 without changing their behavior or achieving the purpose of a switch from ILB to CFL. Unless they install additional CFL, which is counter-productive to environment (as explained above).

  I understand most commercial users have switch to CFL (because of greater sensitivity to monetary return), but they are not given the subsidy. I see little reason why they should be given the same incentive for non-users or same gift for existing users, given that they have been heavy user of HK’s electricity and hence be responsible for a lion share of the carbon emission.

  
  So in a nutshell, I am a bit pessimistic and skeptical that the program could induce a widespread substitution of ILB with CFL. Possibly, the program could instead induce more lighting to be installed, that could be counter-environment.

  
  2. What about the impact on tariff? And what  about electricity companies charge back the users?

  I have elaborated here that as long as the permitted return and the assets of the electricity companies remained unchanged, the whole return to the companies will also remain unchanged. That means, the net income they receive (permitted return) which is closely related to the total tariff (i.e. tariff per unit X electricity consumed) will remain unchanged.

  Permit return unchanged;
  Asset unchanged;
  Total revenue (what CLP and HEC receive) ~ total electricity tariff (what you pay) unchanged
  
  At best what electricity users get will be a over-time (intertemporal) substitution of tariff per unit and electricity units consumed. No significant change in total money paid. For individual household they could pay more or pay less, but all households as a whole, they pay more or less the same.

  The widespread use of CFL and any kind of energy-efficient measures cannot change this mechanism.

  That the companies charge back is just an illustration of my answer above : No change in the 2 key variables (permitted return; assets), no effective change in total tariff over time. But instead of a substitution of unit tariff and electricity consume that is done over years, they want to recoup the subsidy immediately.

  So let me say this, when Donald Tsang says in his policy address that

  “慳電膽較同等照明效果的鎢絲燈泡耗電量少七成。為鼓勵市民以慳電膽取代鎢絲燈泡，兩家電力公司會向住宅用戶派發慳電膽現金券“

  Actually, he is saying the phase I have been saying over and over recently, i.e.

  “加錢送”

  • 10:27 am
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