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WOODROW WILSON (編輯組譯)


非官方發佈資料 Unofficial Release


AN EXPLORATION TO A PRACTICAL BUSINESS MODEL FOR THE APPLICATION OF SOLAR ENERGY AS A SUSTAINABLE INDUSTRY IN HONG KONG.

by P. M. Y. Cheng
June 12, 2009

PREFACE

UM Blogger 網誌編輯組

June 20, 2009

The following report  was originally a course assignment on creativity and innovation written by Ms P. Cheng, who is the marketing officer of our company.  However, we felt that the idea conveyed in the report  worth our serious consideration. It   always seems that there is an internal conflict between the advertising industry and the conservation of environment because the genuine nature of of advertising is the propagation of consumption  and Epicureanism. Upon her consent, we contribute this report to the general public as an unofficial release of our internal study. The mission of  the report was trying to find out a solution for saving the environment without the feeling of the deterioration in the quality of life throughout the process of making changes.  If anyone thinks that he or she may copy the idea and run a business in the way as the report proposed, we, including the writer, will be delighted to see his or her success and we believe that this sustainable mode of living will benefit us, especially our younger generation. In the past, we have never advocated conservation of environment as we thought that it  was hypocritical  for our industry to strive for playing the leading role for the reason we have just mentioned.  Now we may try our best to propose a better solution to our clients in terms of the extent to which conservation of environment  will be achieved .


INDEX

 

INTRODUCTION

BACKGROUND

GLOBAL WARMING AND ITS IMPACT ON THE WORLD

SPECIFIC IMPACT OF GLOBAL WARMING ON HONG KONG

AVAILABILITY OF SOLAR ENERGY AND ITS CURRENT APPLICATION IN HONG KONG

PUBLIC APPEAL TO A FUNDAMENTAL CHANGE

METHODOLOGY AND GUIDING PRINCIPLE

METHODOLOGY

PRINCIPLE

AN EXPLORATION TO A PRACTICAL BUSINESS MODEL FOR THE APPLICATION OF SOLAR ENERGY AS A SUSTAINABLE INDUSTRY IN HONG KONG.

MISSION

OBJECTIVES

RATIONALE OF THE PROJECT

FUNDING

ORGANIZATION

GROWTH AND DEVELOPMENT

CONCLUSION:


INTRODUCTION

           

Innovation and creativity are now claimed to be widely applied in various field. They are especially crucial in the initialization of a paradigm shift. Most leading companies in the world also seek ways to maximize the profit, minimize the expenses, enlarge the market share and reduce costs. On the other hand, more and more emphasis is put on the social responsibility of business firms in carry out their business activities. In order to meet the company's target, innovation and creativity are required for a top management team.

 

A practical example is found in the use of solar energy. Solar energy is an environmental friendly energy source. However, in the application of solar energy as a “clean” and “cheap” energy source replacing the traditional “dirty” energy such as gasoline, coal, etc. There is not enough momentum for the general public as well as the business firm to make a fundamental change in their habit of energy consumption even they recognize the merits and the business opportunities of solar energy. Innovation and creativity are needed for initializing a change in human thought.  Seeking to build up a feasible mode of business for the use of solar energy is now the first consideration among all. 

 


 

BACKGROUND

 

GLOBAL WARMING AND ITS IMPACT ON THE WORLD:

 

The most respected scientific bodies have stated unequivocally that global warming is occurring, and people are causing it by burning fossil fuels (like coal, oil and natural gas) and cutting down forests. The U.S. National Academy of Sciences, which in 2005 the White House called "the gold standard of objective scientific assessment," issued a joint statement with 10 other National Academies of Science saying, "the scientific understanding of climate change is now sufficiently clear to justify nations taking prompt action. It is vital that all nations identify cost-effective steps that they can take now, to contribute to substantial and long-term reduction in net global greenhouse gas emissions.1

 

Now nobody queries the adverse effect of global warming on our world. Both the environment and human life are also affected, which in turn endangers the survival of some species and in the long run even the  human beings. Extreme weather events like El Nino Phenomenon, La Nina Phenomenon, retreat of glacier in the Arctic or frigid zone, shrinking of ice sheet on both the North and South Poles, rising sea level and spreading of tropical diseases keep causing economic loss. In addition, these geographic and biological impacts inevitably cause huge social and political impact on the world. The poor people and poor countries are usually suffer more in the natural disasters. Contesting for the control of natural resources like fossil fuels will likely cause social and political chaos and even warfares among countries.

 

SPECIFIC IMPACT OF GLOBAL WARMING ON HONG KONG

 

It is easy to infer that all these impacts will be equally applicable to Hong Kong. It is estimated that the Gini's Coefficient almost reached 0.533 in 2006. In the light that the extreme polarization of wealth distribution in Hong Kong, the rising temperature in the summer season and the increasing flooding in the low land area in the raining and typhoon season will certainly cause the quality of life of the low income group to deteriorate. Social conflict will be intensified and the authority of government weaken. Obviously, a cheaper energy source help to ease the financial burden of the poor social group directly or indirectly and in turn help to increase the social stability.

 

AVAILABILITY OF SOLAR ENERGY AND ITS CURRENT APPLICATION IN HONG KONG:

 

Hong Kong locates in the sub-tropical area, solar energy is relatively abundant. Yet there is a misconception among people that the application of solar energy is limited by the tensed population of Hong Kong and the lack of open area for setting up the solar energy panel for the generation of power. According to a research report by Mr. Sam C M Hui of the Department of Architecture, the University of Hong Kong , the average sunshine in the “darkest” season still reach 26% and a lot of pilot projects are proved to be successful. (See reference 3 & 4)

 

PUBLIC APPEAL TO A FUNDAMENTAL CHANGE:

 

Apparently, all people admit that we need a change. There is a public appeal to a greener life which implies the following:

  1. low carbon-dioxide emission,
  2. low power consumption,
  3. sustainable mode of consumption, meaning that pollutants is minimized, and
  4. more even distribution of wealth.

 

However, all people, including individuals and business organizations are just waiting and watching. No material action has been taken to initialize such a fundamental change. For instance, the use of solar energy is confined to the government, academic institutions, non-profit making bodies or some prominent business firms. They regard solar energy application as a public relation activity,  carrying out them in a very small scale. Commercial use of solar energy is still in a very primitive stage. It seems that we need some more innovative and creative thinking in the implementation of a sustainable business mode of solar energy application.

 ***

Reference:

 

1. Joint Statement of Science Academies: Global Response to Climate Change, 2005

 

2. Gini's Coefficient of Hong Kong

Year

1981

1986

 1991

1996

2001

2006

Gini Coefficient

 0.451

0.453

0.476

0.518

0.525

0.533

Sources: Census and Statistics Department (1992) and (2006).

 

3. Hui, S. C. M., 2000. Solar Hong Kong - present applications and future prospects, Renewable Energy World, 3 (1): 76-83, January 2000, Table 1

 

Solar conditions in Hong Kong

 

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Year

GSR

11.63

10.69

11.24

13.14

16.12

16.55

19.15

17.61

16.49

15.46

13.39

12.03

14.46

% sunshine

45

30

26

29

38

40

56

52

49

54

55

54

44

Cloud %

58

73

76

78

74

75

65

66

63

56

53

49

65

Note: GSR = mean daily global solar radiation (MJ/m2); % sunshine = percentage of possible bright sunshine (%); Cloud % = Cloud amount (%)

4. Hui, S. C. M., 2000. Solar Hong Kong - present applications and future prospects, Renewable Energy World, 3 (1): 76-83, January 2000, Table 3
Examples of large-scale solar thermal applications in Hong Kong

Year completed

Location

System description

1978

A hotel and office complex in Tsimshatsui facing Victoria Harbour (* by a private developer)

280 nos. of flat-plate collectors each 900 mm x 2130 mm
pic002  pic08

1983

A drug addiction treatment centre on a remote island (Hei Ling Chau)

400 m2 of flate-plate collectors and two 16,000 litre solar water storage tanks

1983

A prison on Lantau Island (Shek Pik)

450 m2 of flate-plate collectors and five calorifiers of capacity 36,400 litres

1994

A hospital in a new town (Tuen Mun)

96 m2 of solar panels designed to serve a hydrotherapy pool
pic003  

1998

A swimming pool complex in a town area (Kwai Chung)

168 nos. of solar panels with total 330 m2 to support swimming pool heating
pic005  pic004  pic006

1999

A new slaughterhouse in rural area (Sheung Shui)

450 nos. of solar panels to provide hot water for processes
  pic007



METHODOLOGY AND GUIDING PRINCIPLE

 

METHODOLOGY:

 

The traditional form of operation is proved to be not working or the application of solar energy should have been faster. In designing a brand new business mode of solar energy, innovation and creativity must be the core of the exploration. Nevertheless, all the ideas incorporated in the following business model are developed in accordance with the practical environment of Hong Kong but not groundless fantasy. All the figures in the relevant projections and forecasts are calculated based on the technical data of energy industry available in the open market by means of the well established approaches of financial analysis.

 

PRINCIPLES

 

To make the proposed model a workable project appealing to the general public including individuals, households, government and business firms, it must comply with the following principles:

 

  1. OPERATION ORIENTED: It must be practical in operation. All the relevant issues of operation such as staffing, training, management, marketing, and maintenance & repairing must be considered and be properly dealt with. 
  1. BUSINESS ORIENTED: It must be a financially sound business, in other words, a sustainable business free of subsidy from government or whatever sources. The profitability or profit generation power will be a key element for its further expansion and development.
  2. USER FRIENDLINESS- It must be easy to install and operate, causing minimal inconvenience to the consumer in the replacement of the conventional fossil fuels which definitely enhances acceptability of solar energy to the consumer. 
  3. ENVIRONMENTAL FRIENDLINESS- Not only the process of power generation should be pollution free, but also in the process of the production of the solar power generation devices and the disposal of all the devices using convention energy, hazard materials should be minimized. Top priority should be given to old devices which are supposed to be replaced in very short time
  4. PUBLIC AWARENESS – It must be able to generate very good propaganda effect so as to arouse the public awareness.
  5. MASS SCALE OF APPLICATION: The scale of the business should be of a significant size so that mass application of solar energy is possible which will result in a further cost cut due to the mass production of the solar energy related devices.

 



AN EXPLORATION TO A PRACTICAL BUSINESS MODEL FOR THE APPLICATION OF SOLAR ENERGY AS A SUSTAINABLE INDUSTRY IN HONG KONG.

 

MISSION:

 

The mission of the following project is to initialize a paradigm shift to green life in a practical mode.  To achieve this aim, no feeling of deterioration in the quality of  life should be perceived amid the process of switching from fossil fuels to solar energy. Moreover, it must be able to prove itself a profitable business which is able to sustain and grow without outside financial aid or assistance of any kind.

 

OBJECTIVES

 

In designing the detail operations of the business, the following objectives are set for testing if the project  is successful or not.

 

  1. PRACTICABILITY: All university graduates or even high calibre college leavers are the  prospective candidate for fitting the job posts. The success of the project relies on the innovation and creativity in building a new mode of business but not the very high-tech science that can only be mastered by experts rarely found in the market. However, the ISO9001 certification should be a mid-term target for the new firm in proving its quality of management.
  2. REASONABLE PROFIT: The capital investment must be fully paid up in three to five and the business should be able to contribute operational profit above the average market yield rate in another five years at least, assuming that no additional investment is needed.
  3. USER FRIENDLY SERVICES- In the first place, expensive frontier technology being developed in well known research laboratory is not recommended. Only affordable well developed or mature technology is considered so that the risk of discontinued supply of parts and equipments will be minimized. It is of fundamental importance that the learning curve for people switching to the use of the solar energy must be rather shallow. In technical jargon, the migration from fossil energy to solar energy should be “transparent” to the consumer, causing minimal inconvenience to them.
  4. QUALIFICATION CERTIFICATION- In order to gain public recognition and acceptance, the relevant qualification certifications should be attained within the first two to four years. Among all ISO Standards, “Environment ISO 14001” and “Health & Safety OHSAS 18001” should be given the top priority. The fulfillment of these ISO standards will convince the public that the process is absolutely pollution free. The possible pollution or wastage arising from the  disposal of the old devices using conventional energy should also be avoided or reduced.
  5. REPUTATION AND FAME – It must be able to generate very good demonstration or propaganda effect so that the public awareness will be aroused.
  6. RELATIVELY LARGE MARKET SHARE: As the rivals in the market will copy the idea and enter the market, capturing a relatively large share of market and build up the good will in the first year is crucial to the success.  

 

RATIONALE OF THE PROJECT

 

In order to convince the general public to change their habit, the cost of solar energy must be significantly cheaper than what they are paying for the use of fossil fuel.  As scientists have made a huge technological progress in recent years, the efficiency of solar panel is greatly enhanced. According to the market information, the price of solar panel is expected to fall at almost 20% per year until 2010. The service life of the panel can be as long as 20 years or more with guarantee from the manufacturer, making the cost of solar energy is only about US$3 per watt. Furthermore, the supply of high lux LED lighting device is increasing over time. It saves almost 75% of power in comparison with halogen lamp or 90% with tungsten lamp so that its cost can be paid back in 9 months at most. I did an empirical case study in a typical residential building where 8 lighting devices are used in the public area on every floor. The following table shows the power consumption and expense of three conventional light devices per year over a period of 20 years.

 

Table 1 Case Study of Power Consumption of Various Conventional Lighting Device over a Period of 20 Years

 

table 1

 

With no doubt the cost of tungsten lamp is the most expensive solution among all. Then I assume that all the conventional lighting devices are replaced with 8 watt high lux LED having  50,000 hours (or 5 years) of service life and equivalent illumination power at retail market price of HK$300 per unit. The estimated annual cost including the initial cost of the LED lamp over a period of 20 years are shown in table 2.
Table 2 Cost Analysis for Using LED (Light Emitting Diode) over a Period of 20 Years



table 2

 

To everybody's surprise, the saving of money is incredibly huge. The cost of LED lamp can be paid back in the first year and remarkable sum of money can be saved in the following 4 years. There are two possible explanations to this scenario: In the first place,  people tend to stick to their habit,  and secondly, they are not certain about the merit of the new lighting device. Obviously, it is a matter of habit, knowledge and confidence.

 

To find out the cost efficiency of solar energy, I did one more analysis. Assuming that the LED lighting devices are powered by Solar Panels installed on the roof top or open podium of the building. A capital investment will be accrued for the installation of the solar power supply unit including the solar power panel, wiring network, power inverter and energy storage system. Most of the solar panel in the market are claimed to have a service life of more than 20 years. A simple straight line method is applied for the calculating the amortized cost of the solar panel and the others. From internet, I sourced the prices of the system components of the solar power supply unit. They are summarized in the table 3:


Table 3. Cost of Solar Power Supply Unit (with Energy Storage System Lasting for 12 Hours)

 

System Components

Specification

Unit Cost

Sub-Ttl Cost

Sub-Ttl Cost p.a.

Kyocera solar panel :

Qty:  16pcs 1

 

Model: KD210GX-LP

Power:210 watt ,

Voltage: 26.6volt,

Amps: 7.9A

Weight: 40.8lbs,

Dimension: 1.5m x 1m,

Service life: 20 years

US$762 (HK$5944)

HK$95,104/20yrs

HK$4755.2

Power Inverter 2

pic001

Qty: 1 unit

Victron Phoenix 24V 5000VA 230V Sinewave Inverter, Parallelable

Phoenix 24V 5000VA
5000VA Sinewave Inverter
Input Voltage: 19.5-33 VDC
Output Voltage: 230VAC
Peak Power:7000 Watts
Suitable for Parallel & 3 Phase Operation
Price: 2,037.00 (single unit net price)

Service Life: not specified, usually very long

2037

(HK$28518)

HK$28,518/20yrs

HK$1425.9

Energy Storage System (ESS) – about 20kwh

Capacity:

8w x 8 x 20storey x 12hrs

=15.36kwh

20kwh auto-switched rechargeable battery system,

(note: at present lead-acid rechargeable battery is the cheapest among all and the service life is 10 years)

US$200/kwh

HK$31,200/10yrs

HK$3,120

Wiring & Panel Installation (30 sq m)

From roof top or podium to the switching room, service life: more than 20 years

(As the power consumption is small and network is simple, the cost is expected to be very low)

 

HK$10,000

HK$500

 

 

 

Total Cost p.a.

HK$9801.1p.a.

 

Base on the cost information, I worked out the table 4. It shows the cost of using LED lighting devices powered by solar panel. It is clear that the solar energy is not so “cheap” as what people think. Even the price of solar panel have dropped a lot but the ESS (energy storage system) is still accounting for a significant portion of the capital investment for the solar power supply unit. The cost for electric power storage is about US$200 per kilo watt hour in the market. As the lead-acid rechargeable battery is still the cheapest power storage among all others, I had no choice but assume the use of it as the core of the ESS. A 20kwh auto-switched rechargeable battery system will be used for supplying the power to the 160 LED lamps in the night time for about 12 hours. However, new batteries using cleaner and more cost effective new storage technology are expected to be delivered to the market from time to time, pushing the price down at a faster speed in the coming years. Therefore, the calculation as shown in the table is just a conservative projection of the cost. There is a good chance for attaining a further reduction in the energy storage cost.

 

1.       http://www.wholesalesolar.com/products.folder/module-folder/kyocera/KD210GX-LP.html

2.      http://www.cclcomponents.com/product.asp?ID=1766
Table 4 Cost Analysis for Using LED (Light Emitting Diode) Powered by Solar Energy over a Period of 20 Years

 

table 4

Though the cost efficiency enhancement is relatively smaller than the efficiency gain from the replacement of conventional lighting device with LED lamp, somehow it will further reduce the cost from HK$19691.52p.a.  to HK$19401.1p.a.. All the data in the above analysis have convinced us that the use of LOW power lighting devices powered by solar energy is justified in terms of the immense benefit to the consumers, even excluding the external positive effect of the change to environment and society as a whole. Yet the public response to the appeal to the use of such devices and solar energy is sluggish. As what I point out before, people refuse to make the move because they stick to their habit on the one hand and can not be sure if the money they pay for the expensive device at the beginning will be paid back at the end or not on the other hand. The technical knowhow involved in the switch to the new devices also bother the public a lot in taking real action to embrace the new fashion of green life. The suppliers of these low power lighting device and solar power supply unit sell their products in the market like all traditional merchants, which means that the customer must take the active role to make the change.

 

Therefore, I must work out a totally different mode of business so that all the customers will be convinced by us that the change will give them incredible benefit immediately. The following considerations are taken in forming the action plan:

 

  1. Focusing on the Replacement of  Low Power Consumption Application: As the cost of ESS is still high and solar energy is not suitable for supplying energy to high power consumption electric appliance, the solution is suitable for low power consumption application only.
  2. Ability to Create Shocking Effect: The contrast between the financial situations before and after implementation of the energy saving plan must be great enough to shock the consumer and the general public. The success of the project in a housing estate will attract more consumers to join the program voluntarily. Therefore, the older housing estate using traditional lighting device like tungsten lamp are ranked as the best target customers. Moreover, the principle and techniques of actuary will be employed to make the fee scheme more attractive to the customers.
  3. Relatively Simpler Physical Environment: The modification of the power supply network may cost a lot of unnecessary money. Hence, the lighting device in the public area is considered as the most suitable target for the replacement. A minor modification in the switching room will work for the whole building.

 

At last, to make the proposal an irresistible offer, the project will pay the customer the benefit in advance upon the signing of the contract. The solar energy firm will bear all the capital and operational cost in the whole process. The consumer will enjoy the benefit immediately without paying anything. According to the projection as shown in the following table, all the capital investment will be paid back in three years and the project will keep generating profit in the next 15 years or more. In the first five years, the consumer's electric bill will decrease by $50,457p.a. while the profit from the project will be HK$57,642.20p.a. in the first 5 years . The internal rate of return of the project with respect to the initial capital investment of HK$212, 822 will be 27.07614%. This project is a win-win solution to everybody in Hong Kong.

 

From the historical data of the past few decades, I have reason to believe that the price of electric power generated by burning fossil fuels will be  increasing but the prices of solar panel and ESS will keep falling down. The profit will be even higher than estimated. There is no cost for the customers except the permission for the occupation of the useless roof top for the accommodation of the solar panel and no risk of any kind exposed in the implementation of the project. They can get the return at the beginning and are free from any trouble in setting up the power unit. In such a situation, they have no reason to reject the offer.

 

Table 5 Cost and Benefit Analysis for the Application of Plan 2 under the Situation of Case 2

 



table 5

Solar energy will not increase the temperature of the earth as it is already there. The solar power supply unit only convert it into a form that is usable to human being. Heat and carbon dioxide emission will be reduced. All we need is just a little bit innovation and creativity for the initialization of the shift from a traditional mode of power consumption to a new one.

- END -


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- 10/1/2009 -

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