The last year has seen unprecedented pressure on government and business for more ambitious climate action.
The “school strikes for climate” initiated by Greta Thunberg, a determined Swedish teenager, now have a global following of climate activists. Others resorted to different tactics such as the non-violent civil disobedience movement started by Extinction Rebellion. Investors and asset managers have also realised the gravity of the “climate emergency” and are increasingly focused on the materiality of climate-related financial risks to businesses. Pressure on companies to enhance their disclosure in accordance to the recommendations of the Task Force for Climate-related Financial Disclosure (TCFD) has gained significant momentum.
At CLP, mitigating the Group’s impacts on climate change is firmly embedded within the business strategy. Board and Senior Management oversight on climate issues is integrated into the organisation’s governance and enterprise risk management system. Set in 2007, the Climate Vision 2050 provides the entire CLP Group with a clear trajectory to guide its transition towards a sustainable, low-carbon future, and CLP is firmly committed to SDG 7 and 13 as part of this strategy.
The Group has enhanced its disclosure on climate issues this year and structured the discussion based on the four pillars of the TCFD’s recommendations. This will help stakeholders better understand how the Group manages climate-related risks and opportunities, their impact on the business as well as the progress in managing these risks. CLP’s Climate Vision 2050 was used as the basis for conducting preliminary scenario analysis to assess the ongoing impact of climate change to the business.
The CLP Group has also enhanced how it measures its climate impact and actions through new quantitative metrics. The Group is now detailing how it will be meeting its 2050 targets going forward, including how much is being invested in different fuel types as well as different energy transition enablers. In 2019, the Group’s carbon intensity has decreased to 0.62kgCO2/kWh, and the proportions of renewable and non-carbon emitting energy of the generation portfolio have increased to 13.7% and 24.9%, respectively. In addition to direct emissions, a comprehensive review of the Group’s GHG profile was conducted to measure and manage the carbon footprint along the value chain. For the first time, CLP is disclosing its scope 1, 2 and 3 emissions on an equity basis to provide a more comprehensive overview of its carbon footprint.
The lack of concrete actions from COP25 in Madrid does not impede CLP’s ambition to make decarbonisation a reality. To the contrary, CLP will continue to enhance its engagement and partnerships with stakeholders in the transition towards a low-carbon future.
The year 2020 will be an opportunity for an interim review of CLP’s Climate Vision 2050 and its decarbonisation and clean energy targets.
The lack of significant progress for climate action at COP25 in Madrid may take more time to resolve. Regulatory certainty that supports long-term investment for a low carbon transition is not yet fully in place in many markets. Nevertheless, addressing climate change by decarbonising the Group portfolio will remain a principal focus for CLP’s future business development.
CLP is on track to achieve its emission intensity targets, while there remain some challenges in meeting the clean energy targets. Progress has been made in diversifying the Group's portfolio of generation assets by fuel type and geography, but the 2018 strategic partnership with CDPQ in India along with the slower uptake of renewable energy in other key markets has slowed growth in the renewables portfolio in the short term.
The updated Climate Vision 2050 commits the Group not to invest in any additional coal-fired generation assets, and phase out coal from all operations by 2050. There is also a strong commitment to revisit the commitments and targets made under the Vision, and to progressively strengthen them. As a way to track the progress of the targets, CLP will benchmark its ambitions against the globally recognised Science Based Targets initiative backed by the United Nations and accepted internationally.
The decarbonisation of the generation portfolio is only one component in the Group’s vision. CLP sees significant growth opportunities in emerging low carbon technologies in transmission and distribution, electric vehicles and smart services.
CLP will also be taking additional steps to further refine its climate scenario analysis, as part of an effort to update the enterprise risk management register on a longer-time horizon. This will enable the enhancement of not only the TCFD-related financial disclosure but also the further integration of climate risks and opportunities into long-term business planning and investment decisions.
The new publication chronicles how CLP's Climate Vision 2050 has evolved over the years. It is integrated into CLP’s strategies on asset portfolio management, guiding the Group in managing climate-related opportunities and risks.
Read moreAs part of CLP's participation in the WBCSD TCFD Preparer Forum for Electric Utilities, the Company has undergone a comprehensive review of how the recommendations are met and has adjusted its disclosure accordingly.
Read more below
CLP's disclosure following TCFD recommendations, the Company's progress against Climate Vision 2050, and their investments that facilitate the transition to a low carbon economy.
In July 2019, the World Business Council for Sustainable Development (WBCSD) published the implementation guide of the TCFD Electric Utilities Preparer Forum. CLP took part in this Forum along with five of its peers to review disclosures and share best practices for the electric utility sector in aligning with TCFD recommendations.
In this year’s report, CLP has enhanced further its disclosures in line with what constitutes effective disclosure across the four TCFD areas as recommended by the Forum. Climate change is considered in a holistic way in the business strategy, and is therefore embedded in the governance and management processes and discussed in the relevant sections.
The index table outlines where to find the key elements of how CLP responds to the TCFD recommendations in this report:
Climate Vision 2050 (see new publication )
Climate-related scenarios (see below)
CLP has taken steps to consider the resilience of Climate Vision 2050 against the climate-related scenarios outlined below. These scenarios describe alternative outcomes to enable the Group to carry out deeper analysis of potential physical and transition changes. CLP will continue to monitor the operational landscape to better understand the uncertainty that is embedded within these scenarios.
When developing these scenarios, CLP has identified a set of tailored climate-related risks and opportunities relevant to its assets and services across key markets. This exercise referenced third party energy and climate models to understand the scenarios under which these risks and opportunities may be most significant. Scenarios with the most complete qualitative and quantitative coverage of the risks and opportunities identified as material to CLP have been selected for further consideration. These risks and opportunities and how CLP responds are discussed throughout the report, and the summary table below provides easy reference to the relevant sections:
Climate-related risks are embedded in CLP’s risk management process and risk register. They are identified, assessed and managed alongside all other types of risk as part of the Risk Management Framework.
CLP has established risk profiling criteria to help assess and prioritise each identified risk according to its consequence and its likelihood. Currently, CLP categorises its risk profile into shorter-term regulatory, financial, market, commercial, and industrial & operational risks. To further align with the TCFD, CLP tracks these top-tier risks with the two main climate change-related risk drivers: physical and transition. Examples of physical risks include extreme climate events such as cyclones, bushfires, floods and shifts in climate patterns. Transition risks include policy and legal, innovative technologies, market and reputation shifts. Going forward, the Group is developing an additional risk register that tracks risks and opportunities on the basis of longer-term physical and transition changes.
Read more from the Risk Management ReportScenario analysis supplements CLP's current risk management processes for climate-related risks and opportunities by providing a longer-term, forward-looking perspective to assessing climate resilience. The scenarios were selected for the purpose of evaluating the impact that climate-related risks and opportunities would have on the business and future financial performance.
The most material risks and opportunities were identified based on their potential impact to the business and the anticipated level of market disruption they may cause.
The potential impact to the business was analysed based on a longer-term view of what the business would look like aligned with the Climate Vision 2050. Considering the megatrends affecting CLP, the expected changes in the utility sector in the coming decades and progress in the decarbonisation journey, this was deemed more appropriate than comparing it against what the business looks like today.
The basis for anticipated market disruption was formed from a review of 10 providers of energy, climate and technology scenarios, enabling in-depth discussions amongst a wide range of stakeholders. Material risks and opportunities from CLP's key markets including Hong Kong, Mainland China, Australia and India were consolidated at the Group level.
Moving forward, CLP will continue efforts in refining methodologies and tools for climate risk analysis to maintain a comprehensive and up-to-date understanding of the Group’s exposure to material climate-related risks and opportunities and the resilience of current strategy.
Climate Vision 2050, first launched back in 2007, is integrated into CLP’s strategies on asset portfolio management, including acquisitions and divestments, guiding the Group in managing climate-related opportunities and risks. The last target review was announced in 2018, and CLP recently published the updated Climate Vision 2050, pledging not to invest in any additional coal-fired generation capacity and to progressively phase out all remaining coal assets by 2050. Furthermore, the Group committed to reviewing its targets no less than every five years. These commitments underscore CLP’s continued determination to play a part in combating climate change challenges.
Download the updated Climate Vision 2050CLP is on track to meet the 2020 carbon intensity target. The Group’s carbon intensity decreased to 0.62kgCO2/kWh in 2019 as compared to the 2018 level of 0.66kgCO2/kWh. This was mainly contributed by a decrease of total carbon emissions from coal-fired plants, further commissioning of Yangjiang Nuclear Power Station's sixth and final unit since July 2019, an increase of output from renewable assets, as well as additional long-term purchase arrangements in Australia.
There were several major capital investments in 2019 that contributed to the growth of non-carbon portfolio, thereby helping to reduce carbon intensity. Find out more about CLP's portfolio here.
The trajectory of CLP Group’s carbon intensity has been updated, in line with the current business plan and long-term decarbonisation strategy. This is presented alongside the Sectoral Decarbonisation Approach (SDA) trajectory of the Science Based Targets initiative (SBTi). This transparent comparison will help CLP stay on course to accelerate the transition to a science-based target.
The new CCGT unit at Black Point power station is expected to be in operation in 2020.
CLP's carbon intensity will steadily decrease in the coming years.
The main reduction would come from projects in Hong Kong:
A new 550MW gas-fired generation unit at Black Point power station featuring combined cycle gas turbine (CCGT) technology is expected to be in operation in 2020. The new unit will assist Hong Kong in achieving the Government’s target of increasing the share of gas to around 50% of the fuel mix by 2020. Another gas-fired unit of similar capacity is also planned for commissioning by 2023. The two units will contribute to the gradual phase-out of the oldest coal-fired units at Castle Peak Power Station which are expected to reach the end of their operating life in the mid-2020s.
Construction of the largest landfill gas power generation system in Hong Kong at the West New Territories Landfill began in 2018. It would be in full operation in 2020 with generation capacity at 10MW. Subject to the availability of additional un-utilised landfill gas, expansion will be further assessed.
Crucial to enhancing the diversity and security of natural gas supply, CLP is now preparing for the construction of an offshore liquefied natural gas (LNG) terminal that will provide a long-term alternative source of gas to meet increased demand. The Government of Hong Kong has approved the Environmental Impact Assessment of the project and granted an environmental permit in October 2018. Progress has also been made in finalising the contractual arrangements for the supply of LNG and the chartering of the Floating Storage and Regasification Unit (FSRU) vessel for the project, which is expected to complete construction before the end of 2021.
The Clean Energy Transmission System connecting the CLP grid to Guangdong is planned to be strengthened by 2025, enhancing the accessibility to clean energy resources to help reduce fossil fuels use in Hong Kong.
Carbon intensity data for CLP Power Hong Kong is available here
For over 100 years, Australia’s economic growth has been powered by an abundance of thermal coal.
Regions have developed around coal basins and transmission infrastructure has connected this power source to metropolitan centres and manufacturing facilities. While Australia is similarly endowed with excellent solar and wind resources, there are many technical, social and economic challenges in transitioning away from fossil fuels.
The evolution of Australia’s energy system has begun, and an ageing coal fleet ensures it will continue. Increasingly, new technologies and community and government ambitions to reduce emissions are changing the mix of energy sources.
EnergyAustralia is committed to reducing GHG emissions in Australia by progressively phasing out coal-fired power, while integrating new, cleaner supplies of electricity. The phase-out of coal fired power should be done over a timeframe that provides for a carefully managed transition.
Blackouts in southern parts of Australia through extreme summer heat in early 2019 illustrate how finely balanced the system is and how little reserve electricity is available. The retirement of several major coal-fired power stations in Australia over recent years, without replacement dispatchable generation, has undeniably reduced the electricity system’s ability to provide reliable power. Collaboration between businesses, communities, government and unions will be required to transition at least cost with minimal disruption to people and the economy.
EnergyAustralia has committed to provide at least five years' notice before closing Yallourn power station.
EnergyAustralia plans to run Yallourn Power Station to the end of its technical life in 2032, or as long as policy and regulation permit, and so long as there is not a substantial change in the market. The Company has committed to provide at least five years’ notice before closing Yallourn, where circumstances remain in its control. EnergyAustralia is also planning to schedule the retirement of the Mount Piper station at the end of its technical life at around 2043. The Company continues to invest in comprehensive maintenance programs to secure the reliability of these assets.
EnergyAustralia will closely monitor the energy policy landscape in Australia, and the overall development of the wholesale electricity market. While any move to accelerate the retirement of coal-based assets would help bring CLP closer to our science-based targets, the impacts on workers and regions would be important considerations and EnergyAustralia would have to secure the necessary replacement generation to balance the company's commitment to reliability and affordability.
Find out more about EnergyAustralia's GHG emission data in 2019 Download EnergyAustralia's carbon commitmentsThe following charts demonstrate how CLP has diversified its investment, portfolio and operating earnings to include a broad range of fuel type and non-generation business activities.
Decarbonisation of the generation portfolio cannot be achieved by simply replacing generation plants that use fossil fuel with those that use non-carbon energy sources. Investment in a broad range of transition enablers is required to transform the energy system. These enablers include decentralised generation and smart energy services, transmission and distribution systems, battery or other energy storage solution, or electric vehicle charging facilities, making full use of advanced technologies and innovation.
Group investment in transition enablers is focused on the Hong Kong and Australia markets, where CLP is engaged in retail business. Below are a few examples of these enablers:
In Hong Kong, under the 7-year roll-out plan approved by the Government in 2018, up to end-2019, over 420,000 smart meters have been connected, equivalent to a 16% coverage of the service area.
In Australia, the number of installed smart meters is even higher, at 594,000 with a coverage of over 27%.
Over 200 charging points have been installed for customers across Hong Kong; in addition, there are over 300 charging points in CLP premises to support greater EV adoption in Group operations.
SmartCharge, a joint venture between CLP and HKT, has been actively offering and deploying EV charging solutions in private and public car parks in Hong Kong. There are a number of projects in the construction pipeline and these will be installed in the coming year.
By the end of 2020, all EnergyAustralia sites will have EV charging facilities.
In Hong Kong, around 1,500 commercial and industrial customers signed up for the demand response programme, and together around 62MW of demand reduction was achieved in 2019.
EnergyAustralia’s demand response contracted capacity now stands at 56MW. Over 20,000 household customers have opted in to the PowerResponse programme.
The Feed-in Tariff scheme in Hong Kong had an encouraging start, with 8.7GWh of electricity generated from renewable sources through the scheme in 2019.
EnergyAustralia has over 194,000 business and residential solar customers.
As more renewable energy is being introduced to the grid, the challenges posed by its intermittent nature, which does not necessarily follow the local load profile, requires enhanced grid connectivity and system balancing solution on a larger scale.
In 2019, CLP India entered into the power transmission sector. Through acquisition, 240 km of transmission line has been handed over to CLP India’s portfolio in 2019 and an additional 575 km will be handed over in 2020.
The Clean Energy Transmission System connecting the CLP grid to Guangdong is planned to be enhanced by 2025, improving accessibility to clean energy resources and further reducing fossil fuel use in Hong Kong.
EnergyAustralia's Ballarat energy storage system has been responding to demand and supply imbalances since December 2018, and the Gannawarra energy storage system since March 2019, with a total installed capacity of 55MW/80MWh.
These systems recharge from the grid at night when excess generation capacity is available and prices are low, and provide dispatchable energy during times of peak demand when prices are high, while improving grid stability and reliability at the same time.
Today, battery storage solutions require a government subsidy. Battery costs will continue to decline over time, allowing the further deployment of storage solutions which help build a flexible energy supply market.
Large scale battery storage at Gannawarra, Australia.
Experience in many countries suggests that although good progress is being made with decarbonisation in the power sector, the transportation sector is proving harder to decarbonise, despite it representing a significant proportion of total GHG emissions. With numerous non-carbon sources increasingly available for electricity generation, electrification can make a significant contribution in the global effort to decarbonise transportation.
One of the two EVs recently added to EnergyAustralia's vehicle fleet.
Looking at road transportation, technology is advancing fast in the development of electric vehicles (EV), with many more models becoming available. There are still challenges though, with potential users needing some reassurance over vehicle range as well as the availability of charging points. Total cost of ownership is still sensitive to vehicle purchase price differences and the relative running costs of fossil fuels and electricity. Although constantly improving, EV performance in terms of power and range still falls behind internal combustion engine (ICE) vehicles in some industry specific applications, such as Heavy Goods Vehicles.
Having said that, there is significant potential for reductions in both carbon and roadside air emissions by using EV technologies that are readily available. One example is the suggestion from the public engagement exercise on Hong Kong's Long Term Decarbonisation Strategy to promote adoption of electric vehicles (EVs) in the city. A pilot study showed that commercial EVs have about 30% less emissions on average than their internal combustion engines (ICE) counterparts on the same mileage travelled.
According to the Global EV Outlook published by the International Energy Agency (IEA) in 2019, GHG emissions for a mid-size car on a fuel and vehicle life-cycle basis is about one-third lower for EVs, based on a global average carbon intensity of electricity at 0.518kgCO2/kWh, which is roughly equivalent to Hong Kong’s current fuel mix. The actual carbon intensity of electricity will continue to decline in Hong Kong as the fuel mix shifts to natural gas in the coming years. With this in mind, CLP is actively developing EV infrastructure in Hong Kong by providing free charging facilities to the public and helping individual and commercial organisations to install relevant facilities.
To further demonstrate CLP’s commitment to EV development, in 2019, the Company joined the global EV100 initiative run by the international non-profit organisation The Climate Group, a first amongst Hong Kong companies.
CLP has committed to transitioning its fleet of more than 1,000 cars to EVs by 2030 and encouraging more employees to switch to EVs. Specifically, CLP’s target is to convert all company vehicles weighing below 3.5 tonnes and half of those weighing between 3.5 and 7.5 tonnes to EVs by 2030, where realistically feasible. The scope includes vehicles in Hong Kong, Mainland China, India and Australia. The shift has the dual benefits of reducing GHG emissions and reducing roadside air pollution. This is particularly important for many of the densely populated Asian cities in which the Group operates.
Many customers would like to contribute more to combating climate change. In Hong Kong, CLP Power launched the Feed-in Tariff (FiT) Scheme in October 2018 and the Renewable Energy Certificates (RECs) in January 2019 to encourage participation from the community to support local RE development.
The FiT Scheme, where CLP Power will pay for electricity generated by small-scale RE projects connected to its electricity grid, has received a strong positive response from the public since its launch. Read more in the case study below.
Meanwhile, customers who want to support the local development of RE but are unable to accommodate an RE system of their own now have the option of subscribing for RECs which represent the environmental attributes of electricity produced by local RE sources and purchased by CLP. As of end-December 2019, environmental attributes of over 3GWh units were sold through RECs.
Read more on CLP demand-side management efforts in Hong Kong
EnergyAustralia customers can subscribe to PureEnergy, where they can purchase accredited green energy which feeds into the grid on their behalf. The GoNeutral Programme allows residential customers to opt in to fully offset the carbon emissions associated with their home electricity usage, at no added cost to them. Over 220,000 customers have opted in to Go Neutral, making it one of the largest Climate Active certified offset programmes in Australia.
Cathay Pacific Catering Services (HK) Limited has installed solar panels with a combined size of 3,000 square metres on the rooftop of its facilities.
With the introduction of CLP’s Renewable Energy Feed-in Tariff (FiT) scheme in May 2018, CLP Power Hong Kong received overwhelming support from the public with 6,900 applications by the end of December 2019.
More than 80% of these applications have been approved. Upon completion, these projects will represent a total of 90GWh of green electricity a year – equivalent to the annual energy consumption of about 22,000 households and a reduction in carbon emissions of around 45,000 tonnes a year.
Participating customers came from a variety of segments with 80% of applications from village houses, and the remainder from commercial and industrial buildings. Cathay Pacific Catering Services (HK) Limited has installed 828 solar panels with a generation capacity of 299kW and a combined size of 3,000 square metres on the rooftops of its two facilities. It is expected to generate 320,000kWh of electricity a year, which will make their installations the largest system under one customer in the community of the Hong Kong International Airport.
Similarly, another leading educational institution, Li Po Chun United World College of Hong Kong (LPCUWC), has also signed up to the FiT scheme and innovatively developed a solar-scholarship for its students using 100% FiT revenue contribution as funding for students coming from grassroots families. CLP conducted solar assessment to support their installation of 1,168 solar panels, with generation capacity of 403kW and annual generation of 480,000kWh approximately.
CLP has been promoting the awareness of FiT and REC initiatives through a variety of channels. Overall in 2019, CLP organised more than 50 seminars promoting these initiatives to more than 3,000 participants.
LPCUWC's solar scholarship is funded by the FiT revenue from the 1,168 solar panels on the school's rooftop.
Richard Lancaster, CEO, speaks at a panel themed “Profit with Purpose” alongside Mr Ronnie Chan (left), Chairman of Hang Lung Properties Limited, Mr Henry Fan (second from left), Chairman of Hong Kong Hospital Authority, and Dr Ruth Shapiro (right), Founder and Chief Executive of Centre for Asian Philanthropy and Society.
Sound public policies are required to balance the social, economic and environmental needs and support the long-term development of communities. CLP participates in a range of industry and professional bodies to discuss the major issues deemed important to ongoing viability and success, in particular climate change and energy.
When joining any organisation, respective Public Affairs teams act as a control point and will consider the appropriateness of the membership request. The Group CEO or respective MD approves the participation, to ensure the position of the organisation supports CLP’s mission, in particular its ambition towards decarbonisation.
Following is a list of organisations which are active in climate change and broader energy market policies, and to which CLP devotes significant resources through membership, sponsorship, and other contributions including active participation by senior management. CLP has contributed annually over HKD 250,000 (or equivalent, in cash) on average over the last 3 years to the organisations listed below (by alphabetical order).
