Governance highlights

It is chaired by the Group Chief Executive Officer and leads and oversees all matters related to sustainability in the CLP Group. David Simmonds, Chief Administrative Officer is responsible for CLP’s climate change strategy on the SEC.

Focusing on CLP's implementation of the TCFD recommendations, a cross-functional working group covering key markets identifies, analyses and manages the climate risks and opportunities. This is coordinated by Group Sustainability with participation from fleet management, renewable energy, finance, risk management and investors relations. A broad range of other business functions are also engaged in the process, including business development and planning, legal and policy, innovation, health and safety, environment, human resources, as well as representatives from each business unit.

The SEC reviewed the material risks and opportunities across all key markets and selected scenarios. The SEC will also consider the steps to be taken next to further evaluate the impacts of scenarios on Climate Vision 2050.

Understanding carbon emissions along CLP’s value chain

As a result, the greenhouse gas profile and disclosure has been focused on the Scope 1 and 2 emissions. To create transparency and to better manage the carbon footprint of the supply chain, CLP has conducted a comprehensive review of the Scope 3 emissions on an equity basis and will start reporting on this going forward.

Seven out of the 15 Scope 3 categories are considered relevant to CLP. Fuel- and energy-related activities, use of sold products and capital goods are the three that contribute the biggest carbon footprint under Scope 3. Find out more here.

Risk management highlights

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.

Scenario 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.

Reducing emissions in Hong Kong

The new CCGT unit at Black Point power station is expected to be in operation in 2020.

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.

Challenges along EnergyAustralia’s decarbonisation journey

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.

EV100 – Greening road transport

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.

Supporting the growth of renewables in Hong Kong

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.

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.