Decarbonisation and digitalisation are at the core of CLP’s business, and sustainability is fully integrated into this strategy.
Responding to climate change 
Harnessing the power of technology 
Reinforcing cyber resilience and data protection 
Building an agile, inclusive and sustainable workforce Harnessing the power of technologyReinforcing cyber resilience and data protectionBuilding an agile, inclusive and sustainable workforce
The COVID-19 pandemic has presented many new challenges this year, but it has not altered CLP’s commitment to climate action. The pace of change has expedited around the world, underscoring the importance for CLP to accelerate its transition to a low-carbon economy.
Recent years have seen high-impact climate events including typhoons, floods, droughts, heatwaves and bushfires around the world, often in the markets where CLP has a presence. The bushfires in Australia over the summer of 2019/2020 burned over 24 million hectares, with the largest losses in the eastern states. In Mainland China, the worst flood in over two decades occurred in the 12 provinces of central and southern China during the year’s rainy season.
There is ample evidence that the impacts from climate-related events are costly. The insurance damage from the top 10 climate disasters is estimated to have amounted to over US$150 billion in 2020.
In response to the economic damage caused by the COVID-19 pandemic, the concept of ‘build back better’ has emerged, where government economic stimulus efforts are being directed towards climate action. Governments and businesses have prioritised spending to accelerate the delivery of clean power, enable clean mobility and ensure that recovery policies align with net-zero greenhouse gas (GHG) emissions to achieve a green recovery. For CLP, decarbonisation remains a strategic priority and it aligns with the Company’s commitment to SDG 7 – Affordable and clean energy and SDG 13 – Climate Action.
The year 2020 is a milestone under CLP’s Climate Vision 2050. The Company is pleased that its carbon intensity has reduced to 0.57kgCO2/kWh, surpassing the 2020 decarbonisation target of 0.6kgCO2/kWh.
Due to portfolio changes and evolving market circumstances the clean energy targets for 2020 were not met. A review of CLP’s decarbonisation targets to 2050 is now underway, in line with the Company’s commitment to strengthen them at least every five years.
This year, the Group has further enhanced its disclosure. It has followed the Task Force on Climate-related Financial Disclosure (TCFD) recommendations to provide transparent and credible climate-related information to stakeholders, including investors and capital providers. CLP business units have also strengthened analyses on the risk and opportunities from climate change specific to their markets.
The Group's progress on its key climate change metrics, as at 31 December 2020, is outlined below.
Both governments and capital providers are prioritising low-carbon investment as a means of economic stimulus. As a lead-up to COP26, a continued acceleration of country pledges towards carbon neutrality by 2050 is expected.
At the international level, there were keen expectations of the 26th United Nations Climate Change Conference of the Parties (COP26), originally scheduled to take place in November 2020 in Glasgow, UK. Under the Paris Agreement, 2020 was to be the year when countries stepped up their ambition and enhanced their Nationally Determined Contributions (NDCs) to slow or reverse growth in GHG emissions. COP26 was postponed to November 2021 due to the COVID-19 pandemic.
Despite the COP26 deferment, during 2020, nations continued with their pledges towards carbon neutrality. The EU in March and the UK in June announced their ambitions to become carbon neutral by 2050. China followed suit in September with a pledge to become carbon neutral by 2060. Both Japan and South Korea made announcements in October for carbon neutrality by 2050. The same commitment for carbon neutrality was announced by Hong Kong in November. Immediately after taking office, US President Joe Biden signed an Executive Order for the US to rejoin the Paris Agreement. A US national commission is expected to be appointed to accelerate domestic action and international leadership on climate change.
As countries step up their respective commitments, companies are also expected to raise their ambition and accelerate decarbonisation efforts. Investors, especially those focusing on the long term, recognise the value of climate change risk management, and increasingly take these into consideration when reviewing their portfolios.
This convergence of external investor pressure, government support for carbon neutrality and TCFD disclosure is clearly being felt by companies in carbon-intensive sectors. While roadmaps on how to achieve carbon neutrality are yet to be determined, further details are expected to emerge ahead of and during COP26. CLP will continue to monitor the policy landscape and development of different performance standards, and feed this information into its 2021 review and strengthening of CLP's Climate Vision 2050 targets.
The 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
CLP's climate disclosure follows the TCFD recommendations. The Company's disclosure outlines progress against the CLP Climate Vision 2050, climate-related risks and opportunities, and investments facilitating the transition to a low- carbon economy.
CLP’s progress towards its Climate Vision 2050 targets is summarised in the table below. Performance is tracked on an equity plus long-term capacity and energy purchase basis to represent the Company’s decarbonisation effort comprehensively. Performance on an equity basis continues to be disclosed for comparison.
2020 targets | 2020 performance | ||
|---|---|---|---|
On an equity plus long-term capacity and energy purchase basis | On an equity plus long-term capacity and energy purchase basis | On an equity basis | |
Carbon intensity (kgCO2/kWh) | 0.60 | 0.57 | 0.65 |
Renewable energy capacity (percentage of total capacity) | 20% | 13.5% | 12.8% |
Non-carbon emitting energy (percentage of total capacity) | 30% | 24.4% | 20.9% |
Climate Vision 2050 is CLP’s foundation to guide the overall business strategy, providing clear direction to manage climate-related risks and opportunities. First launched in 2007, it is integrated into CLP’s strategies for asset portfolio management, including acquisitions and divestments. Over the years, the targets have been reviewed and strengthened in response to changing policy drivers and technological advancements. CLP’s key pledges include:
Not adding new coal-fired generation assets;
Progressively phasing out the remaining coal-based assets before 2050; and
Revisiting and strengthening the Company's decarbonisation targets at least every five years.
In 2020, the Group further reduced its carbon intensity to 0.57kgCO2/kWh down from the 2019 level of 0.62kgCO2/kWh. The reduction was achieved by:
Operation of the new combined-cycle gas turbine (CCGT) unit in Black Point Power Station in Hong Kong as a baseload unit since July 2020, reducing output from the coal-fired Castle Peak Power Station by almost 60%.
A close to 25% decrease in output from coal-fired Jhajjar Power Station in India. Output from thermal assets in Australia was also reduced slightly as a result of the combined impact of COVID-19, asset outages, and the planned outage and upgrade of Mount Piper.
Some increase in nuclear power generation at Daya Bay and Yangjiang.
Higher total output from renewable assets and those under long-term contracts at EnergyAustralia through power purchase agreements.
There were several major capital investments in 2020 that contributed to the growth of the Group’s renewable and non-carbon portfolio. This brought each portfolio closer to the 2020 targets of 20% and 30% of the Group’s total portfolio respectively. However, these investments were not enough to allow CLP to catch up on the Company's slow growth in the renewables market in prior years, which has resulted in CLP not being able to meet its 2020 clean energy targets.
Read more on CLP's portfolio hereThe trajectory of the Group’s reduction in carbon intensity has been updated, in line with the current business plan and long-term decarbonisation strategy. As in the previous year, it is presented alongside the Sectoral Decarbonisation Approach (SDA) trajectory of the Science Based Targets initiative (SBTi) in the graph below. This transparent comparison helps ensure CLP remains on course with its decarbonisation target.
2020 is a milestone year for CLP’s Climate Vision 2050 targets. Looking back over the last decade, CLP has been actively investing in renewable and non-carbon energy generation to decarbonise its portfolio.
CLP has made strategic investments to decarbonise its power generation over the years, despite the fact that the Company's carbon intensity temporarily increased:
In 2013 when CLP acquired the Mount Piper and Wallerawang Power Stations as part of the NSW electricity privatisation process; and
In 2014 when the equity share of Hong Kong’s fossil-fuel portfolio increased from 40% to 70%.
Irrespective, the Company remained focused on growing the share of renewable and nuclear energy, including purchasing renewable energy capacity through long-term power purchase agreements. Combined with operational efficiency measures, the Group’s carbon intensity declined by 28% from 0.80kgCO2/kWh in 2010 to 0.57kgCO2/kWh in 2020 .
The clean energy targets set back in 2010 were based on high growth assumptions. By 2011, the initial renewable target of 5% of total capacity was met at 11.3%, and by 2012, it reached an encouraging 20.2%, which at the time already surpassed the 2020 renewables capacity target. However, changes in the Group’s ownership of its subsidiaries in the past few years has reduced its renewable and non-carbon capacities to 13.5% and 24.4% respectively.
Most notably, in 2018, the Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) took a 40% equity share in CLP India, which included 1,094MW of gross renewables capacity at the time. This strategic partnership with CDPQ is based on the premise of expanding CLP India’s low-carbon business in the long-term. An additional 400MW of renewable capacity has been added by CLP India, since this partnership with CDPQ has been formalised.
Over the last three years, market-based support mechanisms for renewables projects have in many cases been halted, often due to expectations that the levelised cost of energy (LCOE) has dropped to such a level that subsidies are no longer required. As an additional complexity for CLP’s existing renewable assets, receivables for national subsidies in China and receivables for revenues in India have reached a total of HK$2.5 billion in 2020. This combination of factors has made the addition of renewable investments into the CLP portfolio more challenging. Nevertheless, besides the additional renewables capacity in India, CLP’s businesses in Mainland China and Australia continue to support renewables in their portfolios.
As the Company takes stock of its performance in the last decade, CLP’s current target review will need to balance the different expectations from stakeholders, government policies, technologies and market realities.
Between 2010 and 2020, on an equity basis CLP’s carbon emissions increased by only 2% while the energy sent out increased by 24%.
In 2020, the GHG intensity of the electricity sold by CLP Power in Hong Kong reduced by 26%, down to 0.37kgCO2e/kWh, compared to 0.50kgCO2e/kWh in 2019.
CLP continued with its commitment to decarbonise Hong Kong’s electricity generation and made progress in key capital projects. The reduced GHG intensity is due to:
The increase in share of natural gas-fired generation.
The operation of the landfill gas power generation units in the West New Territories (WENT) Landfill of Hong Kong.
The addition of distributed solar generation from the Feed-in Tariff Scheme.
Reduced output from the coal-fired Castle Peak Power Station by almost 60%.
The first new 550MW combined-cycle gas turbine (CCGT) unit (D1) at Black Point Power Station went into operation in 2020. This enables CLP to support the Government’s target of increasing natural gas use to around 50% of Hong Kong’s fuel mix for power generation in 2020.
Plans are in place to further lower the city’s GHG emissions. For Black Point Power Station, the early civil works for the second new gas-fired generation unit (D2) have already begun. The engineering, procurement, and construction contract for the project has been awarded and the unit is targeted to start operation by the end of 2023. These two CCGT units will contribute to the gradual phasing-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.
The offshore liquefied natural gas (LNG) terminal is another mega project crucial to enhancing the diversity and security of natural gas supply for power generation in Hong Kong. Construction of the offshore LNG terminal commenced this year after engineering, procurement, and construction contracts were awarded in January for the offshore jetty facility and subsea pipelines.
Meanwhile, enhancement of the Clean Energy Transmission System connecting the CLP grid to Guangdong is progressing, with completion expected by 2025. The system will enable CLP to access more zero-carbon electricity from Mainland China.
In parallel, CLP will continue to develop local renewables through the Feed-in Tariff Scheme, connect with further waste-to-energy projects from the Government, and study other potential renewable energy sources such as offshore wind. Under consideration is the feasibility of constructing an offshore wind farm in the south-eastern waters of Hong Kong. Recent advances in the technology of offshore wind turbines and an increasingly mature supply chain in the region have made it appear more feasible.
Find out more about Hong Kong's decarbonisation plan Read more on CLP Power’s effort in providing cleaner electricityThe new CCGT unit at Black Point Power Station has led to significant reduction in CLP Power's GHG intensity in 2020.
Starting in 2019, CLP reported its Scope 1 and Scope 2 GHG emissions on two bases – operational control as well as equity and long-term capacity and energy purchases – to provide a transparent overview of its decarbonisation efforts and progress.
Scope 3 emission is reported on an equity basis. 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 categories contributing the biggest carbon footprint to CLP under Scope 3.
Read more on the compilation of CLP’s GHG profileIn 2020,CLP's total Scope 1 and Scope 2 GHG emissions have reduced to 45,349 ktCO2e on an equity basis, and to 44,023 ktCO2e on an operational control basis.
CLP's Scope 3 GHG emissions reduced by 21% in 2020. There were significant reductions from Category 3 - Fuel- and energy-related activities, which is also the most material category, and from Category 2 - Capital goods.
The TCFD has recently published additional guidance on scenario analysis for non-financial companies, which CLP is using to guide its own approach. The TCFD recommendations call for businesses to consider their strategic plans against two or more climate scenarios. These scenarios offer differing views of the future over a typical horizon of 20 to 30 years. By exploring multiple scenarios, the Group can carry out deeper analysis of the potential physical changes to the climate and changes to the operational landscape that may occur alongside the transition to a lower-carbon economy. CLP has taken steps to consider the resilience of its Climate Vision 2050 against the climate-related scenarios outlined below.
The three scenarios cover:
A ‘business-as-usual (BAU)’ view of the future, in that limited additional progress is made to decarbonise energy systems and global warming exceeds 3°C by 2100.
A ‘low carbon’ case where emissions growth is reduced or reversed (depending on location) and warming is limited to 1.5-2°C by 2100.
A third scenario added in 2020, which tracks a path from high to low carbon, but over a compressed timeframe, resulting in some expected disruption to the operational landscape. This ‘Deferred Transition’ scenario is in line with the recommendations of The United Nations Principles for Responsible Investments (UNPRI) and the Network for Greening the Financial System (NGFS).
CLP will continue to monitor signpost indicators, such as carbon pricing and cost of renewables, to better understand the uncertainty that is embedded within these scenarios.
Scenario | Example trends1 |
|---|---|
Warming of 3-4oC by 2100 (based on Intergovernmental Panel on Climate Change (IPCC) Representative Concentration Pathway 8.5 and IEA Stated Policies Scenario (STEPS)) |
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Warming of 1.5-2oC by 2100 (based on IPCC Representative Concentration Pathway 4.5 and IEA Sustainable Development Scenario (SDS)) |
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Deferred Transition scenario (based on the UNPRI's Inevitable Policy Response and NGFS climate scenarios, where a late or deferred transition from the 3-4oC pathway to the 1.5-2oC pathway occurs) |
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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.
These transition and physical risks are discussed in the sections below. Opportunities and how CLP responds are discussed throughout the report. The table below provides easy reference to the relevant sections:
Risks | Opportunities | |
|---|---|---|
Short term (0-1 year) | ||
Medium term (1-5 years) | ||
Medium to long term (5+ years) |
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To help implement the TCFD recommendations, CLP has established a cross-functional working group to analyse and manage the climate risks and opportunities of the Group's key markets.
This working group is coordinated by the Group Sustainability Department with participation from fleet management, renewable energy, financial planning, risk management and investor 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, and representatives from each business unit.
In 2020, this working group focused on deepening the analysis on the implications of a range of climate scenarios for CLP’s business units.
The Sustainability Executive Committee (SEC) reviewed the material climate risks and opportunities across all key markets and selected scenarios. The SEC and the Board Sustainability Committee have considered the various scenarios put forward in updating the carbon intensity targets for the years 2030, 2040 and 2050, including the deliberation of setting a net-zero target for 2050. How the financial impact of the climate risk and opportunities could be assessed in the analysis of these scenarios was also discussed, and the working group's study on climate scenario analysis will continue to inform the discussions in the coming year.
EnergyAustralia has conducted scenario analysis focused on the specifics of its market.
In 2020, EnergyAustralia undertook a review of climate risks, by considering different policy and regulatory scenarios. In line with the CLP Group Risk Management process, EnergyAustralia has a robust risk management process in place. However, it was recognised that climate change could impact the entire EnergyAustralia business. Consequently, an in-depth assessment was conducted to supplement the standard risk management plan, and ongoing risk evaluation cadence.
The identified risks cover three areas:
Transitional risks considering different levels of policy and regulatory changes and plausible market reactions to such changes.
Physical risks impacting the operations across multiple commodities and the safety of on-site workers, with financial impacts felt across physical output and wholesale positions.
The impacts of extreme weather events on customers who may be less able to pay their bills, and on the customer service teams.
The review was led by the EnergyAustralia executive team with participation from across the Company. Cross-functional workshops were also held with senior management participation. The results were endorsed by the Group's Executive Risk Management Committee.
EnergyAustralia has set a goal to be carbon neutral by 2050. Read their statement here.
The large battery at Gannawarra, underpinned by EnergyAustralia, is an example of the changing technologies shaping the energy system.
If the world continues on the current business-as-usual trajectory of GHG emissions, transition will occur only to the extent defined by currently implemented government policies, as well as policy announcements and targets which are likely to arise. Transition risks and opportunities are not significant under such a scenario.
However, a deeper and faster transition requires significant development in government policies and regulation, technology and the renewable and low-carbon market.
For CLP, three transitional trends have been identified to be most significant. They pose risks to the current business model as they erode the Company's existing value proposition. However, they present opportunities if the Company responds accordingly.
Technology developments in electric vehicles (EV) and heat pumps will drive down costs and increase their competitiveness against incumbent, fossil fuel-based technologies. Overall demand for electricity will increase. In tandem, the market for providing energy services to the building sectors is also expected to grow.
The electrification of energy consumption could lead to increased corporate customer demand for renewable power purchase agreements from CLP. It could present opportunities to diversify from the current centralised generation business model towards an asset-light business model, for example, by providing EV charging infrastructure, energy services, and demand-side management and demand response.
Find out how CLP harnesses the power of technology to capture these opportunitiesTechnology improvements and government policies will increase the attractiveness of low-carbon electricity generation business models including both large-scale renewables and battery storage, as well as distributed assets such as rooftop solar and virtual power plants.
There is also potential for increased competition in the energy services market due to technology improvements and the emergence of new business models, in particular in the digital space. New market entrants could be from non-traditional electric utility companies, causing disruption to current markets and increasing competition.
A possible outcome for CLP is a smaller market share in electricity generation due to competition from disruptive new market entrants. This is most likely to be material in China, India and Australia where the electricity market is open. Increased competition may also reduce the tariff received from renewable energy in the competitive renewable auctions held in these markets.
Regulatory intervention could take a number of forms. New low-carbon policies could have significant financial impacts on high-emitting assets, especially if they are enforced suddenly and without warning. On the other hand, policies could also subsidise low-carbon generation assets.
The risks to CLP arise if these interventions are not anticipated and effectively managed in asset planning. These risks include regulatory pressure to phase out legacy coal and gas assets; and increasingly stringent climate policies such as emission standards or carbon pricing requiring increased capital expenditure and operational expenditure on thermal generation plants to meet regulations.
CLP is closely monitoring the policy landscape in its markets. The government policy updates listed below are expected to impact on the operating environment in the near term:
In November 2020, the Hong Kong Council for Sustainable Development recommended that Hong Kong should progressively advance to net-zero carbon emissions by 2050. Following from these recommendations, the Chief Executive of Hong Kong committed the city to strive to achieve carbon neutrality before 2050 in the 2020 Policy Address.
Some of the proposed initiatives will have a direct impact on CLP’s business, these include: securing interim lower carbon options (e.g. LNG); ramping up local renewable energy production and storage; and sourcing zero-carbon energy regionally and locally including potentially green hydrogen, for example, as and when available. CLP Power will continue to use its expertise to work with the Government and community in delivering a stable and reliable electricity supply solution for the city. Read CLP Power’s response here.
During the UN General Assembly in September 2020, China’s President Xi Jinping announced that China will aim to peak carbon emissions before 2030 and reach carbon neutrality before 2060. To this end, China will accelerate electrification, enlarge the scale of renewable energy, implement major enhancement on abatement technologies, and establish a well-functioning national carbon market.
Since the announcement, there has been further development on the national carbon market. The Ministry of Ecology and Environment (MEE) released the final national carbon market regulatory framework effective in February 2021, marking the operational launch of the nationwide emission trading system (ETS). The latest allocation plan (power generation sector) adopts benchmarking as the main allocation approach and includes processes for pre-allocation and ex-post adjustments. The scope of the scheme will cover 2,225 asset types including coal and gas plants.
The Government is in the process of developing a 2030 carbon emissions peaking plan, where the national ETS is expected to be one of the key policy instruments to realize the country’s climate ambition.
India submitted its Nationally Determined Contribution (NDC) in 2015 for implementation of the Paris Agreement in the post-2020 period. The NDC has eight goals including three quantitative targets:
Reduce emissions intensity of Gross Domestic Product (GDP) by 33% to 35% by 2030 from 2005 levels;
Achieve about 40% cumulative electric power installed capacity from non-fossil fuel based energy resources by 2030; and
Create an additional carbon sink of 2.5 to 3 billion tonnes of CO2e through additional forest and tree cover by 2030.
In 2020, the Government of India established a new taskforce to coordinate different policies required for its emissions target under the Paris Agreement, as well as international and domestic carbon market activities. Renewable energy continues to be the dominant form of energy added to India's electricity system and policy initiatives are moving to address issues of storage and firming capacity as penetration of renewables continue to rise. The Government is planning to issue guidelines for domestic and international rules for carbon pricing, market mechanisms, and other instruments. Establishment of domestic emissions trading schemes for both particulates pollution and GHG emissions are also being studied. These initiatives are expected to facilitate the launch of a domestic carbon market in India, which would be on a voluntary basis in the initial stage.
The Federal Government has confirmed that its 2030 target under the Paris Accord will remain at the 26% to 28% emissions reduction target already promised on 2005 levels and has not set a firm date for carbon neutrality. The State Governments have moved ahead with ambitious policies and support for decarbonisation. All States have separately confirmed targets for reaching carbon neutrality by 2050.
Of note, the State of New South Wales recently announced its Electricity Infrastructure Investment Roadmap to drive investment in up to 12GW of renewable energy and 2GW of long-duration energy storage over the next decade. The plan will accelerate the design and formation of large-scale renewable energy zones.
In Victoria, the Government is advancing complementary policies targeting emission reductions across sectors to meet its 2025 and 2030 targets. The Victorian Government is planning further support for new renewable energy assets, has committed to support the construction of a major utility-scale battery in Moorabool, and has announced mechanisms to drive electricity usage reduction through energy efficiency.
Under the Paris Agreement, 2020 was to be the year when countries stepped up their ambition. For the corporate sector, science-based targets (SBTs) provide companies with a clearly-defined decarbonisation path in line with the Paris Agreement goals.
The electric utilities sector faces several challenges in setting SBTs. The challenges range from technical ones such as reporting emissions from their value chains, defining appropriate scopes and boundaries, to strategic ones such as ensuring a just transition away from fossil fuel-based power generation, or abating certain sources of value chain emissions.
Together with four other peer companies from the sector, CLP participated in a World Business Council for Sustainable Development (WBCSD) working group to share its experience and develop solutions to these challenges. The working group's findings were summarised in the report Setting science-based targets: A guide for electric utilities, published in June 2020.
In Hong Kong, CLP is a signatory to the Business Environment Council's Low Carbon Charter which was first launched in 2019. Initially focused on the property and construction sector, the Charter was expanded in 2020 to companies from all sectors. Signatory companies collectively contribute towards Hong Kong’s long-term decarbonisation by pledging to set and achieve carbon reduction targets, and report their progress on an annual basis.
Hendrik Rosenthal, Director - Group Sustainability (right), speaks at a panel themed “Mitigation, Adaption and Building Resilience”. The Company actively participates in local and international organisations and events that promote climate action.
Evidence suggests that, under the 1.1°C of average global temperature rise recorded to date, significant climate-related risks are already emerging.
Under a business-as-usual scenario, the average global temperature rise is projected to be around 3 to 4 °C. Considering CLP’s assets and geographical presence, the following climate trends have been identified to be of more significant impact:
Higher mean temperature and more heat events – A range of direct and indirect impacts could arise from higher mean temperatures.The impacts could be related to short-term, extreme heat such as heatwaves and wildfire, or to chronic temperature increases leading to water stress and drought, as well as other events.
Increased water scarcity and drought – Thermal and hydro assets are prone to the impact of such temperature events. The occurrence will be particularly acute in regions where demand for water increases and rainfall patterns see a trend towards greater extremes, for instance in India and Australia.
More intense and frequent storms and floods – Storms also include typhoons which occur across a significant area of CLP’s operating regions and drive some of the most significant climate hazards. CLP has experienced super-strong typhoons in Hong Kong in recent years bringing serious damage across the city. Flooding is a widespread event type, occurring in all countries to an extent.
Michael Starkey, a civil engineer at EnergyAustralia's Mount Piper Power Station, was one of four volunteer firefighters who joined an epic battle against Black Summer, Australia’s worst ever bushfire season in 2019-2020.
These events can cause physical damage to CLP’s assets or reduce operational efficiency, which in turn, can result in reduced output, increased repair and maintenance costs, and service disruptions for customers. The Company’s operations could also be affected indirectly by these events, for instance damage to assets along the supply chain, in particular the procurement of fuel, may affect the Group’s ability to reliably deliver electricity.
Weather pattern changes will not be experienced uniformly around the world in relation to either the extent or rate of change. Even within the same country, considerable geographical variance is present especially for countries with large terrains such as Mainland China, India and Australia. It is therefore important to assess climate risk asset-by-asset. This helps CLP incorporate climate adaptation measures into its plant design for new build projects, and ensures its systems are resilient to withstand extreme conditions, thereby minimising disruption and facilitating faster recovery for its affected communities.
Throughout the years, a range of measures were put in place along CLP’s value chain to help the Company prepare for climate events. The tailored measures are deployed for the different geographies, taking into account the asset type, location and relevance. These are summarised in the table below:
Relevant part of the value chain | Protection measures |
|---|---|
Supply chain | Diversify fuel supply from multiple sources. Find out how the offshore liquefied natural gas terminal would help CLP Power diversify the natural gas supply in Hong Kong in this case study. |
Generation |
To address extreme heat and increased temperature:
To address the risk of water shortage and drought for thermal plants:
To address flooding risks:
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Transmission and distribution |
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Retail |
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Service recovery |
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CLP is developing a physical climate risk tool for application during the investment due diligence process to help enhance its preparedness for such risks. Using bespoke characteristics related to CLP’s asset types and data specific to its operating regions, the tool will assess trends in physical climate from present day to 2080 to account for the long lifetime of electric utility assets. The screening style assessment will identify possible risks and recommend next steps for CLP expert personnel, including engineers, to assess further. Overall the tool and accompanying approach will ensure any physical climate risks to assets are identified at an early stage, and effective resilience is planned in those assets.
Extreme weather events such as typhoons pose significant risks to the operation and structure of overhead lines in Hong Kong.
CLP Power is undertaking a highly detailed climate change risk assessment of all its generation, transmission and distribution assets in Hong Kong.
The Generation and Power System business groups are renowned for completing assessment work at the cutting edge of international best practice, particularly in relation to extreme events such as typhoons, flooding and heatwaves. The detailed assessment currently underway will benefit from industry-leading datasets specific to Hong Kong, including downscaled climate projections throughout the 21st century from the Hong Kong Observatory. A purpose-designed methodology has been prepared for the assessment, engaging technical input from across CLP. The overall outcome will see the generation and transmission business fully aligned in its risk assessment methodology, with a set of focused adaptation measures for deployment across assets.
Decarbonisation of the generation portfolio cannot only be achieved by simply replacing generation plants that use fossil fuel with those that use non-carbon energy sources. A range of transition enablers are needed to transform the energy system, these include: decentralised generation and smart energy services; transmission and distribution systems; battery or other energy storage solutions; and electric vehicle charging facilities. Digital technologies are also providing new tools for customers to interface with the energy system.
CLP’s investment in transition enablers is focused on the Hong Kong and Australian markets, where CLP is engaged in retail business. Below are a few examples of these enablers.
In Hong Kong, under the seven-year rollout plan approved by the Government in 2018, over 843,000 smart meters have been connected to date. This is more than double the number connected in 2019 and is equivalent to a 30% coverage of CLP Power’s service area. More details on the mass rollout plan are available here.
In the Australian States where CLP operates, the number of smart meters installed has reached over 636,000 with coverage of over 30%.
CLP is actively developing EV infrastructure in Hong Kong by providing free charging facilities to the public and helping individual and commercial organisations install relevant facilities. To date:
Over 160 charging points have been installed for customers across Hong Kong; in addition, there are over 340 charging points at Company premises to support greater EV adoption across CLP operations.
In support of the Government’s newly-launched EV-charging at Home Subsidy Scheme, CLP Power is launching an advanced service, Eco Charge 2.0, which will provide one-stop technical support and customer service to applicants eligible to apply for funding EV charging-enabled infrastructure in the car parks of private residential housing blocks.
Smart Charge (HK) Limited, 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 which will be completed in the coming year.
By the end of 2020, EnergyAustralia had installed EV charging facilities at their head office, and Yallourn and Mount Piper Power Stations. There was a delay to other sites due to COVID-19 restrictions but it is expected that all sites will be completed in 2021.
To 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. CLP is the first Hong Kong company to do so. Read more here.
In Hong Kong, around 1,900 commercial and industrial customers signed up for the CLP Demand Response Programme. Together with residential customers, the total demand reduction reached approximately 105MW.
EnergyAustralia’s demand response contracted capacity now stands at over 110MW. This includes more than 360,000 household customers who are part of the EnergyAustralia PowerResponse Programme.
The Feed-in Tariff Scheme in Hong Kong had seen a significant increase in interest. By the end of 2020, more than 13,000 applications had been received, of which around 87% (representating a combined capacity of 175MW) have been approved or connected to the grid.
EnergyAustralia has over 220,000 business and residential customer accounts with solar panels installed.
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 a system balancing solution on a larger scale.
Satpura Transco Private Ltd. is CLP India's first transmission asset. It is an intra-state project located in Madhya Pradesh that was acquired by CLP India in 2019, marking CLP India’s entry into a new segment of the country's electricity value chain. Another project, Kohima Mariani Transmission Limited, spanning three north-eastern states, was commissioned in November 2020 and will be taken over by CLP India following the completion of conditions precedent, including obtaining approval from the Federal Government.
The Clean Energy Transmission System connecting the CLP grid to Guangdong is planned to be enhanced by 2025. The system will improve accessibility to zero carbon energy resources and help further reduce fossil fuel use in Hong Kong.
In 2020, EnergyAustralia executed a binding long term storage agreement with Genex Power to underpin the 250MW Kidston pumped hydro energy storage facility upon the project's financial completion and commissioning. Under this 30-year agreement, EnergyAustralia controls the market operations of the facility, and holds a right to acquire equity in the project. If successful, this facility will be the first of its kind in the National Electricity Market in almost 40 years, and with 7.5 hours of storage, this will be a key project for EnergyAustralia to lead the integration of renewable energy into the grid.
EnergyAustralia continues to operate the Ballarat and Gannawarra battery storage facilities in Victoria. The facilities have a combined capacity of 55MW and have been operating since the summer of 2018/19, providing peak energy demand and ancillary services.
The 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.
The renewable and non-carbon generation capacity in operation and under construction increased in 2020:
The portfolio percentages are shown in the graph below.
CLP's coal-based generation decreased by 7% as the new natural gas generation unit at Black Point Power Station went into operation. Percentages of energy sent out from renewable and non-carbon sources remain at similar levels as in 2019.
CLP continues to invest most in transmission, distribution and retail. In 2020, the investments in coal assets included maintenance, upgrades and efficiency improvements only.
Operating earnings from non-carbon generation assets represented 17% of Group operating earnings in 2020, supplemented by 46% of operating earnings from transmission and distribution and retail-related activity.
Sound public policies are required to balance 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 the energy sector's ongoing viability and success, in particular climate change and energy.
When joining any organisation, the respective Public Affairs teams act as a control point and consider the appropriateness of membership. The CLP Group CEO or CLP Managing Director gives final approval for membership to ensure the position of the organisation supports CLP’s mission, in particular its ambition towards decarbonisation.
In response to the economic damage caused by COVID-19, there has been demand for economic stimulus efforts to be directed towards climate action. During the early days of the pandemic, the We Mean Business coalition became a strong advocate of this notion and lobbied governments primarily in Europe and North America via its extensive business network. The Energy Transitions Commission advocated for similar economic recovery packages. CLP is a supportive member of both organisations.
As part of CLP's ongoing engagements, the Company also participates in organisations active in climate change and broader energy market policies. Following is a list of organisations to which CLP devotes significant resources through membership, sponsorship, and other contributions including active participation by senior management. CLP has contributed annually over HK$250,000, in cash (or equivalent) over the last three years to the organisations listed below (by alphabetical order).
Organisation | Description of organisation | CLP contributions and engagement |
|---|---|---|
The AEC represents 21 major electricity and downstream natural gas businesses operating in competitive wholesale and retail energy markets in Australia. | EnergyAustralia is represented on the Board of the AEC and is an active participant in its various working groups which cover a range of competitive energy market issues. These include reviews of wholesale market operation, competitive retail markets and emissions reduction policies. | |
The BCA is a CEO-led industry association, representing over 100 of Australia’s largest businesses. They support transitioning to a more carbon efficient economy with a goal of net-zero emissions by 2050. | The Managing Director of EnergyAustralia is a Director of the BCA. The BCA advocates for a national, bipartisan energy and climate change framework that can deliver against reliability, affordability and sustainability objectives, consistent with EnergyAustralia’s position. | |
An independent, charitable organisation established by the business sector in Hong Kong, the BEC promotes environmental excellence by advocating for the uptake of clean technologies and practices. | The CLP CEO has been a Director of BEC since 2012 and is currently Chairman of its Board of Directors. CLP actively participates in or sponsors events, public consultations and working groups organised by BEC. It is also a signatory of the BEC Low Carbon Charter. | |
The ETC supports energy system transition by showing what it will take to create credible, accelerating transitions towards universal, clean energy systems across the world. It aims to inform decision-makers in both the public and private sectors and support leaders to undertake more rapid deployment of low and zero-carbon solutions. | Having joined in August 2018, the CLP CEO is one of a diverse group of leaders from the public, private and NGO sectors in the ETC. | |
An accelerator programme for electric utilities, Free Electrons enables startups to work closely with utilities to develop digital solutions to overcome challenges arising from the increase of renewable energy and decentralisation of energy systems. | CLP first participated in Free Electrons during 2018, and has identified collaboration opportunities through the programme. In 2019, CLP hosted Free Electrons in Hong Kong for a week-long module. CLP participated again in the 2020 programme. | |
The treaty-based, inter-governmental organisation, ISA, was established in December 2015 at COP-21. In June 2016, ISA entered into an agreement with the World Bank to raise US$1 trillion by 2030 to meet the Paris Agreement objectives. | CLP is supporting the Indian Government’s plan to deploy solar technology across the country. | |
A global, CEO-led organisation of over 200 businesses, WBCSD is working to accelerate the transition to a sustainable world. It targets the realisation of its Sustainable Development Goals through six work programmes including Circular Economy, Cities and Mobility, Climate & Energy, Food & Nature, and Redefining Value and People. | CLP is participating in various initiatives, such as the Climate & Energy Program Board, TCFD Electric Utilities Preparer Forum, the Energy Solutions Project, the Natural Climate Solutions Project and the Redefining Value Programme. |
In June 2020, the Group updated its CAFF to reflect the commitments it made in the latest CLP Climate Vision 2050 and to enable a broader range of financial transactions under which CLP can raise funds.
Read more on CLP’s Climate Action Finance FrameworkSubsequently, CLP, through its intermediary CAPCO, entered into a series of energy transition finance transactions for the construction of an offshore LNG terminal in Hong Kong waters and its associated subsea pipeline and gas receiving station. This new terminal will allow CLP to purchase gas directly from more diversified sources for its gas-fired electricity generation facilities, thereby enabling the gradual phasing out of existing coal-fired generation units in the CLP supply area.
The transactions in 2020 were as follows:
In June 2020, CAPCO issued its second Energy Transition Bond in the amount of US$350 million with a coupon of 2.20% and a tenor of 10-years. The bond has been selected as the best energy transition bond in The Asset Magazine's Country Awards 2020.
In June and September 2020, CAPCO executed an inaugural HK$3.3 billion medium-term Energy Transition Loan facility and a HK$2.0 billion long-term Sinosure-covered Energy Transition Loan facility respectively with a syndication of banks.
CLP has also joined the Sustainable and Green Exchange (STAGE) established by the Hong Kong Exchange and Clearing Limited as one of the inaugural members in August 2020. STAGE is an online repository of information for sustainability, green and social bonds listed in The Stock Exchange of Hong Kong Limited. By joining the STAGE, CLP will display the associated information and post-issuance reports of its Energy Transition Bonds on the platform which can be assessed by global investors.
Download CLP's 2020 Climate Action Finance Report Download the Independent Assurance Statement for the 2020 Climate Action Finance Report
