As CLP progressively phases out coal-fired power generation, the Company is directing investment towards low-carbon streams of business, including renewable energy and energy services. In 2022, CLP continued to expand its renewable energy portfolio in Mainland China. Commercial operations began at the 100MW Qian’an III Wind Farm in Jilin province and construction commenced for the 50MW Xundian II project in Yunnan province. These additional wind assets allow customers to access zero-carbon energy supply and support the issuance of Green Electricity Certificates (GECs) in the region.

In India, Apraava Energy continued to progress its 251MW Sidhpur wind farm in Gujarat state, with the project expected to be commissioned by June 2023. In December 2021, Apraava Energy acquired a 49% stake in a 254-kilometre interstate power transmission project in northeast India, and is due to take up the remaining 51% by the end of 2025. Apraava Energy also recently won a contract to provide advanced metering infrastructure services in two regions in Assam State in northern India.

CLP's capital investment in gas assets has almost doubled in the past two years, increasing from HK$3,445 million in 2020 to HK$6,713 million in 2022, supporting the low-carbon energy transition.

The Group’s renewable energy portfolio, including equity capacity and long-term capacity and energy purchase arrangements, remained relatively stable in 2022 at 3,611MW, compared to 3,624MW in 2021. While additional renewable energy assets came into service this year, the divestment of 10% equity in Apraava Energy hampered overall net growth. The current CLP renewable energy portfolio now sits at 23% solar and 14% hydro, while wind energy represents 63%.

CLP also made strategic investments to reduce the carbon intensity of baseload power generation.

In Hong Kong, the second new gas-fired generation unit D2 at Black Point Power Station is scheduled for full operation in 2024. This will play a key role in allowing older coal-fired generation units at Castle Peak A Power Station to be retired in the next few years. It will also increase the use of natural gas in CLP's fuel mix in Hong Kong, which is currently about 48% on a sent-out basis.

In Australia, construction of the Tallawarra B plant in New South Wales began in 2021 and is due to be completed by late 2023, creating Australia’s first carbon offset hydrogen and gas-capable power plant.

Care for the environment is one of the core values in CLP’s Value Framework. It is demonstrated in operations as follows:

1. As part of pre-investment decisions: CLP conducts environmental due diligence and climate risk assessments to evaluate a comprehensive range of potential environmental impacts and risks.

2. During the project implementation stage: CLP conducts environmental impact assessments. In some jurisdictions, the Company goes beyond compliance requirements and mitigation measures to ensure impacts are handled with extra diligence.

3. For ongoing operations: CLP has a robust ISO 14001 certified environmental management system in place to monitor its environmental impacts.

4. To drive continuous improvement: CLP now sets and discloses short-term (2022) and long-term (2030) environmental intensity targets for air emissions, water and waste. Targets are set on the basis of reviewing the performance pattern of individual assets, and identifying potential improvement areas with planned control measures and operational processes.

As CLP strives to deploy international best practice in operations, it continues to explore state-of-the-art technologies which can further reduce environmental impacts and also enhance operational efficiency. In 2022, CLP Power completed a multi-year Gas Turbine Upgrade Project for eight gas-fired generation units at Black Point Power Station which avoided the emissions of 300 kt of CO₂ and 0.4 kt of NO_x in 2022.

In Australia, a Particulate Matter Continuous Emissions Monitoring System (PM-CEMS) was successfully installed at Mount Piper Power Station. It is the first coal-fired power station in Australia to be calibrated to the United States EPA PS11 standard.

As nature and biodiversity loss is an increasingly material global risk, in 2022, CLP kept up its goal of “No net loss of biodiversity” by implementing various initiatives to preserve precious ecosystems in the regions where it operates.

In Hong Kong, CLP entered a 10-year partnership with Kadoorie Farm and Botanic Garden Corporation (KFBG), providing a HK$10-million sponsorship to support nature and biodiversity recovery by planting up to 25,000 native trees of 200 different species or more over a 10-year period. This could potentially reintroduce critically-endangered native plants to the local ecosystem, with anticipated positive knock-on effects for pollinators and other wildlife. CLP Power also continued its vegetation management programme along transmission lines built in environmentally-sensitive country park areas, as well as funding the preservation of Hong Kong’s aquaculture and fisheries resources.

In China, CLP China engaged its employees to participate in a tree-planting programme combating desertification in the vicinity of Jinchang Solar Farm.

In Australia, EnergyAustralia established a Biodiversity Conservation Agreement (BCA) for restoring the habitat at the Thompson Creek Reservoir.

In India, Jhajjar Power Station carried out a baseline biodiversity survey and assessment resulting in the Natural Capital Action Plan to mitigate biodiversity loss across its site. The project received a “Commendation for Significant Achievement in Biodiversity” in the CII ITC Sustainability Awards 2022 (Award category: Domain-Biodiversity).

In the meantime, CLP is closely monitoring the development of the Taskforce on Nature-related Financial Disclosures (TNFD) framework and Science-based Targets for Nature (SBTN). The Group has completed a review of the expectations of the framework and targets and, in response, will develop short- and medium-term action plans to enhance current practices.

Effective progress in decarbonisation must factor in evolving government and community expectations within the markets where CLP operates. Regulatory certainty, clear government targets and consistent roadmaps support CLP’s ability to execute long-term planning and strategic decision-making.

For instance, in Hong Kong, CLP Power is regulated by the Scheme of Control Agreement (SCA). To support the Government’s environmental policy and goals, CLP Power developed the current Five-Year Development Plan (2018 – 2023) under the SCA with a number of significant capital projects, which include:

• Constructing the D1 gas-fired generation unit at the Black Point Power Station;

• Constructing an offshore liquefied natural gas (LNG) terminal;

• Commencing the enhancement of the Clean Energy Transmission System connecting Hong Kong and Mainland China to increase use of zero-carbon energy in the future; and

• Strengthening the smart grid with digitalised smart meter upgrades.

Governments worldwide have been aligning their short- and medium-term climate actions with long-term net-zero targets. While CLP fully supports governments’ net-zero pledges, the Group also considers the risks and opportunities triggered by evolving government policies. For example, the Mainland China Emissions Trading Scheme (ETS) is one of the key policy instruments in realising the Chinese government’s decarbonisation plan. CLP closely monitors the emerging ETS compliance rules, such as the new draft allocation plan released in November 2022, and assesses the respective regulatory risks for better business planning.

As part of its climate action plan, the Hong Kong Government has a long-term policy of promoting the adoption of electric vehicles (EVs), it announced the target of no new registrations of fuel-propelled private cars in 2035 or earlier. While supporting the Government in building the EV charging infrastructure and network across Hong Kong, CLP Power also extended its free EV charging service until the end of 2023. This demonstrates continuous commitment to providing convenience and reliable energy resources to EV motorists across Hong Kong.

Similarly, Australian governments are introducing growing supports for electric vehicles, and EnergyAustralia is exploring different funding options for EV infrastructure, such as working with asset and finance companies, as well as developing innovative retail contracts.

As the Indian Government announced an interim plan of installing 500GW of renewable energy capacity by 2030 under its 2070 carbon neutrality target, Apraava Energy will play its part in contributing to India’s clean energy transition plan. Apraava Energy is eagerly working towards increasing its clean energy portfolio to contribute to India's energy transition.

Financial materiality

Shaping and executing the transition to net zero in CLP’s markets attracts a lower cost of capital, enhances environment, social and governance (ESG) fund flows, and lower insurance premiums, and supports the Group’s attractiveness as a commercial partner for private sector and government joint ventures. It also reduces stranded asset risk for fossil fuel-powered assets, as well as the potential for shareholder activism.

Read more on the financial impact