Shaping and executing the transition to net zero

CLP’s growth opportunities are positioned around becoming a Utility of the Future. In pursuit of this ambition, CLP is decarbonising its existing asset base, investing in clean electricity infrastructure, ensuring the delivery of reliable and reasonably priced energy, and acting as a trusted partner for governments, communities and customers in the transition to a clean and reliable energy future.

Partnering in the clean energy transition

Support for the decarbonisation agenda impacts positively the environment and the broader community, by helping to reduce air emissions, water use and waste while also ensuring the continued supply of reliable and reasonably priced electricity and energy services. CLP’s role as a trusted partner in the zero-carbon transition also supports the economy by making energy systems more efficient and resilient, and by decoupling generation and distribution from extractive, non-renewable and polluting fossil fuels.

558_V3_CLP_Material_Topic_infographic_Partner in the clean energy transition

As per CLP’s Climate Vision 2050, efforts to identify opportunities to phase out coal-fired power generation continue. In November 2022, CLP sold its entire 70% interest in the coal-fired Fanchanggang Power Station in Mainland China.  

CLP carefully reviewed all possible exit strategies for this plant and considered divestment the most appropriate option. Handing ownership to a trusted partner, in CLP’s view, supports a just transition that aligns with the Group’s Value Framework and Labour Standards. In addition, CLP considers that transferring the Group’s interest in the plant to a state-owned enterprise supports continued power supply reliability in the community as well as an efficient and orderly transition in line with China’s decarbonisation policy. At the same time, the sale freed up capital to grow CLP’s renewable portfolio in Mainland China.

The sale of this coal-fired plant accelerates CLP’s decarbonisation trajectory and is expected to reduce the Group’s absolute annual greenhouse gas (GHG) emissions by around 10% compared with 2022 levels on an equity plus long-term capacity and energy purchase basis. This demonstrates CLP’s strong commitment to accelerate phasing out coal-based assets and achieve the net-zero GHG target by 2050.

In 2022, CLP Group reduced the GHG emission intensity of electricity sold to 0.55 kg CO2e/kWh when compared to 0.57 kg CO2e/kWh in 2021, while the GHG emission intensity of electricity sold in Hong Kong by CLP Power maintained at
0.39 kg CO2e/kWh.

CLP maintains its commitment to progressively phase out coal-fired generation plants.

In Hong Kong, older coal-fired generation units at Castle Peak A Power Station will be retired in the next few years, while daily coal-fired power generation at Castle Peak B Power Station will be ceased by 2035. The phase-out of CLP's minority-owned coal-fired assets in Mainland China and Taiwan is also expected before 2030.

In Australia, the closure of Yallourn Power Station will reduce EnergyAustralia’s Scope 1 carbon emissions by over 60% in 2028-2029 against the 2019-2020 base year.

The other remaining coal-fired power stations where CLP maintains operational control are Jhajjar Power Station (operated by Apraava Energy) and Mount Piper Power Station (owned by EnergyAustralia). CLP maintains its commitment to find practical solutions to phase out these coal-fired power generation assets from its portfolio in the mid- to late 2030s and by 2040 at the latest, respectively. 

As the climate crisis brings a raft of pressing problems to all regions of the world, CLP remains a trusted partner in transitioning its assets to a clean energy portfolio. This steady progression to low-carbon electricity infrastructure ensures CLP’s customers continue to have options for accessing clean energy supply.

Over the years, CLP maintained its dialogue with governments and communities through various channels to help shape and deliver their long-term decarbonisation and environmental objectives.

For instance, CLP Power Hong Kong Limited (CLP Power) organised various working and advisory committees, panels and meetings to actively listen to community voices. The Company organised site visits to Black Point Power Station for more than 20 members of the Hong Kong Legislative Council and around 40 senior government officers in October and December 2022 respectively. The visits aimed to strengthen communications and enhance understanding of CLP Power’s multi-pronged approach to decarbonisation in support of the Hong Kong Government’s target to achieve carbon neutrality by 2050.

Clean electricity infrastructure

Investing in clean energy infrastructure benefits the broader community by reducing the combustion of fossil fuels, thus reducing the negative impacts of air pollution and climate change. In addition, investment in clean energy infrastructure also benefits the economy by helping establish new industries.

558_V3_CLP_Material_Topic_infographic_Clean electricity infrastructure

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.

Environment and biodiversity 

Effectively minimising environmental impacts from power generation is one of CLP’s commitments as a responsible power utility. This is fundamental for upholding a social licence to operate and to ensure the maintenance of ecosystem services for sustainability. Conservation of biodiversity has a direct positive impact on local economies by protecting ecological processes and influencing critical industries, such as agriculture and food production.

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 NOx 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.

Regulatory landscapes

CLP’s collaboration with governments and regulators positively impacts the environment by reducing emissions. By contrast, misaligned agendas would increase the environmental, social, and financial costs of the energy transition for governments, customers, and communities.

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.

Read more on our approach, initiatives and progress for stakeholder impact in relation to this material topic

Climate-related Disclosures ReportEnvironmental ImpactsSocial Impacts – Our peopleSocial Impacts – Partners

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

Stakeholders section in the 2022 Annual Report

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