Upholding our values under different context
Our strategy “Focus ∙ Delivery ∙ Growth” demands that we generate growth for our shareholders. While Hong Kong remains our core market and strategic focus, Mainland China and India are our primary growth markets, while we continue to explore secondary growth opportunities.
There is enormous variation in the electricity market structure where we have a presence. These market structures and the associated rules have a fundamental impact on the financial performance and sustainability of each of our businesses. Regardless of where we are, the respective local and national governments are one of CLP’s most important stakeholders. We work closely with them and the results help guide and inform our business model and development plans for each country. Wherever we go, we uphold our Value Framework and our Code of Conduct, paying special attention to Competition and Anti-Corruption Laws and regulations.
Read more on our commitment to regulatory compliance
Read the Business Performance and Outlook in our different markets
Market development in Mainland China
Although the power industry in Mainland China is dominated by state-owned companies, there are limited opportunities for private companies like CLP to invest in the industry. Although our business is small compared to local players, we are one of the largest external electricity investors in Mainland China.
Given the government plays such a large role in the electricity industry in Mainland China, maintaining strong relationships with government officials is just as important as monitoring regulatory developments. We have held meetings and visits to our assets and engaged with key government stakeholders through constructive discussions on key issues.
Market development in India
Over the past few years, the Government of India has taken steps to improve the access to electricity, and increase renewable energy capacity. During 2017, the Indian electricity market witnessed a number of milestones on these areas and this set an overall direction for the market. These milestones include a significant increase in the number of electrified villages and a reduced frequency in power cuts in towns and villages. Although we are not directly involved in rural electrification, we expect this reform will contribute to an overall increase in electricity demand and hence a potentially higher offtake for our power plants.
Competitive bidding for renewable energy projects becoming the mainstream is another major market change that we have seen in India. After successfully implementing competitive bidding for long term Purchased Power Agreements (PPA) for solar in the last few years, in 2017 the Government of India rolled out bidding guidelines to procure wind power under long term PPAs. We are monitoring the competitive bidding market and will participate at an appropriate time.
Thanks to reduction in solar tariffs and implementation of net metering regulation by many states in India, rooftop solar tariffs are now lower than the retail tariff offered to industrial and commercial consumers by power distribution companies in most states. Due to this pricing, regulatory conditions and the availability of zero down payment PPA (also known as OPEX / RESCO PPA), the solar rooftop market in India is expected to grow exponentially over the next few years. We are developing rooftop solar solutions for commercial and industrial consumers under the OPEX model and expect to roll this out in 2018.
Market development in Australia
The Australian energy market consists predominately of private companies, however there remains several state-owned operations across the supply chain, particularly in the northern state of Queensland. Our local business unit, EnergyAustralia, is one of the largest integrated electricity retail and generation businesses in Australia.
Energy and climate change policy is a shared policy issue across Federal and State governments and continues to be one of the most contentious political issues in Australia. This dynamic has created a fragmented and uncertain operating environment for many energy businesses. Despite this, EnergyAustralia continues to maintain cooperative working relationships with all Australian governments.
Australia has historically considered a range of policies to reduce greenhouse gas emissions. The most recent is the National Energy Guarantee (NEG) which would place an obligation on electricity retailers from 2020 to meet an emissions and reliability guarantee. The emissions guarantee will oblige retailers to ensure that the electricity they supply to customers meets a given emissions intensity and the reliability guarantee will mean retailers have to have sufficient levels of flexible and dispatchable generation to meet forecast demand from their customers. Federal and State governments are expected to decide in 2018 whether to implement the policy.
In relation to Purchase Power Agreements (PPAs), in 2017 EnergyAustralia completed a A$1.5 billion programme to support the development of over 500MW of new solar and wind energy to help meet our obligations under the federal government’s Renewable Energy Target. This includes the:
- 150MW Coleambally solar farm in southern New South Wales
- 48.5MW Manildra solar farm in New South Wales
- 142MW Ross River solar farm in northern Queensland
- 60MW Gannawarra solar farm in northern Victoria
- 113MW Bodangora wind farm in central-west New South Wales
Across Australia, electricity and gas retail markets have been deregulated, paving the way for highly competitive markets. The state of Victoria is considering a number of recommendations from the Thwaites review of retail markets.
The Australian Competition and Consumer Commission (ACCC) electricity and gas inquiries were announced in March and April 2017 respectively. The electricity inquiry is one of the largest inquiries the ACCC has ever done. It covers margins, retail and wholesale market behaviour, and the effects of vertical integration. The preliminary report was released in September 2017. The scope of the inquiry was increased to include wholesale bidding behaviours and increased attention on consumer outcomes. The final report is expected in June 2018. The gas inquiry was established to review the supply and demand for wholesale gas in Australia, as well as to publish regular information on the supply and pricing of gas. In 2017 they published two interim reports. These bi-annual reports will continue until 2020.