CLP Holdings (中電集團)

CLP is one of the few electric utilities assessed that has a policy specifying that trade associations and organisations in which it participates are vetted to ensure they support decarbonisation. Indeed, CLP participates in several organisations advocating climate-positive policy such as the World Business Council for Sustainable Development and the Energy Transitions Commission, and CLP’s CEO chairs Hong Kong’s Business Environment Council. The company engages constructively with climate policy, for example with its recent support of Hong Kong’s long-term decarbonisation strategy.

CLP’s low-carbon transition plan, called ‘Climate Vision 2050’, was first developed in 2007 and was strengthened in 2018. It contains emissions intensity targets and capacity targets. Additionally, it provides a climate action finance framework, which sets out a process for issuing bonds that are consistent with CLP’s climate aims. CLP’s strategy is informed by scenario analysis and considers climate risks and opportunities. The company has also committed to conducting further scenario analysis and strengthening decarbonisation targets in line with the recommendations of the Task Force on Climate-related Financial Disclosures. Furthermore, there is board-level oversight of climate issues, and executive renumeration provides incentives to reduce emissions.

CLP is shifting to a low-carbon business model in several areas. In its generation business, CLP is targeting an expansion of low-carbon generation to 30% by 2020 and 40% by 2030, including 10% from nuclear and the rest from renewable sources such as wind and solar. However, the company was not on track to meet this target in 2018, with 12.8% renewable capacity. The company is also enhancing grid connectivity in Hong Kong and India and has developed a 55 MW energy storage system in Australia. These will enable greater penetration of renewable energy into the grid. In addition, CLP is building an energy management business, launching a new Smart Energy Connect business in 2019 and developing tools for energy auditing.

The company currently seeks to achieve an emissions intensity (including capacity and energy purchase) of 600 gCO2e/kWh by 2020, 502 gCO2e/kWh by 2030, 337 gCO2e/kWh by 2040 and 150 gCO2e/kWh by 2050. The long-term horizon of these targets is important as it allows for strategic consideration of the lifetime emissions of assets. However, the ambition of these targets is below that required by the company’s well-below 2-degree pathway, which requires its emissions intensity to fall to 337 gCO2e/kWh by 2030. CLP’s ‘Climate Vision 2050’ states that it will track its progress against a science-based target. The company should revise its emissions intensity targets to be aligned with a well-below 2-degree pathway, otherwise its decarbonisation plan will be seriously undermined.

While CLP has committed to stop building new coal-fired generation assets, it does not plan to phase out all its existing carbon-intensive coal assets until 2050. This lack of a timely phase-out of coal is part of why CLP is expected to exceed its carbon budget. CLP is also developing new gas-generation assets which, while less carbon intensive than coal generation, lock in emissions for decades to come. Without a clear plan for developing commercial-scale carbon capture and storage technology, new gas-fired power stations could become stranded assets – assets that suffer premature write-downs or devaluations due to regulatory, legal or market changes.

In 2019, CLP invested US$16.39 million in innovation. However, it did not disclose what proportion of that was spent on technologies with significant potential to mitigate climate change. Therefore, the company should disclose publicly how much it is investing in these technologies, including a breakdown of investment in mature and non-mature technologies. Doing so could also encourage more transparent disclosure of such information in the Asia-Pacific region, where the sector’s low-carbon transition is falling behind.

CLP has set a target to reduce its emissions intensity from 740 gCO2e/kWh in 2018 to 150 gCO2e/kWh by 2050, with intermediary targets for 2020, 2030 and 2040. The company has also set targets to increase renewable capacity to 30% by 2030, as well as 10% nuclear capacity in 2030.

CLP is no longer investing in new coal-fired generation and has committed to phasing out existing coal generation by 2050. It is expanding its gas and renewable generation to replace coal. It has established a climate action finance framework and is issuing climate action bonds to finance its transition.

CLP has been enhancing grid connectivity in Hong Kong and India to accommodate new renewable energy. It is also developing a liquefied natural gas terminal in Hong Kong to import more gas.

CLP reduced its emissions intensity from 740 gCO2e/kWh to 700 gCO2e/kWh between 2018 and 2019. It launched a new Smart Energy Connect business in 2019, which provides smart energy and energy-efficiency services. Its Australian subsidiary opened a 55 MW energy storage system, which will help accommodate variable renewables.

CLP is planning a shift to a low-carbon business model and is securing finance for this. However, its emissions intensity targets are not ambitious enough, and it is unlikely to meet these if it continues with its plans to run existing coal assets for decades to come.