CLP Holdings has stepped up its decarbonisation goals and pledged to achieve net zero carbon emissions by 2050 and phase out coal-fired electricity by 2040, ahead of an announcement by the Hong Kong government next month of an updated climate action plan to meet its 2050 carbon-neutral target.
The goals upgrade at CLP, the larger of Hong Kong’s two power utilities, comes after Chinese President Xi Jinping on Tuesday pledged to the United Nations that China would not build more new coal power plants abroad. A year ago, he surprised the world by pledging to peak China’s carbon emissions before 2030 and achieve carbon neutrality by 2060.
“We are now working towards a science-based target for 2030, which is in line with what the world requires for reducing carbon [emissions] to keep global warming well below two degrees Celsius,” Richard Lancaster, CLP Holdings’ CEO, said on Thursday.
CLP, which also has operations in mainland China, India, Australia and Southeast Asia, previously aimed to phase out coal power by 2050 as part of efforts to slash its carbon emissions to 0.15 kilograms per kilowatt-hour the same year, from 0.57kg last year across its entire portfolio. Now it aims to cut that to 0.36kg by 2030 and zero by 2050.
Asked if electricity bills will go up due to decarbonisation costs, Lancaster said: “Yes, a lot of investment will be needed, which will impact the price of electricity, but these investments will be spread over 30 years, not all in one go.
“The price of fossil fuel is incredibly volatile and makes up most of the power generation cost. As we shift to more renewable power and hydrogen, it will take away that volatility and the impact on electricity price won’t be as much as people fear.”
As fossil fuels are replaced by low-carbon alternatives to meet zero emissions goals, energy prices globally – not just in Hong Kong – will rise, said William Yu Yuen-ping, CEO of non-profit World Green Organisation. “It will take time to ramp up production volumes of the new energy [sources] and reduce costs, as we need to build up supply chain economies of scale, ensure safety and deal with logistics issues,” he said.
The cost impact on consumers can be spread over many years, as utilities account for asset depreciation costs over multiple decades, Yu added.
Hong Kong, which peaked carbon emissions in 2014, has set a 2050 carbon neutrality target. The government will announce a more detailed plan on its execution in October. Global leaders will meet for a climate summit in Glasgow next month that aims to raise global decarbonisation commitments to avert disastrous economic and human impact from global warming, which has already reached 1.1 degrees from the second half of the 19th century.
In Hong Kong, where power generation accounts for 65 per cent of carbon emissions, CLP has already cut is emissions intensity to 0.37kg last year from 0.5kg in 2019, thanks to the commissioning of additional natural gas-fired generating units that reduced coal-fired output. Gas combustion is roughly half as carbon-intensive as coal.
No reduction target for 2030 has been announced, because CLP is in discussions with the government about installing offshore wind farms and purchasing more nuclear power from mainland China, as the main replacement for shutting down four more units of the coal-fired Castle Peak plant in Tuen Mun, Lancaster said.
“We are still in early-stage planning there, and we have to agree with the government on that plan,” he said. “So the timing around the shut down is uncertain, but it will definitely be before 2040.”
The first four are expected to be closed by 2023 under an agreement with the government, which must approve CLP’s infrastructure investments every five years. Under the Scheme of Control agreement, CLP is entitled to a reasonable return for reliable electricity supply delivered in an environmentally responsible manner and at a reasonable price.
While a site in the waters in eastern Hong Kong is technically, environmentally and economically feasible for the development of a wind farm of scale, CLP will also consider working with potential partners to build wind farms in mainland Chinese waters, although it would incur higher costs to send the power to Hong Kong, he said.
Adding zero-carbon emitting “green” hydrogen into its natural gas supply is another decarbonisation solution for CLP, which earlier this month signed an agreement with US power equipment supplier GE to develop a road map for upgrading its plant so that it can burn a variable blend of hydrogen and natural gas. A preliminary timetable can be worked out by early next year, Lancaster said.
Green hydrogen is made by splitting water into hydrogen and oxygen using renewable power. Its combustion produces no pollutants.
Instead of using offshore wind farms to power such an operation, it is more likely that CLP will buy hydrogen made with power generated by onshore wind and solar farms in mainland China, Lancaster said. The hydrogen will be infused into the pipeline that sends natural gas from Central Asia to its power plant in Hong Kong.
Meanwhile, Lancaster said CLP will seek potential partners in Australia to share investments for decarbonisation and growth, which will allow it to focus more of its own resources on the Hong Kong and Guangdong markets. It sold 40 per cent of its India operations to a Canadian partner in 2018.