clp and renewable energy in asia
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CLP and Renewable Energy in Asia
May 2010
Andrew Brandler
CEO
CLP Holdings
1
Disclaimer
This presentation contains some comments about future events including our expectations about the performance of CLP Group's business. The comments are not audited and are based on a number of
factors that we cannot control. We cannot be certain that the comments
will be accurate or complete and so they should not be relied on. As circumstances change we will update our website at www.clpgroup.com
and, where relevant, notify the Hong Kong Stock Exchange.
2
Global Energy Challenge
How to provide energy necessary for social and economic development, yet avoid serious environmental impacts?
3
CHINESE MAINLAND – 6,579 MW� Largest external investor in electricity industry
� Diversified portfolio
- Coal
- Nuclear
- Hydro
- Wind
- Biomass
INDIA – 2,421 MW� Largest foreign investor in
electricity industry
� Top investor in wind
� Diversified portfolio:
- Coal
- Gas
- Wind
AUSTRALIA –3,188 MW
� Largest foreign investor in
electricity industry
� No. 2 Private Generator
� No. 3 Private Retailer
SOUTHEAST ASIA – 853MW� Largest shareholder in EGCO,
Thailand after EGAT
� JV with Mitsubishi in Thailand
and Taiwan
� Development of 2 coal projects in
Vietnam
HONG KONG – 6,908 MW� Vertically integrated power company
- Generation
- Transmission & Distribution
- Retail
� Largest HK Power Utility
- 2.2 million customers
- Supplying 80% of HK’s population
CLP Group Portfolio – Cross Regional Presence
4
CLP’s Climate Vision 2050
CO2 Emissions Intensity
0.8(kg CO2/kWh)
0.7(kg CO2/kWh)
0.45(kg CO2/kWh)
0.2(kg CO2/kWh)
0.83(kg CO2/kWh)
Towards The Future
Energy Efficiency & Conservation
Renewable
Energy
Natural Gas
Nuclear
Clean Coal
By
Non-carbon Emitting
20%Non-carbon
OngoingReview of
Target
2009
2010
2020
2035
2050
2004
>75%
>45%
~5%
<1% RE
11% RE15% Non-carbon
Our Manifesto to Climate Change
5
Five major initiatives to implement our climate commitment
� Renewable Energy
− Largest external investor in RE both in China and India
− Exploring solar energy projects –with first project in Thailand to start construction in June
− Secured Environmental Permit to develop a 200MW offshore wind farm in Hong Kong
� Natural Gas
− Participating in measures to bring additional, long-term supplies of natural gas to HK to move to a +/- 50% target for Hong Kong electricity supply
− Commissioned a new 420MW CCGT plant in Australia which is amongst the most efficient fossil-fuelled power station in Australia
� Nuclear Power
− Obtained approval to extend the Daya Bay joint venture through to 2034
− Looking to extend our involvement in nuclear energy in China
� Clean Coal Technology
− Using latest efficient technology for any new coal-fired plant that we build
− Looking at ways to reduce emissions at Yallourn in Victoria, Australia through experimental coal drying and CCS projects
� Energy Efficiency and Conservation
− Carried out over 800 energy audits for large customers in Hong Kong and extended such services services to Hong Kong-owned manufacturers in Guangdong
− Offer energy efficiency services to our customers in Hong Kong and Australia
Climate Vision 2050
6
…Different Energies, Different Markets
� Different Energies
− Wind and hydro power making the major contribution to the growth of RE capacity in Asia
− Solar gradually moving into commercial scale deployment
− Large-scale deployment of clean coal technology, absent significant policy and technological development, is unlikely in the near to medium future
Powering Asia Responsibly
� Different markets offer different opportunities
− Wide variances in national or local policy support
- There are no national feed-in tariffs for Solar in China at present- Indonesia and Hong Kong do not offer feed-in tariffs for renewable generation at
present- In Australia, wholesale tariff in Victoria, South Australia, Queensland, New South
Wales and Tasmania is determined by National Electricity Market
20% 20%
2%
10.60%10% 10%
0
50
100
150
200
250
300
350
400
450
China India Thailand Australia Hong Kong Indonesia
Maxim
um
Feed
-in
Tarr
if A
vail
ab
le (
US
D/M
Wh
)
0%
5%
10%
15%
20%
25%
Ren
ew
ab
le E
nerg
y T
arg
ets
(vari
ou
s d
ead
lin
es)
Solar Tariff Wind Hydro Bioenergy Renewable Energy Targets
7
Renewables Portfolio ~2,000 Equity MW
Our Footprints
Australia
India
China
Thailand
AUSTRALIA – total 142 MWOperational� Bluff Point 65/33 MW (w)� Cathedral Rocks 66/16 MW (w)� Studland Bay 75/37 MW (w)Construction� Waterloo 111/56 MW (w)
INDIA – total 446 MWOperational� Khandke Wind 50/50 MW (w)� Samana Wind-I 50/50 MW (w)� Samana Wind-II 38/38 MW (w) � Saundatti 21/21 MW (w)� Theni 21/21 MW (w)Construction� Samana Wind-II 12/12 MW (w)� Saundatti 62/62 MW (w)� Andhra Lake 114/114 MW (w)� Theni 78/78 MW (w)
THAILAND – total 60 MWOperational� Small Biomass 33/3 MW (b)Construction� Solar project 55/21 MW (s)� Nam Theun 2 1,087/36 MW (h)
� Changdao 27/12 MW (w)� Weihai I & II 69/31 MW (w)� Nanao II 45/11 MW (w)� Shuangliao I&II 99/49 MW (w)� Rongcheng 49/24 MW (w)� Datong 49/24 MW (w)� Laizhou 41/18 MW (w)� Changling II 50/22 MW (w)� 3 Shandong 149/73 MW (w)� Qujiagou 49/12 MW (w)� Mazongshan 49/12 MW (w)� CGN Wind 246 MW (w)� Huaiji 125/106 MW (h)� Dali Yang_er 50/50 MW (h)� Boxing Biomass 15/12 MW (b)
� Rongcheng II /III 99/49 MW (w)� 3 Shandong 149/73 MW (w) � Qian’an 50/50 MW (w)� Nanao III 15/4 MW (w)� CGN Wind 170 MW (w)� Jiangbian 330/330 MW (h)
• Station Name Gross MW / CLP Equity MW
Solar project (s)
Hydro projects (h)
Biomass projects (b)
Wind projects (w)
OperationalWind 534 MWHydro 156 MWBiomass 12 MW
ConstructionWind 346 MWHydro 330 MW
CHINA – total 1,378 MW
8Geographical and fuel diversity
Wind (1,468 MW)
� 22 wind farms in China (464 MW)
� Strategic investor in CGN Wind in China (416MW)
� 4 wind farms in Australia (142 MW)
� 6 wind farms in India (446 MW)
Equity Capacity
Hydro (522 MW)
� 3 hydropower projects in China (486MW)
� 1 hydropower project in Laos (through EGCO) (36MW)
Biomass (15 MW)
� 1 plant in China (12MW)
� 3 plants in Thailand (through EGCO) (3MW)
CLP Group Renewables Portfolio
Solar (21 MW)
� 1 solar project in Thailand (21MW)
� Various solar opportunities in Australia and India
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Our Portfolio
� Largest external investor in the RE sector in China
� Repositioning of our portfolio towards low carbon generation
� CLP has 1,378 Equity MW in operation or under construction
− 31 Mar 10 cumulative investment of ~HK$3.9 billion with total commitment of ~HK$4.4 billion
− Included strategic stake in CGN Wind
Policy Target
� Renewable Energy Law provides for robust regulatory framework and ancillary infrastructure facilitation
� NDRC targets increase in renewable consumption to 15% by 2020
China
HEILONGJIANG
JILIN
LIAONING
HEBEISHANXININGXIA
SHAANXI
GANSU
XINJIANG
TIBET
QINGHAI
SICHUAN
HENAN
YUNNAN
GUIZHOU
HUNAN
HUBEI
ANHUI
JIANG
SU
JIANGXI
FUJIAN
GUANGDONGGUANGXI
INNER
MONGO
LIA TIANJIN
BEIJI
NG
SHANDONG
ZHEJIANGCHONGQING
SHAN
GHAI
HAINAN
Hydro projects
Biomass project
Wind projects
Disciplined growth in wind energy
� Continue to develop majority-owned projects
� Build out expansion of existing minority-owned project sites
� Strategic acquisition in CGN Wind
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Our Portfolio
� Largest wind investor / developer in India (foreign or domestic)
� A portfolio of 446MW wholly-owned wind projects and significant development pipeline
− 180MW in operation
− 152MW commissioning by 2010
− 114MW commissioning by 2011
� 31 Mar 10 cumulative investment of ~HK$1.3 billion with total commitment of ~HK$1.8 billion
Government policies
� RE Law – nationwide review of industry with long-term targets for Renewable Purchase Obligations, Tariff-Fixing mechanisms, inter-state trading
� New Generation Based Incentive Scheme provides additional top up tariff for wind projects
� National Solar Mission to provide attractive framework for Solar Thermal and PV projects
India
Wind projects
Theni
11
Australia
� Established R40s with Hydro Tasmania
� A portfolio of 142 Equity MW
� 3 operational wind farms and 1 wind farm under construction
Policies
� The Government implemented the Renewable Energy Target Scheme to ensure that 20% of Australia’s electricity supply will come from renewable sources by 2020
� Legislative change to split target between large RE projects and small RE projects pending
Thailand
� Formed a joint venture with EGCO and Mitsubishi Corp to build a 73MWdc
(55MWac) solar project in Thailand
� The project is one of the largest solar photovoltaic projects in the world
Policies
� Renewable energy policy with an aim to increase the use of renewable energy to end user to 20% of total energy consumption by 2022
� Tariff based on energy payment with adder tariff given for 7 to 10 years from COD
� Income tax incentives and preferential treatment on import and export duties
Australia and Thailand
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Massive amounts of stable funding needed for the development and demonstration of technologies
� Expensive; solar PV has low capacity factor
� Costs expected to reduce over medium term
� Energy storage under development
Solar
� Appropriate as baseload generation
� Heat-to-electricity conversion efficiency lower than conventional generation
� High exploration costs and resource uncertainties
Geothermal
� CCS can help reduce emissions significantly
� Construction costs 5 times more than conventional plant
� Inconceivable without government support / high and firm price of carbon
Carbon Capture and Storage
� More appropriate for managing agricultural waste – too many challenges to make it suitable for electricity generation on a widespread basis
Biomass
� Small to medium (up to ~300MW) better option
� Challenges: Sites, safety, remoteness of location, grid connection
Hydro
� Best renewable energy option for now
� Price of wind turbine are commoditised, technology continuing to improve
� Challenges: Sites, grid connection, grid capacity
Wind
Technologies
13
0 100 200 300 400 500 600
Biomass
Hot Dry Rock
Conventional Geothermal
Small Hydro
Large Hydro
Solar PV
Wind offshore
Wind onshore
Wave
Tidal Current
Tidal Barrage
Coal
Gas
Nuclear
Levelized Cost (USD / MWh)
0 100 200 300 400 500 600
Biomass
Hot Dry Rock
Conventional Geothermal
Small Hydro
Large Hydro
Solar PV
Wind offshore
Wind onshore
Wave
Tidal Current
Tidal Barrage
Coal
Gas
Nuclear
Levelized Cost (USD / MWh)
� Conventional generation technologies remain competitive in short to medium term
� Some RE such as onshore wind are close to competitive under favourable conditions such as good resources
� In general RE are more expensive than conventional generation today and they need appropriate policy and technology advancement to support their deployment in coming years
� In particular, solar photovoltaic (PV) could become attractive vs conventional generation between 2015 and 2020, depending on the actual cost reduction and technological advancement path achieved by the industry
Generation Cost – Today & 2030
Today 2030
Source: IEA Energy Technology Perspectives 2006 & 2008, IEA Energy Technology Essentials – Nuclear Power
14
Market Uncertainty
� Practical difficulties in the CDM process
� CER prices are volatile
− CER Dec 10 contract prices fell from c. €24 to c. €8 between Jul 08 and Feb 09 and now stand at c. €13
� As a consequence of the price volatility, the CDM has not been a reliable source of revenue
� Uncertainty on whether there will be any CDM program post 2012
0
5
10
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25
30
35
Apr-
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Oct-
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Apr-
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Oct-
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Apr-
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Oct-
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Oct-
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Apr-
10
EUA (€/t) CER (€/t) EUA-CER Spread
Source: ECX; Bloomberg
Carbon Markets
Carbon Price
� Currently there are benchmarks for CERsup to 2012. These can easily be sourced from the European Climate Exchange (ECX) or BlueNext
� But there are no post 2012 futures contracts on ECX or BlueNext
� Market signs are bearish
− E.g. the EUA-CER spread for Dec 12 futures contract are sharply higher than those for spot
− E.g. the Dec 12 contract spread continues be higher than that of Dec 10
� As at 27 April’s close the EUA vs. CER spread for:
− the Dec10 CERs was €1.72 (€15.59 vs €13.87)
− the Dec11 CERs was €2.43 (€16.03 vs €13.60)
− the Dec12 CERs €3.35 (€16.77 vs. €13.42)
We need a clear, long-term stable price of carbon to support renewable energy in Asia
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Supplementary
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1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0
Australia Wholesale Tariff
Thai Wholesale Tariff
PRC Wholesale Tariff
Tariff and cost spectrum for projects
Project Cost in USD Mn. / MW
Ta
riff
in
US
¢/ kW
hr
PRC Wind
Solar Projects still far to compete with
wind
Project Cost ~ US$ 3 – 4 Mn per MW
Feed in Tariffs at US¢ 30-35 per kWhr
India wind
Thai Wind
Australia Wind
Note: No CDM benefits are included
India Wholesale Tariff
India current short-term merchant tariffs
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General Observations & Ending Remarks� Regulations drive RE - not markets
− Wind tariffs are not at “grid parity”
� Cost reduction for wind has slowed
� Less attractive onshore sites and cost of offshore installation is still very high
− Cost of solar power is “off the chart” - literally...
� Downward cost trajectory is not infinite
� Even if cost of cells/silicon goes to zero - there is still the 20%-25% cost of steel/fixtures
� Market mechanisms do not produce more RE
− RE is only possible through government regulatory regime that is� Predictable
� Simple
� And, of course, has a high enough tariff
� Designing RE regulatory support through artificial markets is not very efficient
− REC market in Australia
� Uncertainty on REC supply and demand, and the future price of RECs
� Limits the number of eligible developers
− CER/CDM markets by UNFCCC
� Uncertainty on registration process and post-2012 value - could be zero!
� Numerous inefficiencies (cost of consultants, etc)
General Observations
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