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HK Climate Change Forum CPD Program on Climate Change Adaptation – An Industry Perspective 22 September 2010 Dr Jeanne Ng CLP Holdings Limited. Why Adapt?. While we mitigate , we must also adapt …. - PowerPoint PPT Presentation
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HK Climate Change ForumHK Climate Change ForumCPD Program on Climate ChangeCPD Program on Climate Change
Adaptation – An Industry PerspectiveAdaptation – An Industry Perspective
22 September 201022 September 2010
Dr Jeanne NgDr Jeanne NgCLP Holdings LimitedCLP Holdings Limited
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While we mitigate,we must also adapt…
Why Adapt?
Adaptation is necessary to address impacts resulting from the warming which is already unavoidable due to past emissions
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How Can Businesses Adapt?
General Increasing adaptive capacity includes consideration of
climate change impacts in: development planning and disaster risk reduction strategies
Adaptive responses include: technological behavioural managerial policy
Source: IPCC 4th Assessment Report (FAR), Working Group 2 Report: Summary for Policymakers
Many early impacts of climate change can be effectively addressed through adaptation, but options diminish and associated costs increase with increasing magnitude of climate change...
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How Can Businesses Adapt?
Risk Monitoring & Assessment Physical climate change impacts – anticipate and assess
potential impacts and implications to business Emerging regulations – anticipate and monitor regulatory
risks and implications to businesses Investments – conduct climate risk assessments for
potential/new investments Stakeholder expectations – anticipate and assess potential
stakeholder expectations and implications to business
Businesses should monitor and assess regularly the potential climate change impacts, regulations and related stakeholder expectations.
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How Can Businesses Adapt?
Risk Mitigation Strategies Development planning – incorporate climate change
considerations into design specifications and contracts Crisis management planning – incorporate climate change
considerations into crisis management plans Investments – build in carbon-related investment/screening
criteria Maximising opportunities – identify and pursue potential
new business opportunities arising from changing market conditions
Businesses should develop and implement strategies to reduce business risk and optimise business opportunities.
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Examples Of Hypothetical Scenarios
Water shortage – changed rainfall patterns and water shortages in certain regions
Higher temperature – increased average temperatures, longer and more intense summer heat waves and a greater number of extreme heat days each year
Legal action – Non-government Organizations begin to take action against major emitters
Investors’ limit – Leading institutional investors institute a voluntary code that limits their investment in businesses with emission liabilities greater than 10% of EBIDTA
Begin raising staff awareness and capacity from different units on possible adaptation measures for some climate change scenarios.
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The Problem: Water Shortage
Climate change leads to changed rainfall patterns and water shortages in certain regions.
In the worst affected regions, Governments respond by introducing mandatory caps on water use for industrial purposes and a system of tradeable water rights.
Existing power station water extraction rights are curtailed and power stations must forgo generation or purchase water rights from other users.
New power stations are forced to purchase all their water requirements from other users and to put in place stringent water management practices to limit water use on site.
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Not as unlikely as you might think…WATER FLOW CUT TO POWER STATIONS The Australian – 8 March 2007The Queensland Government will today reduce the water supply to the Tarong North and Swanbank power stations, which is expected to save 3,600 megalitres over the next 12 months. Opposition Leaders called for the Government to go one step further and temporarily shut down the power stations, to save a further 6,530 megalitres of water. The cap on water extraction was only possible after a lengthy process to ensure the Government was legally able to enforce it without leaving itself open to compensation claims.DROUGHT TO PUSH UP POWER BILLS The Advertiser - April 26, 2007 POWER bills delivered to South Australian homes and businesses will jump unless the drought breaks, one of the state's biggest electricity retailers has warned. The big dry has been blamed for more than doubling the price of wholesale power in SA during the past month. This is occurring because hydro-electric and some interstate coal-fuelled generators on the national power grid are struggling to cope with a lack of water. Analysts say the wholesale price has risen to $63 a megawatt hour, compared with $28MW/h for the same time last year. Industry commentator and Electricity Week editor Laurel Fox-Allen said the market was undergoing a "very dramatic change in conditions…What we are seeing now is most unusual. This is a massive change in the market. "Two months ago, no one would have predicted these sorts of prices in the market.” BABCOCK POWER UPGARDES 2007 GUIDANCE The Age - April 26, 2007 While Australia's water crisis is causing headaches for some, water shortages have underpinned Babcock & Brown Power Ltd's (BBP) upgraded earnings forecast for this financial year. The energy utility said it expected earnings to be more than 12.5 per cent higher than the previous forecast of $91 million for 2006/07, following favourable conditions linked to water constraints. "The widespread water shortages have resulted in rising wholesale electricity prices across Australia in both the spot and forward…In Queensland, level five water restrictions are now in place, which has led to a significant reduction in baseload generation capacity…In addition, Snowy Hydro has hit a critical point in its water stocks with levels currently around 10 per cent of active capacity,“ BBP said.
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Assets
Implications Shortage of water
supply Cooling water
restriction Increased cost for
generation Water rights and
potential legal issues – leading to water trading markets
Responses Seek government
incentives/funding to retrofit
Seek government approval Different tariff Additional water source
Community awareness & engagement
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Systems & Processes
Implications Rise of ambient river
temperature Change in water salinity May need to use substitute
or alternative water sources e.g. recycled, reclaimed, seawater cooling, etc. Technical safety and
environmental issues encountered when making these changes
Responses Retrofit new technologies
although high cost Moving to ZERO discharge
sites Securing additional/
alternative water sources or options
Purchasing water from others e.g. market, other entitlement holders, etc.
Introducing different operating regimes e.g. for cooling water blow down
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Growth & Development
ImplicationsDuring planning consider: Technology selection e.g.
gas/renewable, hybrid dry-wet cooling, co-generation, etc.
High cost Water entitlement issues Migration of
customers/industries (shifts of location of rainfall patterns)
Government policies
Responses New technology e.g.
integrated generation & desalination (produce water as well)
Alternative generation technology
Changing of geographical location
Securing water entitlement Pass through of cost to
customers\upfront project planning
Partnership with water suppliers & customers
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The Problem: Higher Temperature
Climate change leads to increased average temperatures, longer and more intense summer heat waves and a greater number of extreme heat days each year when temperatures exceed 40C.
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Not as unlikely as you might think…GLOBAL WARMING CAUSES HEAT WAVE China Daily – 7 Feb 2007Beijing reports record high temperatures. After temperature records were broken on "Lichun" (the beginning of spring, the first of China's 24 traditional agricultural "terms" in the lunar calendar, which this year fell on February 4), Beijing reported another record high temperature of 16 degrees Celsius on the afternoon of February 5, the highest recorded temperature on that date in the last 167 years (systematic temperature records have been kept since 1840). Meteorological data shows that the average temperature in Beijing last December and this January were significantly higher than in previous years and that trend will continue this month. Meteorological experts say that the recent abnormally high temperatures have seldom been seen during this period at any time in history. Temperatures also remain high in Harbin city. The snow in the streets is melting. In Shanghai, the temperature was above 20 degrees Celsius for a few days in early February. HEAT WAVE HITS EAST CHINA CITIES China Daily - 2004-07-27 The city of Shanghai is expected to remain on red alert as the temperatures are expected to remain above 35 C until the end of this month. Electric generators have been kept running near maximum load so as to meet the surging power demand of households while 5,000 industrial producers have been co-ordinated to shift their working hours to reduce the pressure. The electric load reached 14.44 million kilowatts Monday, following 15.006 million kilowatts recorded last Friday according to Shanghai Municipal Electric Power Company. The company has worked out arrangements with other power suppliers such as introducing electricity from the East China Power Grid to help the city through the hot summer. The city saw four successive days last week with the temperatures rising above 38 C. On Saturday, the temperature soared to this summer's highest of 39.5 C . The heat has also worsened the serious power shortage in the city. Although the local government launched emergency measures last week to ensure the residents have electricity during the night, more than a hundred lines of electricity have to be cut off. As the number of high-temperature days outnumbered officials' predictions, 97 local enterprises have been required to stop operation today.
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Assets
Implications Increase in electricity demand (sales
increase) More peaking capacity needed (load
factor decreases) Generation efficiency decreases Higher risk of damage to
transmission and distribution systems
Bush fire risks to assets in very dry areas e.g. Australia
Difficulty of supply responding to meet the rapid increase in demand
Future Developments New assets must work reliably in
high temperatures Embedded generation (smaller
plants) for meeting peak power demands
Responses Build more peaking capacity
Need to optimise cost Demand side management
Incentives to customers to reduce demand in high temperature period
Build embedded generation (smaller plants) for meeting peak power demands
Operations integrity Keep plants running May mean retrofitting to provide more plant
capacity, more cooling capacity Asset flexibility to meet peak and shut down
when not required Crisis management plan for potential blackout –
emergency response Increase fuel inventory
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The Problem: Legal Action
Non-government Organizations, like Greenpeace, WWF, Climate Justice and Stop Climate Chaos, begin to take action against power companies.
Action takes the form of: Legal actions filed against leading electricity generating
companies with large coal-fired portfolio. Legal challenges filed against all new coal fired power plant
planning/permitting. Activist protests at individual power stations; and Public campaigns against large regional electricity
generators.
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Not as unlikely as you might think…US POWER GIANTS FACE LANDMARK CLIMATE LAWSUITEight states and New York city have launched an unprecedented civil action against five of America's largest power companies, demanding that they cut carbon dioxide emissions because of global warming. The companies being sued are American Electric Power Co, Southern Co, Xcel Energy, Cinergy and the federal Tennessee Valley Authority. They collectively own 174 fossil-fuel-burning power plants which produce 646m tons of carbon dioxide a year - about 10% of the nation's total, the statement said. GREENPEACE HIGHLIGHTS THE HAZARDS OF CLIMATE CHANGEGreenpeace India today sent a strong message about the hazard of climate change caused by the excessive burning of coal. Greenpeace activists beamed messages on the Ennore Coal Power Plant to highlight the fact that coal is one of the highest emitters of carbon dioxide which causes climate change. This is part of a series of activities Greenpeace India is undertaking to draw attention to the immediate threat from climate change. Greenpeace wants subsidies to the coal industry to be phased out. Greenpeace demands that 30% of the energy generated in India by the year 2030 should come from renewable sources and that this should increase to a 60% by the year 2050. CLIMATE ACTIVISTS BRING POWER STATION TO A HALT Climate activists from around the East Midlands managed to stop some operations at Radcliffe on Soar Power Station after climbing onto conveyor belts and dumper trucks inside the plant yesterday. The power station is the 3rd biggest emitter of CO2 emissions in the UK. The owner of the plant, E-On, said operations ran as normal and that their environmental record is good with aiming to be a clean coal-fired power station. The blockade lasted for 3 hours and 11 people were arrested all of which were later released.
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Business
ImplicationsShort term Disruptions in day-to-day operations
from protests Security & safety issues from
protests Publicity, reputation & credibility
issues Governments may react under
public pressure, particularly where rule of law not as entrenched
Medium – long term In Thailand and India, can lead to
close-down of facility (high risk to our investment and serious economic implications)
Delay in granting permits Impact our decisions on strategy,
facility planning, fuel mix
Responses Need to have a proactive, positive
responses to public and NGOs to show responsibility and long term commitment
Sizable stakeholder engagement programme
Government, community, NGOs, academia, customers, etc.
Collaboration, communication, education, sponsorship of green project
Influence policy makers and authorities
Formulate corporate climate strategy/carbon reduction plan
Flexible business models to cater for new technologies and changes required of a responsible company
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The Problem: Investors’ Limit
Leading institutional investors, such as AMP, California Public Employees Pension Scheme, HSBC Holdings, Henderson, etc, institute a voluntary code that limits their investment in businesses with emission liabilities greater than 10% of EBIDTA.
The emissions liabilities are to be calculated on the basis of total greenhouse gas emissions coming from direct sources – and apply to operations in all countries, irrespective of the existence of climate change regulations.
The emissions liabilities are to be valued against an indexed carbon price published by a recognized trading exchange, such as the European Climate Exchange.
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Not as unlikely as you might think…GET ECO-SAVVY, OR LOSE OUT ON MEGA INVESTMENTS 21 Apr, 2007 – The Times of IndiaWhen a group representing institutional investors controlling $41 trillion (that's trillion with a T) sends an innocuous-looking questionnaire asking about your GHG (greenhouse gas) emissions and preparedness to tackle climate change, can any CEO afford to ignore it? Boardrooms of the top 100 companies in India will be pondering over this eight-page survey that seeks to assess potential risks and opportunities relating to climate change for global businesses. From Reliance Industries to NTPC to ICICI Bank to Ranbaxy to even computer giants such as Infosys and the corporate giants of the Bombay Stock Exchange are part of the select group of 2,400 companies that have been asked to fill a questionnaire by the Carbon Disclosure Project (CDP), a UK charity representing the World's Largest Investor Coalition comprising a group of 284 institutional investors. The investors include ABN Amro Bank, California Public Employees Retirement System, CIBC, Deutsche Bank, Development Bank of Japan, Goldman Sachs, HSBC Holdings plc, Morgan Stanley, Old Mutual plc, Rabobank, UBS Global Asset Management, Warburg-Henderson and Zurich Cantonal Bank among others. CITY TRADERS FACING UP TO CLIMATE CHANGE BBC – August 15, 2005If some of Britain's biggest pension funds get their way, City traders will soon be discussing how climate change could affect the stock prices of FTSE 100 companies. Nick Robins, of Henderson Global Investors, believes that the market will see a profit warning from a company as a result of a failure to grasp the impact of emissions on business. A recent report published by Henderson and Trucost estimates that up to 12% of the pre-tax earnings of FTSE 100 firms could be at risk from measures required to incorporate the cost of emissions into market prices. A recent report by the UK-based Institutional Investors Group on Climate Change (IIGCC) and the Carbon Trust warned that "virtually all" types of asset could be affected by climate change. "We're not trying to save the world, what we want is for people to realise that climate change is an issue that can affect the value of their investments," says Mr Scales of the IIGCC.
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Existing Assets
Implications Risk warning raised by
institutional investor on asset liability
If investors leave Company share price drops Credit rating drops Cost of finance increases
Financing for operations or new projects may become difficult
Responses Reduce emissions through
technological improvements Change dispatch / fuel mix,
based on assumption that there is cost past-through to the customer
Buy credits to offset liabilities
Sell off high emitting assets Sell greener power at higher
price to increase earnings
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Growth & Development
Implications Hard to find funding for new
projects Credit rating drops, so cost
of financing increases Investors sell off their shares Public image of company
negatively impacted Change of investor mix e.g.
% of institutional investors drops
Responses Acquire non-emitting
projects / business e.g. transmission, gas, nuclear, retail, etc.
Join / acquire partners with cleaner portfolio
Privatise the company so not affected by these investors
Set a target or aim for more stringent liabilities / EBIDTA ratio <<10%
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Process & System
Implications Alter the profile of some
existing systems - need to be elevated
Monitoring, reporting, etc.
Responses Integrated GHG / financial
accounting reporting system Scenario modelling capacity
to optimise future liabilities and earnings
Strengthen emissions monitoring system – more timely, more accurate
Carbon credit / offset system Bank pools of credits for
future Negotiate with investors on
timeframe to achieve their requirements
23
CLP Adaptation WorkshopCase Studies: Vung Ang II, Vietnam and Samana Wind Farm, India
27th May 2010, Hong Kong
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Project methodology
Identify Vulnerability
Past impacts Future climate scenarios
Identify Adaptation Options
Already implemented Future options
Cost-Benefit Analysis(loss vs. adaptation cost)
The potential loss arising from climate change was quantified for each site and adaptation options identified where possible
CLP Values / Best Practice
Economic Benefit of Mitigating
Emerging Risk
Regulatory Requirements
Adaptation Decisions
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Climate Change Impacts on Vung Ang II Coal Fired Power Plant
CLP-JV Environmental Synergy Conference 2010/GEA
Climate Risks
Impacts Affected Parts
Typhoon Wind
Structural damages Destruction to resource and transport systems Reduced demand due to rapid shut down
Plant cladding, conveyor belt, transmission line, stack, housing structure, storage, turbine hall, ash “flight”, desalination plant, jetty and loading system, staff injuries
Coastal Flooding
Inundation Supply Disruption
Switchgear, milling, cooling water, auxiliary pumps, access road, ash pond, conveyor, jetty, cable tunnels, transmission
Fluvial Flooding
Sedimentation Contamination of cooling water Inundation Landslides and soil subsidence Reduced condenser efficiency
Sediment influx, blockage of access road, damage to transmission, deteriorated cooling water quality due to river/estuary contamination
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Potential Adaptation Options for Vung Ang II Coal Fired Power Plant
CLP-JV Environmental Synergy Conference 2010/GEA
Hard measures Soft measures
Relocate site inland / Elevate site (including ash pile) Plant mangroves/wetlands to dissipate floods Ensure station orientation to be aerodynamic Increase coal stock pile onsite during typhoon season Concretize coal storage with flood protection Specify design to withstand wind speed >110m/s and subsidence Install shut down protection design Install underground cables to desalination (desal) plant, cooling water (CW) plant and other services Install dredging/ damage protection Apply online condenser cleaning Increase filtration system of desal plant Elevate pumping/electrical systems and access road Build ash pond containment walls to pevent inundation/piesometric monitoring For jetty conveyor system, store inventory, encapsulate conveyor belt and develop underground system
Develop early warning system and emergency evacuation plans Train staff in activating emergency power shut down and startup Monitor weather conditions
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Climate Change Impacts on Samana Wind Farm, India
CLP-JV Environmental Synergy Conference 2010/GEA
Climate Risks Impacts Cost Implications
Temperature Rise (May – July maxima)Low scenario: 48
oC
High scenario: 51oC
Increase breakdowns (electronic card failure) Decrease resource availability More servicing
High scenario may reduce availability to 90%, implying a loss of approx. HKD500,000 for 3 months
Intense Rainfall Pole erosion/corrosion Access blocked
Low rainfall scenario: damage 10 poles 2-3 times/year, cost: approx. HKD675,000 High rainfall scenario: damage 20 poles 2-3 times/year, cost: approx. HKD1,350,000
Typhoon Wind Low wind scenario (50m/s) High wind scenario (60-80m/s)
Low scenario: 15 days outage, 2-3 towers damaged High scenario: 30 days outage, 10 towers damaged
Low scenario: approx HKD450,000 for tower replacement; HKD7,500,000 revenue loss High scenario: HKD1.5 million for tower replacement; HKD1.5 million revenue loss
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Potential Adaptation Options for Samana Wind Farm, India
CLP-JV Environmental Synergy Conference 2010/GEA
Measures Estimated Cost
Cooling of electronic cards Upgrade cards to sustain high temperatures
HKD850,000 HKD1.2m
Adapt and improve servicing and people (use ice vests, hydration, air conditioned cars, provide climb assist and hand held air conditioners)
HKD200,000
Ensure access around site using high clearance vehicles Improve drainage and flood defense/levee Strengthen pole foundations Install extra protection for cut point poles Build underground distribution/ cabling
HKD70,000 HKD6m HKD200,000 HKD100,000 HKD100m
Adapt and improve servicing and people (use ice vests, hydration, air conditioned cars, provide climb assist and hand held air conditioners)
HKD200,000
Build additional spare towers Improve tower designs Secure transfer point of sale & PPA terms Examine insurance products
HKD1m HKD5m + HKD3m for new builds--
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