As a growing number of financial players demands that companies in their portfolios achieve carbon neutrality by 2050, the climate and energy think tank, Ember, publishes today a conclusive report on Engie’s climate strategy. Not only is Engie late in publishing a plan to close its remaining coal-fired power plants, but its gamble on gas poses serious risks to the climate and its shareholders in a context of climate emergency and an increasing competitiveness of renewable energies. See below a breakdown of the stakes.
Engie’s decarbonization path until today
Engie committed in 2015 to not build new coal plants and to reduce its activity in the coal sector. In December 2017, Engie joined the Powering Past Coal Alliance, reaffirming its commitment to work towards the global phase-out of unabated coal power. Yet Engie pursued the development of new coal plants in Brazil (Pampa Sul), Chile (Infrastructura Energetica Mejillones-IEM), Mongolia and Morocco and mostly sold its coal assets instead of closing them – bringing no real benefit in terms of greenhouse gas emissions reductions (1).
While Engie reduced its coal power capacity by more than 75% – from 20,872 MW in 2015 to 4,700.8 MW in 2019 – it still currently operates 10 coal power plants for a total of 4 GW of installed capacity. 76 % in Latin America (Chile, Brazil and Peru), 14 % in Morocco and 10 % in Portugal (2).
Of this installed capacity, 70% still does not have a closure date: 3 of Engie’s coal-fired power plants in Chile (Andina, Hornitos and IEM), 2 in Brazil and 1 in Morocco. Engie is trying to sell its coal plants in Brazil.
Engie’s business-as-usual road ahead
A new report reviewing Engie’s transition strategy warns about the absence of a comprehensive coal-phase out strategy and the inconsistency of the company’s SBTi target of 2°C with the objectives of the Paris Agreement (3).
Renewable energy accounts currently for 27% of Engie‘s total installed capacity, against 54% for gas. Despite Engie’s plan to increase solar and wind capacity, Engie’s strategy focuses largely on switching from coal to fossil gas and biogas/biomass between now and 2050. In an interview with FranceInter, Claire Waysand, Interim Chief Executive Officer and General Secretary Engie group, suggested that Chilean power plants would be converted to gas or biomass (4).
Even in Europe, Engie is working to defend gas from regulations and is developing new gas infrastructures. A case in point is the Vado Ligure plant managed by Tirreno Power, 50% owned by Engie. The plant was 100% coal-fired before its conversion to fossil gas of an 800 MW unit in 2007 and the later closure of the coal units due to violating health standards. However, Tirreno Power recently announced that it will double the plant’s capacity to produce electricity from fossil gas.
Ember’s report also highlights that the intended reliance on fossil gas over the next decades is a source of potential climate and regulatory risks for Engie, especially if shale gas ends up being one of the fuel sources, given the higher risk of fugitive emissions. From a financial point of view, the collapse in the cost of generating electricity from renewable energy sources reduces the financial viability of fossil gas assets and would ultimately lead to the abandonment of these assets.
An alternative scenario
Engie‘s current decarbonisation strategy is not aligned with the objective of limiting warming to 1.5°C, nor with the goal of achieving carbon neutrality by 2050. This is, however, a demand of a growing number of financial institutions, notably those involved in the Net Zero Asset Owner Alliance.
Not only do 24 French financial institutions (5) expect their clients active in the coal sector to adopt a coal exit plan, but many of them are also committed to aligning their activities with the Paris Agreement goals. Nevertheless, Engie is far from complying with this expectation: its tardiness in publishing a plan to close its last coal-fired power plants adds to the risk of being one of the main promoters of gas as a transition energy.
Reclaim Finance calls on financial players to rapidly address this matter and push Engie to publish a roadmap to close its coal assets without switching over to or gas, and to include it in a global strategy of transition towards a carbon neutrality objective consistent with a 1.5°C trajectory.