Exiting coal without contributing to the decarbonization of the planet is possible, and that is exactly what ENGIE does since it committed to reducing its coal business in 2015. To quicky phase-out coal from its portfolio, the French utility is replacing the problem with another: it has largely resorted to selling its coal assets and converting them to other polluting energy sources such as wood and fossil gas, instead of closing them down. Not only is this strategy not aligned with a 1.5°C trajectory, but it also lacks transparency and risks endangering ecosystems and local communities.   

To limit global warming, the global coal power fleet must be shut down by 2040 at the latest. Yet many companies, such as ENGIE, are opting for an easier way to decarbonize their portfolios: selling their coal plants. This strategy has many advantages for them: they seem to be taking decisive and swift action for the climate, while avoiding responsibility for the environmental damage caused by years of coal operations and the reconversion of workers.

A growing number of vocal investors and financial institutions are publicly opposing divestment as an ineffective climate strategy and promoting instead engagement as the only way to achieve change in the real world. Yet, no criticism has been heard from and no action seems to have been taken by investors regarding ENGIE ’s dirty coal phase-out.

ENGIE  has sold 16 coal plants since COP21, accounting for 60% of its total coal capacity reduction (1). To name a few, ENGIE sold four coal power plants in Germany and the Netherlands to Riverstone Holdings, a dubious private equity firm that continues to operate them. More recently, ENGIE sold its remaining two coal plants in Brazil, Jorge Lacerda and Pampa Sul plants. ENGIE is currently seeking to sell its Safi coal plant in Morocco.

Selling is the main, but not the only one strategy used by ENGIE to quickly remove coal from its portfolio. The company has turned to solid biomass despite growing warnings from scientists and NGOs that it is not a carbon-neutral fuel. In Chile, ENGIE is working on the conversion to wood of the Andina and Hornitos coal plants, which should be completed by the end of 2024 (2).

Also in Chile, ENGIE will convert the IEM coal plant to fossil gas. This conversion from coal to gas is just the tip of the iceberg of a corporate climate plan that relies excessively on fossil gas under the false pretext that it is a transition fuel (3).

ENGIE confirmed to investors its conversion plans in Chile more than a year ago. However, the company has not bothered to explain how solid biomass and fossil gas for the three plants will be supplied.

Chile Sustentable and Biofuelwatch recently published a briefing analyzing and questioning the conversion of the Andina and Hornitos coal plants in Chile to wood. While ENGIE states that both plants will use wood pellets or wood chips, the NGOs briefing concludes that neither option is suitable. Due to the large amount of wood needed to run the plants, the supply of wood pellets or wood chips would cause significant damage to forests and ecosystems – either in Chile or in other countries if they were imported – while creating conflict in local communities and stress in local markets (4).

ENGIE also needs to clarify the origin of the fossil gas it will use for the third coal plant being converted in Chile, the IEM plant, as it risks being shale gas (5) in the form of LNG from the United States (6) or transported by pipeline from Vaca Muerta in Argentina.

These issues highlight some of the inconsistencies in ENGIE’s transition plans. Investors engaging with ENGIE should increase pressure, as the company has clearly failed to deliver a credible and responsible exit from coal. Investors should insist that the company abandon its remaining sale and conversion plans and opt for closure. Furthermore, as ENGIE’s fake coal exit is just one element of an inadequate corporate climate plan, investors should demand more transparency and ambition in the utility’s climate plan (7). Specially, demand that it does not rely on fossil gas by falsely claiming that it is a bridge fuel.

Notes:

1. The equivalent of 12,5 GW.
2. Among the European utilities, ENGIE has the largest planned biomass capacity additions. Some other biomass examples: ENGIE, as part of the TrustEnergy joint venture attempted to convert Pego coal power plant in Portugal to solid wood in 2021. Highly contested by local NGOs, the project was fortunately cancelled, as the tender jury favored another project focused on solar, wind, battery storage and green hydrogen. Similarly, in 2010, ENGIE converted the coal-fired power plant Max Green-Rodenhuize in Flanders, Belgium, to solid biomass. The plant burns pellets imported mainly from the United States, from Canada and, before the EU sanctions, from Russia. The Flemish Minister for the Environment has been very critical of this plant in the past.
3. Among European utilities, ENGIE currently holds the largest gas-fired power generation capacity. ENGIE is still planning to extend its gas capacities in Australia, Belgium, Brazil, and Italy. This is despite the scientific conclusions stating that to limit warming to 1.5°C all fossil fuel power plants must be closed by 2035 for EU/OECD countries.
4. According to Chile Sustentable and Biofuelwatch’s briefing, existing wood pellet production capacity in Chile would only provide raw material for 25 days of operation for both plants. In addition, competition for local pellets for residential heating would deplete the domestic market, which has already struggled to meet its demand over the past two years. Importing pellets would likely only displace the environmental damage. The global wood pellet trade is dominated by pellets produced in British Columbia (BC), Canada and the southeastern United States, two regions where pellets are routinely sourced from clearcuts of highly biodiverse forest and, in BC, even primary forests. In the case of woodchips, the NGOs estimated the two plants would consume more than 100,000 hectares of eucalyptus plantations per year (more than 9 times the surface of Paris). Not only do such monoculture plantations cause profound damage to biodiversity, alter the water cycle, and create conflicts with rural and indigenous communities, but they also compete with the country’s pulp and paper industry for this raw resource.
5. The production of shale hydrocarbons has a direct impact on the populations: as of today, they are already affected by risks of pollution of drinking water reserves and exposure to toxic compounds from this industry, as well as by increased seismic activity and competition for water.
6. ENGIE is already buying gas from the United States. In December 2021, it was discovered that ENGIE had signed – and concealed to its investors – a 10-year supply contract for US LNG. Since then, the contract has been extended from 10 to 20 years. Even more alarming, ENGIE had not even sought to assess the climate impact of this contract, satisfied with a future assessment, to come after the agreement was signed.
7. Read our analysis of Engie’s Say on Climate and our demands for Engie investors in the context of the 2022 shareholder meeting held in April.