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Steam billowing from the cooling towers of Vattenfall's Jaenschwalde brown coal power station is reflected in the water of a lake near Cottbus, eastern Germany December 2, 2009. Most world leaders plan to attend a climate summit in Copenhagen December 7-18, boosting chances that a new U.N. deal to fight climate change will be reached, host Denmark said on Tuesday. REUTERS/Pawel Kopczynski

EXECUTIVE PERSPECTIVE: Enel, Climate Leader and Energy Producer

22 February 2017

Climate Leadership is about being both transparent on emissions performance, and reducing emissions in line with policy guidance to stay within 2 degrees C global warming.  As part of our Climate Leaders series, we sat down with Andrea Valcalda, Head of Sustainability at Enel, to learn how and why a top 100 emitter of greenhouse gas is managing its carbon footprint in line with policy guidance.

Sustainability: Why is reducing your GHG footprint important to your business strategy?

Valcalda: Sustainability is embedded in our strategy and business processes thanks to a long-term shared value approach along the entire value chain. Our commitment to sustainability is underscored by our willingness to contribute to the achievement of four of the 17 Sustainable Development Goals adopted by the United Nations in September 2015, namely SDG 4 (quality education), SDG 7 (affordable and clean energy), SDG 8 (decent work and economic growth) and SDG 13, which is aimed at encouraging action to fight climate change.

Within that framework, we have committed to reduce our CO2 emission intensity by 25% compared with 2007 by 2020, meaning we will be able to generate 1 kWh of electricity while producing less than 350g of CO2 emissions. This is an interim target on the way to fully decarbonising the Enel Group’s energy mix by 2050.

We believe that the transition to a low carbon economy is not only significant from an ethical and corporate responsibility standpoint – science shows the contribution of humans to climate change – but it is also a driver for innovation and a way of  creating the conditions to enter new markets, allowing our Group to be more competitive in the current shifting energy environment.

Sustainability: Transparency on emissions is crucial to being a Climate Leader.  Do you report your GHG emissions scope 1,2, and 3?

Valcalda: Yes, we do. Our GHG footprint, including scope 1, 2 and 3 emissions, is reported every year in Enel’s Sustainability Report whose information is compliant with the ISAE 3000 assurance standard. Moreover, GHG emissions are externally verified against ISO 14064-3 and disclosed publicly to the Carbon Disclosure Project (CDP).  Being an electric utility, Scope 1 emissions have the biggest share of our GHG footprint (93% in 2015).

Sustainability: Can you tell us more about the merits of using an intensity target versus an absolute target?

Valcalda: Intensity targets are expressed as emissions per unit of output (kWh in our case). An intensity target seeks to achieve a particular emissions rate rather than a specific amount of emissions. Applied to us, an intensity target gives an idea of the quality of the performance in terms of emissions produced while generating electricity rather than simply reporting the amount of emissions coming from electricity generation.

One of the basics of fighting climate change is to produce more electricity by producing fewer emissions. This is the reason why we believe that an intensity target is more meaningful than an absolute one, as it records the effectiveness of the measures used to lower emissions from electricity production instead of just focusing on emissions from production.

We prefer to use an intensity target also because it can be tracked over time against the decarbonisation trajectory that science suggests is needed to stay below a 2°C rise in global temperatures by the end of the century (see the “Decarbonisation Approach” used to verify “science-based” target) and it allows to compare our emissions performance with those of our peers.  That said, aggregate emissions reduction over time is obviously crucial to achieving our 2050 goal of decarbonisation.

Sustainability: 2015 saw an increase in your aggregate GHG emissions. Can you comment on 2016? Are you still on track for your 2020 intensity target?

Valcalda: GHG emissions may show inter-annual variations depending on a combination of factors. In 2015 for instance, despite new renewable plants coming into operation, we had a temporary rise due to increased production from thermal (mainly gas fired) power plants to offset the lower hydro production caused by lower rainfall in Europe.  2016 emissions figures are yet to be confirmed, but 2015 data and the preliminary figures for 2016 do not represent any concern or deviation in our trajectory towards the full decarbonisation target.

The strategic plan we recently presented to investors envisages an increase in emission-free production to 56% from the current 46% by 2019. If we include production associated to managed capacity, this target rises to close to 60%.  And this is all a process to achieve our long term goal of decarbonisation by 2050.

Sustainability: Has your footprint reduced since 2010? By how much?

Valcalda: It is not possible to have a correct comparison due to changes in inventory boundaries for assets and activities, for example electricity consumption of non-productive hydropower plants was introduced to our scope 2 emission category in 2012. Our overall carbon footprint, including scope 1 and 2, slightly decreased in 2014 compared to 2010.

Sustainability: Do you set targets for future reductions based on a science based target guidance (e.g. Reducing 1.4% per year from a 2010 baseline?)

Valcalda: Yes.  As documented, Enel has committed to reduce CO2 emissions 25% per kWh by 2020, from a 2007 base-year. The target includes the decommissioning of 13 GW of fossil power plants in Italy, and is a milestone in the long term goal to operate in carbon neutrality by 2050.

The decarbonisation trajectory that we have drawn since the application of the Decarbonisation Approach used for the science-based validation is our reference point from which to set additional targets.

Sustainability: What benefits have you seen because of your carbon management strategy?

Valcalda: Enel was one of the first utilities to invest in electricity generated by renewable sources and through our Global Renewables Division we are now a major global operator in green energy, with an installed capacity of 36 GW that is spread around Europe, the Americas, Africa and Asia across a diversified and well-balanced generation mix including wind, solar, geothermal, biomass and hydropower, as well as an impressive pipeline of projects.

We also took the decision of abandoning any new investment in coal as well as to phase out 23 thermal power plants in Italy with 13 GW of capacity (corresponding to half of the country’s installed thermal capacity).  This strategy allowed us to capitalize on the transformation we have been seeing over the last year in the electricity sector, lowering merchant risks and providing safer investments.

Sustainability: To be a leader in climate performance, what advice would you give to other carbon intensive firms about GHG management and planning?

Valcalda: We should be aware that the road to decarbonisation is clearly marked by regulation, technology and customer expectations. We see further expansion of renewable energy, digitized grids, new services and products based on electricity. We are confident that a growing reliance on low-carbon electricity may also help decarbonise other sectors of the economy, starting with the manufacturing industry and then the transportation sector, where the e-mobility could make a massive difference in terms of both emissions reductions and the sustainability of cities.

Any opinions Expressed in "Executive Perspectives" are those of external parties and not those of Thomson Reuters.

Topics

Corporate Governance, Executive Perspective

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