EnBW Energie Baden-Wuerttemberg

EnBW demonstrates its best alignment to the low-carbon transition with its performance on the business model module. Its Renewable Energies business segment provided 13.8% of adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) in 2018, and ongoing deployment plans are well developed for large-scale photovoltaic plants (without subsidy). The company is investing in high-voltage direct current (HVDC) lines (SuedLink and ULTRANET) to transport renewable power from the north of Germany to the south, as well as investing in flexibility optimisation via smart metering, electromobility infrastructure and monitoring, and automated forecast data exchange.

EnBW’s current and predicted generation portfolio is very poorly matched to the low-carbon transition required for the electric utilities sector. Generation from lignite has hardly declined in recent years and coal power has been flat over the last three years, leaving the company with an emissions intensity – the amount of greenhouse gas emissions produced for every unit of electricity – of ~550 gCO2e/kWh in 2018. This is significantly higher than the well-below 2-degree pathway value of ~295 gCO2e/kWh for Europe. The company faces a huge challenge to decarbonise its generation while also making up for nuclear power plant closures mandated by the German government.

EnBW’s R&D spending is not well matched to its ongoing need for greenhouse gas capture and permanent storage technologies – especially if it is to continue generating under the current expectations for its fossil power assets. The 2018 mitigation R&D spend, reported via the company’s 2019 climate change disclosure to CDP, was well below 5% of total capital expenditure; too low for the low-carbon transition. Only just over a third of that spend was dedicated to non-mature technologies, even though the company will rely heavily on development of low-carbon technologies to replace its existing high-carbon assets.

EnBW’s approach to target setting is poorly aligned with the transition pathway required. In the 2018 reporting year, EnBW was already slightly behind its 2020 target – a target which itself is not ambitious enough for alignment with the company’s well-below 2-degree pathway. There is much opportunity for EnBW to apply scenario analysis to inform new emissions reductions targets, set at intervals of no more than five years. Such targets would signal a public commitment to short-, medium- and long-term action for emissions reductions and keep management focus on transitioning to a low-carbon business model.

EnBW plans to reduce emissions intensity by 15% between 2015 and 2020 to reach 515 gCO2e/kWh. It is investing in HVDC lines to transport renewable power from the north of Germany to the south and adopting low-carbon business models such as flexibility optimisation via smart metering, electromobility infrastructure and monitoring, and automated forecast data exchange.

The share of electricity generation from coal will be gradually reduced, as required by German law. Coal plants will be converted to gas where possible and new gas plants opened. Renewable capacity will be doubled from 2012 to more than 40% by 2020 (mainly onshore and offshore wind).

Emissions intensity of ~550 gCO2e/kWh in 2018 compares poorly to its well below 2-degree pathway value of ~295 gCO2e/kWh. Renewable capacity increased over the five years prior to the 2018 reporting year, but brown and hard coal fuels still form the bulk of EnBW’s generation.

EnBW did not manage to reduce emissions intensity between 2013 and 2018 at the rate required for alignment with its well-below 2-degree pathway. However, renewable capacity increased from 19% to 28% of the mix over that period.

EnBW does not publicly commit to action consistent with the low-carbon transition required. Investments in grid infrastructure and policy advocacy for market measures for new renewables are undermined by ongoing coal and lignite generation, with little transparency around plans for these current assets. Mitigation R&D spend is not a high enough proportion of total capital expenditure, particularly given plans for new gas generation.