Enel SpA is a publicly listed energy company headquartered in Italy, with 23.59% owned by the government of Italy. In 2019, its revenue was US$86.81 billion and installed capacity was 84.35 GW. Enel has a presence in 32 countries, from Argentina to Zambia. It is one of only three companies assessed that accompanies its board-level responsibility for climate change management with climate change expertise at the CEO level.
The company is demonstrating leadership in low-carbon business model application with its Enel X business line. This offers products and services for energy efficiency, distributed generation, demand-side management and local government integrated services like public lighting and smart city systems. It also supports creation of off-grid solutions such as vehicle-to-grid and second-life battery services. Enel X is growing quickly and investments are expected to contribute US$454 million to Enel’s group earnings before interest, taxes, depreciation and amortisation (EBITDA) over the period of its Strategic Plan (2020-2022).
Enel has measures in place to manage its interactions with policymakers and other stakeholders such as trade associations and NGOs. Positions on climate change are coordinated and represented by the Europe and Euro-Mediterranean Affairs Unit. The Corporate Governance and Sustainability Committee oversees interactions with stakeholders, and the company supports climate-positive policies such as ambitious regulation on renewables targets, carbon neutrality and clean mobility. It influences trade associations’ positions via membership and by serving on their boards. Enel could show further leadership by publishing a policy clearly setting out actions to be taken if climate-positive policies are resisted by its trade associations.
With 61% of its capacity located in Europe, a region expected to decarbonise rapidly under the well-below 2-degree pathway, there is great potential for Enel’s decarbonisation progress to fall further behind its pathway. Enel is still very dependent on fossil fuel assets (51% of its mix in 2018). Average emissions intensity over the five years to 2018 remained at 2013 levels. Lower hydro generation in 2017 was compensated by increased gas generation, rather than other renewables. Regulatory cost for fossil generation may also increase, diverting funds from more rapid renewables deployment. Converting coal plants to gas, without strong assurance of future availability of cost-effective carbon capture and storage, may prove to be a costly choice.
Large R&D programmes in mitigation technologies are indicative of a strong financial commitment to decarbonisation. However, Enel’s 2018 mitigation R&D spend was small compared to its overall capital expenditure (<2%). Without increased investment in mitigation technology innovation – especially given the current high proportion of fossil fuel generation in its mix (51% in 2018) – Enel may not achieve its target of full decarbonisation by 2050.
Enel is awarded a trend score of -. If the company were reassessed in the near future, its score would likely worsen. The company has set a SBTi-approved decarbonisation target for alignment with a well-below 2-degree pathway, but, in the 2018 reporting year, it was not on track to achieve this target. Enel’s recent emissions reduction trend did not match the pace required for the company’s well-below 2-degree pathway and forward projections of locked-in emissions for 2019-2033 are above the budget available under the company’s pathway. Even though it is taking climate change management seriously and adapting its business model for low-carbon transition alignment, Enel needs to increase the pace of its generation emissions intensity reduction. New data on plans for future generation mix became available after this assessment was concluded. The data applied for this assessment, combined with poor visibility on non-mature mitigation R&D spend, indicates the company is not keeping up with the pace of change required for alignment.
Enel is aiming to achieve complete decarbonisation by 2050. It plans for its Enel X business line to become a global producer of sustainable, innovative and simple technology solutions – contributing US$454 million to Enel’s group EBITDA over the period of its strategic plan (2020-2022).
Enel’s 2020-2022 strategic plan involves 14.1 GW of new renewable capacity to increase carbon-free production to 68%, as well as 10.1 GW demand response capacity and 439 MW storage capacity. Coal-fired generation will be phased out by 2030.
In 2018, coal still provides ~26% of Enel’s generation (~30% in 2013). A further ~26% comes from hydro generation, and the contribution from gas has fluctuated around ~15% in recent years. Oil adds ~10%, nuclear ~10% (~15% in 2013) and the remaining ~13% comes from growing renewables (~7% in 2013).
Ongoing reliance on coal-powered generation means that Enel’s emissions intensity reduced by just 7% between 2013 and 2018 to reach 369 gCO2e/kWh. Compared to total capital expenditure, the 2018 R&D spend on mitigation technologies does not indicate strong financial commitment to decarbonisation.
Enel is ramping up renewable deployment, but the commissioning of coal at the Torrevaldaliga Nord plant as recently as 2009, long after it was clear that unabated coal burning must stop, calls into question the consistency of the company’s transition plans. Replacing coal with gas during the mid-2020s will not achieve a well-below 2-degree pathway.