AES Corporation

The AES conducted a climate stress test over a 2020 to 2040 period which includes all of its businesses. The company decided to accelerate the expansion of solar and wind capacity based on the analysis. It also estimates that around 76% of its assets will be in low-risk locations under the 1.5 – 2°C scenario used. The AES also used total insured values (TIV) – an insurance term that represents exposure to loss due to damage to physical assets or interruption to business operations – and concludes that 11% of its TIV is exposed to medium or high-risk climate events in 2040 against 29% in 2020 in a 1.5 – 2°C (RCP 2.6) scenario.

The AES Corporation plans to reduce its scope 1 emissions intensity by 36% by 2024 and by 75% by 2030 respectively relative to 2018 and 2016. The AES is not completely on track to meet its two scope 1 targets set in 2019 and should intensify its efforts to reduce scope 1 emissions. While these targets are fully aligned with its 1.5°C pathway, the AES Corporation should aim to be carbon neutral for its entire activities by 2040 as this is the expectation for electric utility companies with assets in emerging economies. The company should also add more intermediary objectives to incentivise near-term action over the long-term goals.

The AES Corporation scope 1 and 2 emissions intensity increased quite strongly between 2014 and 2015 but then reduced by 18%, from 790 gCO2/kWh in 2015 to 649 gCO2/kWh in 2019. The company didn’t publish 2020 data. This rate of reduction only represents about a fifth of what is required by the AES Corporation’s 1.5°C pathway between 2020 and 2025. The company will also exceed its carbon budget to 2035 by 50%. To remain within its carbon budget, the AES Corporation should accelerate the decline in electricity production from fossil fuel assets and especially focus on establishing a coal phase-out date.

The AES is planning to increase its renewable capacity by 3-4 GW every year until 2025. It also expects that 55%-60% of its earnings will come from renewable projects by 2025. It is also developing innovative low-carbon business, such as 5B, an innovative solar technology providing up to two times more energy with the same footprint of traditional solar facilities; Fluence a joint venture developed with Siemens and focusing on battery-based energy storage and Uplight, a provider of digital end-to-end customer solution for electric and gas utilities. However, AES could improve its performance by disclosing growth potential and deployment schedule information for these activities.

The AES Corporation plans to reduce its scope 1 emissions intensity by 36% by 2024 and by 75% by 2030 respectively relative to 2018 and 2016. The company also aims to be carbon neutral for all scopes by 2050 and for emissions from the sales of electricity by 2040.

Regarding renewable expansion, the company signed 3.017 GW of Power Purchase Agreements (PPA) for new wind, solar and energy storage contracts. The AES plans to maintain this expansion by signing 3-4 GW of new renewables contracts per year through 2025.

Between 2021 and 2025, the AES Corporation will spend USD 4,800 million for investments in subsidiaries. 65% of this budget will be allocated to projects to develop a 15-20 GW renewable capacity while 10% will be allocated to LNG projects in Vietnam and Central America.

The AES scope 1 and 2 emissions intensity increased between 2014 and 2015 but then reduced by 18%, from 790 gCO2/kWh in 2015 to 649 gCO2/kWh in 2019. This was driven by the closure of coal plants, since 2017 the AES has announced the sale or retirement of more than 10 GW of coal generation.

The AES’ significant renewable expansion is not sufficient to compensate that it has not committed to phase-out from coal. By 2025, coal will still account for around 10% of its total generation. Furthermore, its net zero emissions targets couldn’t be assessed because essential data are missing.