American Electric Power (AEP)

In 2021, AEP accelerated its scope 1 absolute emissions targets from an 80% reduction by 2050 to an 80% reduction by 2030, compared to a base year of 2000. This new target is projected to align with the company’s 1.5°C pathway in 2030. Beyond 2030, AEP lacks the ambition to reach net-zero at the rate required by the IEA’s net-zero emissions scenario by 2035 in advanced economies. Moreover, the company suggests that it may rely on offsets to achieve its net-zero target, rather than focus on direct action. AEP should aim to reach net-zero by 2035 and establish intermediate shot-term targets to ensure that it remains on track.

AEP retired or sold 12.7 GW of coal electricity generation capacity between 2010 and 2020 and aims to retire a further 5.6 GW by 2030. However, this leaves 6.5 GW of coal capacity to be used from 2030 onwards. AEP has not established a plan to phase out coal or fossil fuels more broadly, with natural gas capacity planned to increase. A continued reliance on coal in the long-term leaves AEP at risk of stranded assets. To reach net-zero emissions, whilst continuing coal and gas generation, requires a significant investment in carbon removal technologies, which is currently not feasible according to the company.

In 2020, the company dedicated approximately 66% of its electricity generation capital expenditure (CapEx) to low-carbon sources in 2020. AEP’s latest capital forecast demonstrates increased ambition to fund renewable projects, with a planned investment of USD 9.9 billion, approximately 81% of generation CapEx, forecast between 2022 and 2026. AEP can further align its investment strategy with the low-carbon transition by reducing CapEx in coal and gas.

By 2030, AEP commits to reduce scope 1 absolute emissions by 80% compared to 2000 levels. In 2020, the company was on track to achieve this. In 2021, the company established a net-zero emissions by 2050 target. However, AEP suggests this will not be possible without the use of offsets.

AEP plans to retire seven coal plants by 2030, reducing coal from 43% of capacity in 2021 to 18% in 2030. Moreover, it has allocated USD 9.9 billion of planned capital expenditure (CapEx) between 2022 and 2026 to renewable energy and aims to increase renewable capacity from 19% in 2021 to 50% by 2030.

The company invests approximately 66% of its electricity generation CapEx to low-carbon technologies. It also undertook a scenario analysis that informed its decision in 2021 to increase its target ambition. However, 80% of AEP’s electricity generation capacity in 2020 was still derived from coal and gas.

Between 2015 and 2020, AEP’s scope 1 and 2 emissions intensity decreased by an average of 4% per year. This was driven by the closure or sales of 19 coal plants, resulting in a 55% reduction in coal-fired generation. Nonetheless, the reduction did not keep pace with its 1.5°C pathway.

AEP aims to increase gas capacity and continue coal generation without plans for significant investment in carbon removal. Moreover, its net-zero by 2050 target does not keep pace with the expectation to reach net-zero by 2035 and is reliant on nature-based offsets rather than direct company actions.