Iberdrola SA is a publicly listed energy company headquartered in Spain. In 2019, its revenue was US$40.89 billion and installed capacity was 52.08 GW. It has operations in Spain, Latin America, the UK, and USA. Iberdrola has the highest renewable capacity (excluding hydro) of the keystone companies headquartered outside China, and the fifth highest of the 50.
Iberdrola is one of only three companies in the sample to demonstrate its commitment to the low-carbon transition with climate expertise at the board level. The company has also severed links between executive pay and fossil fuel generation capacity growth and has built achievement of emissions reduction targets into executive remuneration packages. Alignment of strategy with Paris goals could be further demonstrated by providing a summary overview of specific milestone actions, and, importantly, their costs, to reach more regularly spaced low-carbon transition targets along the company’s well-below 2-degree pathway.
The company has embraced the Science Based Targets initiative (SBTi) approach, and, in March 2019, SBTi approved a 2-degree-aligned target to reduce absolute scope 1, 2 and 3 greenhouse gas emissions by 20% by 2030 from a 2017 base year. The company has a record of meeting previous targets (i.e. targets with end points in the past) and is on track to meet all of its currently running targets for 2030 and 2050. However, these targets are not ambitious enough for alignment with the decarbonisation pathway need to remain well below 2 degrees.
Despite having made good decarbonisation progress to date, Iberdrola’s emissions reduction trajectory falls short of what is needed for the well-below 2-degree pathway. This is strongly influenced by the choice of new gas capacity instead of renewables to replace higher intensity generation in Mexico. If the company is banking on the availability of carbon capture and storage and other carbon removal technologies to make up for emissions from gas, this could prove to be a costly decision, especially as renewables and power storage technologies continue to become cheaper and climate regulation tightens.
As a gas generator, Iberdrola may lose public support if its involvement in regional and international climate policy negotiations, either directly or via trade associations, is perceived to slow down steps to phase out gas – particularly highly debated fracked gas. A clear public-facing policy, spelling out actions to be taken if trade associations supported by Iberdrola adopt positions delaying climate action, would help to reduce such reputational exposure.
Iberdrola is awarded a trend score of -. If the company were reassessed in the near future, its score would likely worsen. So far, the company’s emissions reductions have been in line with its benchmarked pathway, but by 2023 the projected emissions reductions will fall behind what is required under the well-below 2-degree pathway. Without a more rapid global phase-out of all fossil fuels, gas included, the company risks undermining its good progress to date with increased generation emissions from gas. The company is proactively evolving its generation and energy services portfolio to reduce the emissions intensity of its business, but these actions are undermined by continued reliance on gas-fired generation.
Iberdrola plans to become carbon neutral at the global level by 2050. However, even this level of ambition is not sufficient for low-carbon transition alignment under the well-below 2-degree scenario. The company will need to reach negative emissions intensity, i.e. to achieve net carbon removals.
Iberdrola is rapidly ramping up renewables deployment and is also striving for leadership in smart grids, storage systems and digitisation. Its stated aim is to ‘bring the energy transition forward’, and it is an active participant in policy-influencing forums.
Iberdrola is replacing coal and nuclear capacity with renewables. This is undermined by reliance on gas generation. Gas provided ~37% of generation in 2018 compared to ~30% in 2013. Smart meter roll-out is improving network efficiency and facilitating renewables integration and electric mobility solutions.
Iberdrola has supported ambitious regulation to drive electrification of the economy and decarbonisation of power generation. It successfully reduced generation intensity to 163 gCO2e/kWh in 2018 (down 28% from 2013).
Iberdrola has climate change expertise at the board level and demonstrates transition commitment via its rapid renewables deployment. However, despite a public commitment to abandon fossil fuels, the company is still planning new gas capacity in Mexico, with no clear carbon capture plan for the resulting emissions.