RWE AG is a publicly listed energy company headquartered in Germany. In 2019, its revenue was US$14.73 billion and installed capacity was 42.9 GW. RWE is currently committed to achieve climate neutrality by 2040. Its long-standing history with fossil fuel generation means it has the highest emissions intensity of the European companies assessed, although it is just beginning to shift its focus towards renewables.
Following the asset swap with E.ON, RWE has begun strategically repositioning itself as a low-carbon electricity generator. With the integration of E.ON’s renewable assets, the share of RWE’s renewable capacity will increase to 22%. The company has drawn up an investment plan to support the continued growth of its renewable segment. This entails making investments of €1.5 billion (US$1.68 billion) per year, which are estimated to allow for an additional 2-3 GW of new renewable capacity per annum. Geographically, RWE will concentrate on markets in Europe, the Americas and the Asia-Pacific region. Maintaining momentum on growing this business model will enhance RWE’s low-carbon credibility. However, the company’s reputation means it may face challenges garnering public acceptance and support of its repositioning as a renewables generator.
RWE’s 2019 annual report states an overall R&D expenditure figure of €21 million (US$ 23.56 million). Although some of this expenditure went towards low-carbon technologies, such as offshore wind innovation, a portion also went towards optimising the efficiency of fossil fuel technologies by reducing mercury emissions from coal plants or turning thermal plants into thermal storage plants. Any R&D that relates to fossil fuel optimisation is not considered low carbon as fossil fuel efficiency does not contribute to greenhouse gas reductions in a meaningful way. Reporting R&D expenditure per technology type would improve RWE’s low-carbon alignment by demonstrating its commitment to innovative, non-fossil fuel technologies.
RWE’s planned future assets show commitment to its coal phase-out – with all but one coal asset scheduled for retirement between now and 2033. However, the company still sees gas as playing an important role in its electricity mix, with gas-fired generation planned in Europe out to 2033 and beyond. Further, the company views gas as a suitable partner for its renewable energy generation, stating that the gas share of its power plant portfolio ‘is expected to increase further’. Ongoing gas use is not sufficient to meet the rapid rate of decarbonisation required by the European pathway. As Europe moves towards a low-carbon society, these assets may be devalued through falling profitability and regulatory pressure, resulting in them becoming stranded. Relying on gas without assurance of effective carbon capture and storage technologies could prove a costly decision.
RWE is on track to meet its new target, set in 2019, which aims to reduce absolute emissions by 75% by 2030, compared to a 2012 base year. While this target represents a significant increase in ambition relative to RWE’s previous targets, its targeted pathway is still not ambitious enough to meet the rate of reduction required by the company’s low-carbon pathway. Increasing the ambition of this target would improve RWE’s alignment with the Paris goals. Further, the company should extend the time frame of its target to cover the majority of its asset lifetimes. For RWE, this means setting a target that extends to at least 2043.
RWE is awarded a trend score of =. If the company were reassessed in the near future, its score would likely stay the same. RWE’s locked-in emissions – emissions from the company’s installed and planned electric power plants up to 2033 – already exceed its low-carbon budget, and its rate of future emissions intensity reduction is not projected to remain on track to decarbonisation. The company has committed to phase out coal generation, but gas-fired generation will continue. RWE’s 2019 strategy, which appears to show more commitment to the low-carbon transition, could represent a change of direction. Business model performance is likely to improve with the integration of E.ON’s renewable assets and its own targeted investment plan for renewable expansion. Delivering on its strategy will maintain RWE’s current trajectory.
RWE’s strategy focuses on the expansion of its renewable electricity generation sources. Coal and nuclear power stations will increasingly lose importance within RWE’s generation portfolio, but gas will still play an important role.
In 2018, 80% of RWE’s electricity generation came from fossil fuels, almost 40% of which was coal-fired generation. The RWE-E.ON asset swap, which was finalised in 2019, will lead to an increase in RWE’s installed renewable capacity.
Ongoing reliance on fossil fuel electricity generation means that RWE’s emissions intensity increased by 3% between 2013 and 2018. The company has, in the past, been criticised for opposing climate-positive policies, including those that prevent coal use.
RWE’s strategy, kick-started by the E.ON asset swap, indicates that the company is more committed to the low-carbon transition. The company’s commitment to a coal phase-out is positive. However, the lack of a gas phase-out strategy calls into question the credibility of the company’s carbon-neutral commitment.