Naturgy Energy is a publicly listed semi-integrated gas company headquartered in Spain. In 2020, it had USD 18.47 billion in revenue and a reported 11,847 employees*. Naturgy operates eight LNG tankers and two pipeline networks and is a leading gas distributor in Latin America. It is developing renewable energy projects and aims to be carbon neutral by 2050 but lacks a scope 3 emissions target.
Naturgy has invested 62% of its total capital expenditure (CapEx) in renewable energy in 2019 and around 38% in 2020. This represents an important proportion of Naturgy’s total spending in 2019 and is not too far off the sectoral expectation for oil and gas companies to invest 77% of their CapEx in low-carbon projects to align with a 1.5°C scenario. Naturgy can greatly improve its performance on material investment by ramping up its current CapEx in low-carbon technologies in future years and investing in carbon removal technologies.
Naturgy is providing energy efficiency services to customers from the tertiary sector, as well as public administration and the industrial sector. In 2019, 0.8% of Naturgy’s 2019 revenues came from energy rehabilitation services such as the replacement and renewal of boilers, efficient lighting services and electric air conditioning solutions.
One of Naturgy’s key goals is to develop a business model focused on providing energy services for residential environments, experimentation of Smart Home equipment for commercial development and testing of energy management platforms. The company can expand this business model further to support its low-carbon transition.
Naturgy is significantly developing its low-carbon electricity business. It has increased its renewable energy capacity through 667 megawatts (MW) of wind power and 250 MW of solar power projects, awarded to the company in the Spanish Renewables Auction. Close to 800 MW of this capacity came into operation during 2019. The company’s operating installed capacity at the end of 2020 reached 4,609 MW, corresponding to a 10% increase over 2019. Naturgy’s objective is to reach a share of more than 34% of renewable installed power in its power generation mix by 2022 compared to 27% in 2019.
Naturgy collects information relating to climate change and carbon performance at least annually from 3% of its main suppliers, which represent 60% of its total procurement spending. The data is used to determine if energy efficiency services can be offered to suppliers, and to analyse risks and opportunities in the supply chain as well as validate the company’s calculated scope 3 emissions.
Naturgy’s strategy can be strengthened by further using the data to determine and implement concrete actions that encourage suppliers to reduce emissions, partner with suppliers to develop low-carbon products and finance low-carbon innovation in the supply chain.
Naturgy has a policy to engage with trade associations and ensure their position is aligned with the company’s own climate change strategy. However, Naturgy’s policy does not indicate actions to be taken in case of divergent positions. For example, Naturgy is a member of the Eurogas Board. Eurogas lobbied against the 100gCO2e/kWh threshold for electricity generation in the EU Sustainable Finance Taxonomy, arguing that it should be increased to 550gCO2e/kWh. The association’s proposed increase will enable unabated gas electricity generation to be considered sustainable. Naturgy can show leadership in climate policy engagement by withdrawing from such trade associations or by actively using its position in these associations to drive support for climate policy.
Naturgy receives a trend score of +. If the company were reassessed in the near future, its score would likely improve. The company’s plans to increase the share of electricity in its portfolio up to 60%, and conversely reduce gas to 40%, can reduce its overall emissions. Similarly, Naturgy’s plans to increase the share of renewable electricity in its power generation mix and develop energy services for its customers can improve the company’s alignment with its 1.5°C pathway. It is however crucial that Naturgy sets short- and long-term scope 3 emissions reduction targets to support its 2050 carbon neutrality objective to significantly improve its performance.
Naturgy plans to reduce its scope 1 and 2 absolute emissions by 21% and its emissions intensity from electricity generation by 22% by 2022 compared to 2017. However, Naturgy has not established a scope 3 emissions reduction target. The company also wants to reach a renewable installed power capacity of more than 34% in its power generation mix by 2022.
Naturgy plans to increase the share of electricity in its portfolio to 50% by 2022 compared to 40% in 2019, while decreasing the share of gas from ~60% to 40% over the same period. Naturgy also aims at developing renewable gas from biomethane and hydrogen and expanding its business model focused on energy efficiency services.
In 2019, the company announced the closure of all of the group’s coal-fired plants and has already divested from high carbon-intensity assets such as a coal mine in South Africa and a fuel oil power plant in Kenya. The closure of all coal plants came into effect in the first half of 2020.
Naturgy reports to have reduced its absolute scope 1 and 2 emissions by 25% and the scope 1 and 2 emissions intensity of its electricity generation (expressed in tCO2/GWh) by 22% in 2019 compared to 2017.
Naturgy wants to reach carbon neutrality for its scope 1, 2 and 3 emissions by 2050 but reports that it can achieve this objective by either reducing its emissions or increasing its carbon neutralisation activities. The company should focus on reducing emissions from its own activities and sold products, especially scope 3 emissions from the sales of natural gas to clients, which represent more than 78% of its overall scope 3 emissions.