SSE sets 1.5C emissions targets on road to net-zero, but ups profit forecasts due to gas
SSE has announced accelerated goals for renewable energy development and reducing operational emissions through to 2030, but has also increased its profit forecast due to soaring gas prices.
The company posted updated 2030 environmental and social sustainability targets on Tuesday (8 February), building on its long-term plans to help the UK develop 75GW of offshore wind projects and five carbon capture and storage (CCS) and hydrogen clusters by 2040, and to reach net-zero by 2050.
Previously, it was working to 2030 targets verified in line with a “well-below” 2C trajectory by the Science-Based Targets Initiative (SBTi). The SBTi is notably updating its minimum target-setting criteria to 1.5C.
Now, under new 1.5C-aligned targets, SSE will work to reduce its absolute direct (Scope 1) and power-related (Scope 2) emissions by 72.% by 2030, against a 2030 baseline. There is also an intensity-based target for Scope 1 emissions specifically, entailing an 80.2% reduction within the same timeframe.
For Scope 3 (indirect) emissions, there is a new commitment to reduce emissions from sold products by 50% by 2034. This ambition also has a 2018 baseline.
SSE has also increased its renewable energy development goals. The firm had already pledged to reach 8GW of renewable energy generation capacity by 2026 and 16GW 2030 – goals underpinned by a £12.5bn investment plan. The 2030 goal has now been increased to 20GW. Additionally, SSE has set targets to install one million heat pumps and chargers serving two million electric vehicles (EVs) by 2030, across the SSEN electricity networks.
Executive pay at SSE will be linked to the delivery of the updated targets.
PwC research published in November 2021 revealed that almost two-thirds of FTSE 100 firms now link executive incentive pay to at least one environmental, social or governance (ESG) target – but SSE’s chief sustainability officer, Rachel McEwan, claims the firm was one of the first to take this approach.
McEwan has called the new goals “ambitious” and said they will “stimulate good, well paid green jobs and economic value for communities” as well as accelerating decarbonisation.
To this point, the new goals include a renewed commitment to the business’s ‘Just Transition’ strategy, designed to protect workers and communities impacted by the energy transition. There is a commitment for SSE to “be a global leader for the just transition to net-zero, with a guarantee of fair work and commitment to paying fair tax and sharing economic value”. There are not, at this point, new time-bound numerical targets in this field.
Shortly after SSE announced the new 2030 goals, it published its Q3 trading statement, upping adjusted earnings per share from 83p to 90p.
Given that renewable energy generation conditions for much of 2021 were unfavourable, the increased forecast is largely due to SSE’s gas operations. The firm operates gas-fired power plants as well as wind farms and hydroelectric facilities.
SSE posted 11.2GWh of output from its fossil-fired power plants and 5.9GWh of output from its renewables portfolio between April and December 2021. The output from gas was down 14% year-on-year, the statement confirms, but is still almost double that of SSE’s renewables.
“Flexible thermal generation continues to play a key part in the GB and Irish energy markets as we transition to net-zero, with its role now focused on creating value by providing vital balancing services to enable a renewables-led system,” the statement reads. “Its profitability is, therefore, less dependent on the volume of its output and financial performance for the year is expected to be ahead of plan.”
Wholesale gas prices in the UK are currently more than four times higher than they were at the start of 2020, due to discrepancies in global demand and supply patterns.
The situation has led to a 54% increase in the price cap for households on dual-fuel homes, after more than two dozen energy suppliers went bust.
While the Government has announced a rebate scheme to assist households with some of the increase in bills, green groups have called this approach a “sticking plaster” and urged longer-term considerations around energy efficiency and clean energy. The Labour Party has been calling for a one-time windfall tax on fossil fuel majors – an idea that has gained popularity among the general public this week after Shell and BP posted increased profits. The Government last week released a blog dispelling myths about the energy crisis, including concerns that oil and gas firms are using it as a money-making opportunity.
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