Limited Utility

The report finds that the assessed European electricity utilities’ net zero
commitments do not correspond to the ambition level required by the IEA Net
Zero Roadmap. The overall transition plans of the utilities, with or without net
zero targets, are widely out of touch with the necessary fossil fuel phase-out
timelines and wind and solar escalation in the electricity sector. After scrutinising the forward-looking plans for each key fuel, it can be concluded that all the power utilities need to urgently prioritise the detailed disclosure of how they intend to align their actions with their pledges.

The quickest litmus test for any net zero plan is a rapid coal phase-out by 2030 in the EU/OECD and by 2040 in the rest of the world. But the report shows that the power utilities with coal assets in Germany, Eastern Europe and, in some cases, Turkey are most noticeably struggling to meet the target. Out of the 21 assessed companies, only nine have a coal phase-out plan aligned with the IEA’s 2030 EU/OECD timeline. Six of the utilities are not even compliant with the 2040 global deadline. Overall, 49 GW of coal must still be announced for decommissioning as a priority action. This equals the combined net generation capacity of Czechia and the Netherlands.

While the global use of unabated fossil fuels in electricity generation is sharply reduced in the NZE system, disappearing by 2035 in the OECD, the European power companies are extremely hesitant to disclose their fossil gas-related plans. The report suggests that the combined amounts of the new gas projects, as well as the existing capacity, would bring the anticipated installed post-2035 fossil gas capacity to ~197 GW. This amount is equal to the entire net generation capacity for electricity in Italy, Bulgaria, Poland and Romania. In advanced economies, this post-2035 gas capacity will be 135 GW. Furthermore, the current hydrogen capacity plans of the utilities are light years away from meeting even a fraction of the enormous gas capacity currently in the system. Any company announcement on hydrogen is therefore not yet contributing to decarbonisation at the necessary scale. Overall, while gas generation has a slightly longer grace period before full decarbonisation, credible plans to decommission the entire fossil fuel fleet are noticeably absent.

The IEA’s net zero modelling entails the rapid and substantial renewable energy transition led by wind and solar. The European power utilities’ existing plans will provide a genuine and sizable injection of new wind and solar capacity, which demonstrates that these companies are key players in making the IEA’s vision a reality. The total wind and solar generation of all 21 companies will comfortably quadruple by 2030, reaching 428 GW, as many utilities will multiply their existing wind and solar capacity. However, given the enormity of the task, even these numbers will not suffice as we will need to see growth to the tune of expanding the wind and solar capacity at least six-fold in size. Similarly, the entire renewables portfolios must triple to account for the majority of the companies’ business models while keeping biomass is a minority role. Only very few companies meet these requirements and none meet them all at once. Therefore, European utilities need to urgently ramp up their existing plans to build wind and solar – especially those in Eastern Europe.