In assessing targets, we recommend, at board discretion:
• Pursuing alignment with sector-modelled 1.5C aligned pathways such as those outlined by the IPCC or International Energy Agency;
• Considering approaches used by groups like the Science Based Targets Initiative and Transition Pathway Initiative;
• Evaluating low-cost, low-carbon energy generation to improve earnings while maintaining energy affordability; and
• Developing a decarbonization strategy that identifies and quantifies the set of actions Southern intends to take to achieve its GHG reduction goals over the targeted timeframe.
Southern Company is making progress on decarbonization and committed to reaching net zero on Scope 1 emissions by 2050. Southern has announced coal plant retirements, invested in clean energy, committed to a just transition, and published its Trade Association and Climate Engagement report. However, Southern lags peers on decarbonization progress aligned with a 1.5 degree pathway. For example, peer companies WEC plan to retire coal generation by 2035, Xcel by 2030, and CMS Energy by 2025. Southern currently plans six coal plants in operation in 2035.
Southern’s 50% GHG reduction target for operational emissions by 2030 from 2007 base falls short. Transition Pathway Initiative found the target exceeds alignment with a 1.5C pathway by 3x and is almost double a below 2C pathway. The Intergovernmental Panel on Climate Change highlights a median decline in the global carbon intensity of electricity of 75% by 2030 from a 2019 base in low/no-overshoot 1.5C scenarios, and the Science Based Targets initiative also recommends deep reductions in electricity emissions intensity by 2030.
Noting the current goal and underwhelming progress for Georgia Power and Mississippi Power subsidiaries, Southern may miss investor-aligned opportunities to decarbonize its electric business.
Renewables are increasingly cost efficient, avoid the issues from coal ash, and are highly incentivized by the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. By accelerating its transition to renewables, Southern may improve shareholder returns while maintaining customers’ rate-levels. By decarbonizing owned electricity generation, Southern may deploy more capital into renewables, transmission/distribution infrastructure (including storage) and efficiency programs, thereby substituting operating expenses like fuel with capitalized investments that grow earnings. Peers (WEC, Xcel, Dominion and AEP) are pursuing these options ambitiously.