SUPPORTING STATEMENT
In assessing targets, we recommend, at board discretion:
· Pursuing alignment with sector-modelled 1.5C pathways such as those outlined by the Intergovernmental Panel on Climate Change (IPCC) or International Energy Agency (IEA);
· Considering approaches used by the Science Based Targets initiative (SBTi), Transition Pathway Initiative, or other science-based methodologies;
· Evaluating low-cost, low-carbon energy generation to improve earnings while maintaining energy affordability and reliability; and
· Developing a decarbonization strategy that identifies and quantifies the actions Southern intends to take to achieve its GHG reduction goals over the targeted timeframe.
Southern Company is progressing on decarbonization, including making the Vogtle 3 nuclear power plant operational in 2023, and committed to reaching net zero on Scope 1 emissions by 2050. Southern has announced Vogtle 4 is nearing commercial operation, coal plant retirements, clean energy investments, and published its Trade Association and Climate Engagement report. However, with a nonspecific claim of Paris alignment, Southern lags peers on 1.5C alignment.1 For example, peers WEC plans to retire coal generation by 2035,2 Xcel by 2030,3 and CMS Energy by 2025.4 Southern currently plans six coal plants in operation in mid-2030s.5
The IPCC highlights a median decline in electricity’s global carbon intensity of 75% by 2030 from a 2019 base in low/no-overshoot 1.5C scenarios.6 SBTi also recommends deep reductions in electricity emissions by 2030.7 Southern has nearly achieved its target to reduce Scope 1 emissions 50% by 2030 from a 2007 base, falling short of 1.5C alignment and excluding Scope 2 emissions.8
Given progress toward the current goal despite underwhelming efforts from Georgia Power9 and Mississippi Power,10 proponents believe more ambitious medium and long-term operational targets are feasible for Southern and may offer investor-aligned opportunities. Renewables are increasingly cost-efficient,11 avoid risks associated with coal ash,12 and are highly incentivized by the Infrastructure Investment and Jobs Act13 and the Inflation Reduction Act.14 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, and AEP) are pursuing these options ambitiously.
1 https://www.southerncompany.com/sustainability/data-downloads-reports.html See page 14 of https://www.southerncompany.com/content/dam/southerncompany/sustainability/pdfs/sustainability-summary.pdf
2 https://www.wecenergygroup.com/home/generation-reshaping-plan.htm
3 https://www.businesswire.com/news/home/20221031005623/en/Xcel-Energy-proposes-to-exit-coal-by-2030
4 https://www.consumersenergy.com/-/media/CE/Documents/company/IRP-2021.ashx
5 https://www.paperturn-view.com/?pid=Mjg283820&v=2
6 https://www.ipcc.ch/report/ar6/wg3/downloads/report/IPCC_AR6_WGIII_FullReport.pdf
7 https://sciencebasedtargets.org/news/us-power-sector-trails-behind-europe
8 https://www.transitionpathwayinitiative.org/companies/southern-company
9 https://www.georgiapower.com/content/dam/georgia-power/pdfs/company-pdfs/2023-irp-update-main-document.pdf
10 https://www.synapse-energy.com/evaluation-mississippi-powers-2021-integrated-resource-plan
11 https://www.inspirecleanenergy.com/blog/clean-energy-101/cost-of-renewable-energy, https://solarpower.guide/solar-energy-insights/energy-ranked-by-cost
12 https://www.epa.gov/coalash/coal-ash-basics
13 https://www.congress.gov/bill/117th-congress/house-bill/3684/text
14 https://www.congress.gov/bill/117th-congress/house-bill/5376