The energy group Enel has recently announced it will dedicate the next 10 years to switching its customers fully out of gas and to rely on electricity for all their energy needs — something that will help customers’ shave about 40% off their bills and 80% off their carbon emissions, says the company’s chief financial officer Alberto De Paoli.
It will also get the group closer to its decarbonisation target: zero emissions by 2040 both for direct (Scope 1) and indirect (Scope 3) emissions — Scope 2 emissions, which relate to purchased electricity, are not relevant to the group. The Science Based Targets initiative (SBTi) approves of Enel’s plans.
As Mr De Paoli stresses, Enel’s is a goal that does not include the word “net”, which could allow the company “to circumnavigate the principle behind it. We do plant trees, but not because we need them to offset our emissions. In 2040, [Enel] will no longer emit any carbon dioxide,” he says.
He talks to The Banker’s sister publication Sustainable Views about the development plans of the multinational group, which is partially owned by the Italian government, and which has earmarked $210bn worth of investment until 2030.
Q: What will the next 10 years look like, with the impact of EU regulation?
A: At the moment, around 85% of our activities are taxonomy-aligned. We then have around 7–8% that we think may be included in the future as the taxonomy develops, because they relate to the ‘electrification’ of customers’ consumption: getting customers to replace gas with electricity, for example using an induction cooker instead of a traditional stove. At the moment, these activities are in a grey area in terms of the taxonomy.
The focus of the past decade has been on renewable energy, during which time it went from an inefficient source of energy that required subsidies to a key and inexpensive one [the share of renewables in global electricity generation was 29% in 2020, according to the International Energy Agency, which anticipates a growth of more than 8% for 2021]. It now offers many comparative advantages over fossil fuel energy, including a lower production cost and independence from fossil fuel-producing countries.
Renewable energy now offers many comparative advantages over fossil fuel energy, including a lower production cost and independence from fossil fuel-producing countries
Our next focus will be on the electrification of consumption. This is the road to a complete decarbonisation. I realise that we’re saying that what will save the world, electricity, is exactly what we produce, but this is the available solution and this is what we have to pursue.
Q: How will you get to zero emissions by 2040?
A: We have intermediate objectives that have already been certified by SBTi. We had initially committed to zero Scope 1 emissions by 2050, with an intermediate 2030 goal that SBTi considered aligned with the Paris Agreement. Now we have brought forward the ultimate target by 10 years and included Scope 3 emissions, which are relevant to us as we still sell gas. We will be developing only renewable energy sources and gradually closing off all gas power stations by then. Our remaining carbon power plants will all be closed by 2027. We manage 85% of Italy’s network and we have nearly tripled the investment in network infrastructure compared to five years ago.
Q: Where are you starting with your ‘electrification’ plans?
A: We have three projects: one is for Sardinia, which isn’t served by gas pipelines — residents use gas tanks — and where carbon power plants are to be closed. The island is also a tourist paradise, so we decided to use it as a case study. A cable transmitting electricity will reach Sardinia in a few years, and we can rely on plenty of sun and wind. We want to make it Italy’s first fully electrified region, and believe it can be done in around 10 years. The other two projects are for the cities of Zaragoza in Spain and Santiago in Chile. We chose Zaragoza because it is an industrial city, so we want to show how you can electrify the industrial part of urban areas; and we chose Santiago because of its notorious pollution problem.
Q: Does the energy market need to change?
A: We have always supported the idea of an integrated market, but what we have now is a fragmented space with energy producers, retailers and energy infrastructure companies. In a sense, it is easier to have specialised players; but to transition to a greener economy and all the changes it requires, an integrated model works better.
It can also deal better with price and production fluctuations, as we have seen recently. In the UK, a large number of retailers did not survive the natural gas crisis in 2021; we expect the same to happen in other countries too. A retailer that is not covered by its own production, with big wholesale price fluctuations, can go under in a matter of days.
Our view is that a future with several actors that both produce and sell energy is preferable. It is a system that will need to ensure competition, but at the end of the day, the real competition will be about gaining customers. It will be about price and about service.
This interview has been edited for brevity and clarity.
