Planning for a Low-Carbon Future a Letter from the CEO
Total Page：16
File Type：pdf, Size：1020Kb
Planning for a low-carbon future A letter from the CEO The energy sector is rapidly evolving, driven by customer preferences, technology advancements, commodity prices, energy security and resiliency efforts, and environmental, social and governance initiatives. With evolution comes opportunity and Southern Company, with its customer- centric business model, is poised to provide continued value to our customers and communities in this evolving energy landscape. We have a long history of proactive, goals are a continuation of our our carbon emission reduction constructive engagement and trajectory of lower carbon emissions goals are no exception. Combined dialogue with shareholders, over the past 10 years, which have with our objective of delivering customers and other stakeholders resulted in a 36 percent reduction regular, predictable and sustainable around the path forward in a low- since 2007. Similarly, our use of coal earnings and dividend growth, carbon future, and we understand for power generation has declined our collective goal is to provide the need for a broader focus on by almost 60 percent; in 2017, coal premier risk-adjusted returns to the financial, operational and represented only 28 percent of our shareholders. regulatory risks that come with our energy mix as compared to 69 reducing carbon emissions over the percent in 2007. I am confident that we are prepared long term. We are committed to and well-positioned to meet the keeping everyone informed as we Over the long term, meeting our needs of our customers well into move forward. goals will require energy policies the future and to succeed in this that support low natural gas transition to a low-carbon future. Throughout this report you will see prices and the development and We remain steadfastly committed how we are taking steps to increase deployment of more low- to no- to providing clean, safe, reliable and disclosure of our preparations carbon emitting energy resources. affordable energy to the customers for a low-carbon future, as well We will continue our commitments we are privileged to serve. as the risks and opportunities to research and development and for our company with this to help shape responsible energy Thomas A. Fanning important transition. policies that promote optionality Chairman, President and Chief across the entire energy value Executive Officer With this backdrop, we are chain and retain each state’s ability April 2018 establishing an intermediate goal to adequately plan and deploy of a 50 percent reduction in carbon resources that meet the needs of emissions from 2007 levels by 2030 their citizens and communities. and a long-term goal of low- to no- carbon operations by 2050. These Managing risks in our business is an integral component of the value proposition for our investors and 2 Contents Greenhouse gas emissions and references 02 to carbon and carbon dioxide A letter from the CEO Southern Company’s greenhouse gas (GHG) emissions 4 come primarily from fossil fuels used to generate Executive summary electricity, which result in emissions of three GHGs: carbon dioxide (CO ), methane (CH ) and nitrous 6 2 4 Goals and actions for a low-carbon future oxide (N2O). Southern Company subsidiaries Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Southern Power, Southern Company Gas, Southern 7 Our approach to reducing CO emissions Electric Generating Company and PowerSecure all have 2 operations that emit CO₂, CH₄ and N₂O. More than 13 99 percent of the system’s electric generation GHG Risks and opportunities in a low-carbon future emissions are CO₂. Throughout this report, references to carbon or CO₂ emissions should be interpreted as 17 all GHGs. Conclusion Southern Company is a holding company that conducts its business through its subsidiaries; accordingly, Further discussion throughout this report references to Southern Company’s GHG emissions and related operations refer 18 to the operations conducted through its subsidiaries. Achieving climate goals through resource diversity and clean energy investment Southern Company is transitioning to a 2007 baseline year that represents Southern Company’s 22 maximum emissions year, while continuing to rely on Details about emissions reporting a baseline calculation methodology consistent with the Environmental Protection Agency’s (EPA’s) GHG 23 Reporting Program (GHGRP) methodology. See “Details Governance about emissions reporting” (page 22) for further information about this methodology. 25 Engagement, transparency Task force on climate-related financial and further information disclosures The Financial Stability Board’s Task Force on Climate- related Financial Disclosures (TCFD) has developed voluntary, consistent, climate-related financial risk disclosures for use by companies in providing information to investors and other stakeholders. In 2017, the TCFD issued its final disclosure recommendations. This report includes disclosure responsive to the four core elements identified in the TCFD recommendations: metrics and targets; strategy; risk management; and governance. Planning for a low-carbon future 3 Executive summary Southern Company is committed to providing clean, safe, reliable and affordable energy, while 36% transitioning to low- to no-carbon operations by Reduction 2050. We have already made significant progress with an “all of the above” approach to electric in greenhouse generation resource diversity. Since 2007, without gas emissions any regulatory mandates, we have reduced CO2 since 2007 emissions by 36 percent. 2007: GHG Emissions Baseline 2017: GHG Emissions Reduced 36% Setting emission modernizing the grid to optimize see potential to invest appropriately reduction goals technology advancements, increasing in new technologies that may the use of natural gas, building new emerge, mature and come to market We are, for the first time, setting nuclear generating units, continuing through our PowerSecure subsidiary. emission reduction goals that are our industry-leading, robust research aligned with our long-term business and development (R&D) efforts, and We are also engaging with strategy and our commitment to investing in energy efficiency for policymakers, customers and a leadership role in developing savings on both sides of the meter. other stakeholders to help shape solutions that make technological and Transitioning to a low-carbon future an energy policy that enhances economic sense. These are enterprise- will require continued advancement optionality across the entire energy wide goals that encompass our in technology. value chain and supports the electric and natural gas operations. development and deployment of Existing opportunities to reduce more carbon-free energy sources, Strategy to achieve our carbon emissions include while ensuring that each state the goals completing construction on the that we serve retains the ability new Vogtle 3 and 4 nuclear units, to adequately plan and deploy Our strategy to achieve these goals seeking useful life extensions for resources that meet the needs of its includes the continued development our existing 3,700 megawatt (MW) citizens and communities. and deployment of a diverse nuclear fleet, continuing to grow portfolio of energy resources to our sizable renewable energy Risks and opportunities reliably and affordably serve our resources, partnering with battery along the way customers and communities with a manufacturers and vendors on focus on reducing CO₂ emissions. To energy storage development and We aim to minimize our exposure do this, we are aggressively growing continuing to modernize the power to carbon risk across the energy our investment in renewable energy, grid for greater efficiencies. We also value chain as we make, move and 4 2030 Goal: 50% Reduction in GHG Emissions 2050 Goal: LOW to NO GHG Emissions sell energy to a wide customer Robust processes to utilities to actively work within its base. Our business model relies get us there regulatory framework to ensure heavily on state-regulated electric that carbon reduction efforts are in and natural gas investments as As we plan for a cleaner energy customers’ best interests over time. well as long-term contracted future, we recognize that our current energy infrastructure, which electric generation portfolio consists Governance to guide differentiates Southern Company of high-capital, long-life assets. us through from other businesses. We believe Efforts to further diversify our that operating a customer-centric portfolio should be achieved through Our Board of Directors recognizes business model provides the an orderly transition that accounts the potential impacts on our opportunity to effectively respond for the economic value of our business and the transitional to future carbon regulations and existing assets. Our robust scenario- risks and opportunities the utility the potential to succeed in an based integrated resource planning industry faces in a low-carbon accelerated transition to a low process occurs annually, and is a key future. Our governance process carbon business environment. component that we use to ensure combines regular assessments of that the right resources are deployed our short- and long-term business By continuing to make major at the right time to maintain safety, strategy and a robust enterprise energy decisions that are in the best reliability and affordability for risk management program, both interest of customers, appropriately customers. The planning process of which facilitate identification, consider