State-owned enterprises’ renewable strategy management
SOEs in the emerging economies and developed countries have been growing and expanding rapidly to become world-class companies in their countries and globally. It is conservatively estimated that SOEs internationally have been contributing more than 10% of the combined sales of the world’s largest businesses listed in the Forbes Global 2000. The proportion of SOEs, amongst the Fortune Global 500 companies, has also grown from 10% in 2005 to over 25% now. The combined SOE corporate sales revenues are currently accounting for more than 6% of the global GDP and are larger than the GDP of some key developed economies, such as Germany or France. SOEs globally have to deal with rising threats from climate change, digital transformation and cyber security. They have to develop appropriate strategies and mitigation actions to ensure their sustainable business growths and successful operations.
Experts have found that state-owned enterprises (SOEs) have been major players in both fossil energy and electricity power sectors. SOEs have major investments in fossil sectors, including oil, gas and coal. The OECD has reported that the total SOE investments could amount to over USD300 billion in the G20. SOEs are also major players in fossil fuel markets and have been estimated to own roughly 60% of coal mines and coal power plants globally. Experts have also reported that electricity power generation companies owned by state enterprises are currently owning more fossil fuel-based generation capacities than those owned by privately owned electricity generating companies. As a result, SOEs have been major producers of GHGs and are currently accounting for a
Renewable strategy management 189 substantial quantity of greenhouse gas (GHG) emissions in emerging economies and globally. Experts have estimated that the combined GHG emissions of the top 50 energy-related SOEs in the world would rank third in a list of country-level GHG emissions, just after China and the United States (OECD, SOE transition away from coal and coal-fired power, 2018).
At the same time, SOEs have continued to invest heavily in fossil resources and technologies. Experts have estimated that SOEs are currently responsible for two-thirds of planned power investments globally, of which more than half are in fossil fuel-based technologies. The International Energy Agency (IEA) has found that, between 2012 and 2017, the share of global energy investment driven by SOEs increased to 42%, with public sector investors found to be “more resilient” to changes in the markets for oil, gas and thermal power (IEA, WEO, 2018).
Many state-owned enterprises (SOEs) in emerging economies and developed countries around the world are beginning to appreciate the serious climate change challenges and the fossil to renewable transformation requirements. Many SOEs have transformed their corporate strategies and have started to invest in renewable and clean energy projects. New pieces of research on state-owned enterprises in the fossil to renewable low-carbon transition showed that SOEs have major influences on renewable investments in emerging economies and globally. State ownership in some of the SOEs, in the electricity power sector, has encouraged these SOEs to invest more in new renewable capacities with new clean energy policies. It is encouraging to note that recent pieces of research have shown that SOEs in the OECD and G20 countries have, between 2000 and 2014, increased the share of renewables in their electricity capacity portfolios from 9% to 23% (OECD, Investment in Low Carbon Infrastructure, 2018).
Looking ahead, the International Renewable Energy Agency (IRENA) has estimated that all renewable electricity technologies, with ongoing technology innovations, should become cost competitive with, or even undercut, fossil fuels as early as 2020. This will mean that this should further promote the shift of fossil power to clean renewable power generation (IRENA, 2018).
In addition to the cost competitiveness of renewables, the fall in production and use of coal will be driven by climate change improvements and new environmental policies linked to air pollution improvements. The IEA has estimated that to keep the global temperature increase well below 2°C, coal-fired power plant emissions must be reduced by more than half globally by 2030 (IEA, 2018).
These global megatrends should help to drive more SOEs to improve their climate performances by reducing GHG emissions and invest more in renewables to continue to support the fossil to renewable transitions. A good SOE example is Vattenfall of Sweden. Vattenfall is fully owned by the Government of Sweden and has invested in power generation facilities globally. It has power generation assets in Finland, Denmark, Germany, Poland and the Baltic countries, amongst others. In 2010, Vattenfall’s board and top management adopted new sustainability targets and strategics for the SOEs. These included reducing their carbon dioxide GHG emissions by more than 30% by 2020. As part of the efforts bythe SOE to meet these new targets, Vattenfall’s management decided in 2014 to divest off its lignite coal mines and associated coal-fired power plants in eastern Germany. Vattenfall’s investments for 2018 and 2019 have been focused on renewables including wind power and solar plus decentralised digital power solutions, advanced energy storage and e-mobility (Vattenfall, Road to Fossil Freedom, 2019).