The Science Based Targets initiative (SBTi) announced the release of its initial draft of its Power Sector Net-Zero Standard, aimed at enabling companies across the power sector, including those involved in power generation, transmission and distribution, and electricity storage, trade and retail, to set near- and long-term goals aligned with achieving net zero by 2050.

Among the key new net zero target setting criteria proposed in the draft standard is a requirement for companies to put in place a plan to phase out unabated fossil fuel capacity, and to stop investing in unabated fossil fuel capacity.

The SBTi was founded in 2015 with the goal to establish science-based environmental target setting as a standard corporate practice. The organizations’ key functions include defining and promoting best practice in emissions reductions and net-zero targets in line with climate science, providing technical assistance to companies who set science-based targets, and providing companies with independent assessment and validation of their emissions reduction targets. The organization published its  flagship cross-sector Corporate Net-Zero Standard in 2021, and is currently in the process of developing an update to the standard, Corporate Net-Zero Standard V2.

The new publication forms part of a series of sector standards released and under development by the SBTi covering heavy emitting industries such as Forest, Land and Agriculture (FLAG), air transport, building, chemicals, cement, and automotive, among others. The SBTi also recently released its finalized Financial Institutions Net-Zero (FINZ) Standard, outlining criteria for banks and investors to set net zero-aligned targets for their lending, investing, insurance and capital markets activities.

According to the SBTi, the new draft standard comes as the power sector faces significant risks and opportunities from the transition to net zero, with the sector representing a major share of greenhouse gas (GHG) emissions from energy, and facing threats from climate change and the transition to its own infrastructure, while also positioned to contribute significantly to the transition in other sectors, and to benefit from the substantial growth in electricity’s share in the energy mix over the coming years.

The SBTi said:

“With the sector responsible for nearly 40% of global energy-related emissions –and increasingly exposed to climate risks, resulting in threats to critical infrastructure and generation capacity– rapid decarbonization is both urgent and strategic. At the same time, the sector’s role as an enabler of decarbonization across other industries positions it for long-term growth in a carbon-constrained economy.”

The new proposed standard was developed in alignment with the SBTi’s draft Net-Zero Standard V2, while also introducing new methodologies and requirements specific to power sector companies.

One of the key new criteria in the draft standard is a requirement for power sector companies to “publicly disclose a plan to transition away from unabated fossil fuel power generation,” which includes “interim actions to decarbonise, phase-out or retrofit unabated fossil fuel assets, with maximum 5-years milestones up to the net-zero year.”

The proposed standard also requires companies to cease investing in new unabated fossil fuel capacity.

The phase-out plans outlined in the standard set out different criteria for OECD- and non-OECD-based assets, and for different fossil fuels, with coal assets to by fully retired or abated in OECD countries by 2030 and in non-OECD countries by 2040, and oil and natural gas assets by 2035 in OECD countries and 2040 in non-OECD countries. Similarly, companies are given until 2030 to cease new investments in unabated natural gas assets in non-OECD countries.

Notably, the new standard proposes exemptions from the fossil fuel phase-out requirement for unabated natural gas assets when intended to serve as non-baseload capacity, which it states “may be retained until 2050 only if it is demonstrably required for system flexibility or reliability,” with the SBTi noting “different roles of power generation assets and need to maintain non-baseload capacity for either regulatory requirements or grid stability.”

The new standard also introduces criteria requiring companies using biomass for power generation to commit to source 100% of the biomass from certified sustainable sources by 2030. Alongside the introduction of this requirement, the SBTi publication acknowledged “the importance of building upon existing frameworks to avoid redundancy and additional administrative burden for companies,” and added that it is considering allowing third-party certification schemes, and that it is working on a protocol outlining the methodology for recognizing the certification schemes.

The release of the new proposed standard comes as the SBTi faces increasing political scrutiny in the U.S., including a recently announced investigation into the organization, alongside environmental disclosure platform CDP, by Florida Attorney General James Uthmeier into alleged potential antitrust violations and deceptive trade practices. Additionally, 23 U.S. State Attorneys General recently sent a letter to the SBTi demanding information about the organization and its members, citing concerns about potential violations of antitrust, consumer protection and other laws, with a particular focus on its new financial sector standard, and its requirements for financial companies to pull back on funding for fossil fuel activities.

The SBTi announced the launch of a public consultation for feedback on the new proposed power sector standard, which will remain open until November 3, 2025.

Click here to access the new draft standard and consultation.