Uniper, one of Germany’s largest utilities, has set a 2035 net-zero target for its European power business, a surprising pivot for a company that only recently completed construction on what will likely be Europe's last coal-fired power plant.
Uniper, which is in the process of being taken over by state-owned Finnish clean energy firm Fortum, unveiled the target this week as part of its strategy day and alongside the release of its full-year results.
Like its peers, Uniper faces the forced closure of its coal fleet in Germany while navigating the shifting sands of European energy policy. Uniper has 34.3 gigawatts of generating capacity across Europe, including 9.1 gigawatts of coal. Other than 3.6 gigawatts of hydro, it owns no renewable assets, though it does have some capacity under contract.
Among Europe's utilities, Uniper has not been a leader in embracing clean energy. Uniper was spun out of E.ON several years back as part of a corporate strategy to separate the more traditional coal- and gas-focused business from the newer, cleaner one.
But with Fortum as its new majority owner, Uniper's focus may be shifting to green technologies faster than expected.
Uniper is allocating at least €1 billion ($1.13 billion) for 2020-2022 for what it terms its "new growth" projects. This basket of investments includes modernizing its Russian gas power plants and building new gas capacity in place of decommissioned coal in the near term, as well as investment in renewables.
Beyond that, details for the growth investments are scarce, though there are signs the company may take a new approach to renewables.
CEO Andreas Schierenbeck said the company is already the offtaker for 1 gigawatt worth of solar and wind contracts, but it will now consider a similar strategy pursued by rivals such as RWE and Statkraft.
“We are not ruling out building [projects] ourselves or, acquiring or taking a stake in an operator. But the quicker and better strategy is [power-purchase agreements],” Schierenbeck said during a press conference.
Schierenbeck has previously said that Uniper's investment-grade credit rating and the decision to factor carbon-intensity into its spending decisions meant it could find itself directly backing projects.
As merchant projects and PPAs become a more important component of the European power market, Uniper sees its commodity trading expertise giving the company a key advantage.
“At some point, the step from only contractual business toward physical renewable business is not as big. Therefore, we are also currently examining the commercial framework conditions for entering into the development, construction and operation of renewable energy [assets],” Schierenbeck told analysts.
Last coal plant in Europe
Majority shareholder and soon-to-be parent company Fortum said it would analyze the new strategy and comment later this week. Any changes to Uniper's strategy are viewed through the prism of the buyout.
Fortum took a 49.99 percent stake in Uniper in February 2019, increasing it to 70.5 percent six months later. Talks on an acquisition of the remaining shares are ongoing.
Uniper’s new strategy better aligns it with Fortum’s own position. The Finnish state-owned company has no standalone coal or gas capacity, and when it agreed to become majority owner of Uniper, it said their joint vision would be "centered around the three cornerstones of sustainability, affordability and security of supply.”
Uniper’s Datteln 4 coal power plant began operations only late last year in Germany. With Poland freezing finance for a new coal power plant last month, Datteln 4 will be among the last gigawatt-scale coal plants to be commissioned in Europe, if not the very last.
Uniper is also keeping a close eye on hydrogen and carbon capture. An earnings call from one year ago focused on “volatile renewables” creating more demand for storage, in particular hydrogen.
Half of Uniper’s current generation capacity is gas, and carbon capture will be a linchpin of its net-zero plans, even though the technology is not commercially attractive today.
Hydrogen could also play a big role in Uniper's operations in the decades ahead. “The announcement of the German federal environment minister to set quotas and to start subsidy programs to get hydrogen production started is a step in the right direction, but certainly not enough,” said Schierenbeck this week.