I'm confident that we are prepared and well-positioned to meet the needs of our customers, employees, communities and investors well into the future and will succeed in our transition to a net zero future.
Tom Fanning, Southern Company Chairman, President and CEO
Climate change is real, and Southern Company is committed to reducing our greenhouse gas (GHG) emissions to net zero and providing the customers and communities we serve a clean energy future.
This is about far more than decarbonization. It goes to putting customers at the center of everything we do, building a sustainable workforce and making sure that communities are better off because we’re there. This approach is embedded in our values and our DNA, and we know that it is the right way to drive long-term performance.
We’ve set a GHG emissions reduction goal of net zero emissions by 2050. At the same time, we’ve reaffirmed our intermediate goal of a 50% reduction of GHG emission from 2007 levels by 2030. These are enterprise-wide goals across all electric and gas operations.
In 2020, the Southern Company system reduced GHG emissions 52% from 2007 levels, exceeding its 2030 goal. While emissions reductions may fluctuate around 50 percent the next few years depending on demand, weather and other factors, the system expects to sustainably achieve 50% reduction or greater by 2025, if not sooner.
1 The reduction in GHG emissions from 2019 to 2020 was primarily driven by milder weather, decreased customer energy usage resulting from the COVID-19 pandemic, and the continued transition to lower- and non-emitting resources. Expect to achieve sustainable reduction of at least 50% in 2025, if not earlier.
Since setting our first decarbonization goals in 2018, we have continued to evaluate ways to achieve our goals and have engaged in the evolving dialogue regarding the global need to achieve net zero emissions by midcentury.
Based on our research and planning, shareholder and stakeholder dialogues, we believe our path to net zero by 2050 will be achieved through:
* Annual energy mix represents all the energy the Southern Company system uses to serve its retail and wholesale customers during the year. It is not meant to represent delivered energy mix to any particular retail customer or class of customers. Annual energy mix percentages include non-affiliate power purchase agreements.
We are one of the only U.S. utilities pursuing an “all of the above” net zero strategy. Having a diversified energy portfolio is essential to reducing emissions while also maintaining reliability and affordability. Since 2007, we have transformed the Southern Company system’s annual electricity generation mix with coal decreasing from 69% to 17% and renewables increasing from 1% to 15%.
We are also growing our investment in renewable energy, modernizing the grid to take full advantage of new technology, using natural gas to support our transition to a lower emitting generating fleet, building new nuclear generating units, continuing our robust research and development (R&D) efforts and investing in energy efficiency.
Natural gas has served a critical role in reducing our GHG emissions while providing clean, safe, reliable and affordable energy to our customers. Given its abundance, affordability and relative carbon footprint, we believe natural gas will play a meaningful role in securing America’s energy future. We also believe that energy policy should consider the full portfolio of resources in a collective effort to achieve net zero emissions by 2050.
As we deploy increasing amounts of intermittent, renewable capacity across our system, natural gas fueled generation is needed to maintain reliability for our electric customers. The direct use of natural gas is a necessity for many of our residential customers, particularly in colder climates.
Because we believe natural gas is an important part of our nation’s effective transition to a net zero future, we are committed to playing a leadership role in reducing the environmental impact of natural gas usage. We are focused on opportunities to lead the industry in the use of renewable natural gas, while minimizing fugitive methane emissions across the natural gas supply chain and reducing GHG emissions for end use customers, including electric generation.
In 2019, our R&D organization celebrated 50 years of delivering innovative solutions and creating value for customers. Southern Company has led the U.S. utility industry in the development, funding and demonstration of innovative research necessary to provide clean, safe, reliable and affordable energy.
Decarbonization continues to be a major focus of our R&D efforts. As just one example, under Southern Company’s leadership and management, the National Carbon Capture Center remains focused on efforts to reduce and capture carbon emissions from electric generation sources. In light of the long-term goal of net zero by 2050, Southern Company will continue its leadership by including negative carbon technologies in our R&D efforts.
Southern Company’s success, including efforts to decarbonize our system, are dependent on supportive and constructive regulation and public policy. We have long been a leader in the advancement of ideas and positions in the private and public arenas that are beneficial to our customers, communities and employees.
The work of planning, transitioning and operating our system to meet our decarbonization goals will require continued active and constructive engagement with government officials, investors and a wide variety of other public and private stakeholders. Our success will require the support of policies that encourage and advance innovation while protecting the affordability, reliability and resilience of service to customers.
The significant progress we have made in reducing emissions and the development of a strategy for the future have occurred under the guidance and oversight of a competent and engaged Board of Directors and a committed management team. Together we are keenly focused on the planning and execution required to meet our GHG reduction goals.
The company’s independent directors provide substantive oversight to our management team on strategy and risk issues across the environmental, social and governance spectrum, including carbon reduction efforts. Each committee of the Board has responsibility for key elements of risk oversight including future capital investments, stranded and physical asset risk, climate issues, human capital impacts, cybersecurity and policy advocacy.
We believe a suite of complementary policies will be required to reach net zero by mid-century. These policies should be built around a foundational mission to support the acceleration of energy research, development, demonstration and deployment to enable solutions at equal or lower cost of service to energy customers compared to current conditions. This figure depicts a collection of established and emerging solutions that could be useful in decarbonizing our operations.
While coal has been key to supplying affordable energy to our customers, we are embracing an orderly transition of our coal fleet.
Nuclear, hydro and natural gas are foundational baseload and flexible components of an orderly transition.
We are expanding our deployment of renewables and energy storage, modernizing the electricity grid and enhancing energy efficiency programs.
Emerging technologies, such as carbon capture, use and storage (CCUS), renewable natural gas, next generation nuclear and hydrogen, will be key to achieving our emission reduction goals.
Negative Carbon Concepts
Negative carbon concepts, such as natural solutions, biomass energy with CCUS and direct air capture, must emerge and become cost-effective to achieve net zero carbon emissions.
Southern Company is a holding company that conducts its business through its subsidiaries. Accordingly, unless the context otherwise requires, references in this document to Southern Company’s operations, such as generating activities and GHG emissions, refer to those operations conducted through its subsidiaries.
Cautionary Statement Regarding Forward- Looking Information
Certain information contained in this document is forward-looking information based on current expectations and plans that involve risks and uncertainties. Forward-looking information includes, among other things, GHG emissions reduction goals, including expected timing of achievement, expected future renewable energy resources, Southern Company cautions that there are certain factors that can cause actual results to differ materially from the forward-looking information that has been provided. The reader is cautioned not to put undue reliance on this forward-looking information, which is not a guarantee of future performance and is subject to a number of uncertainties and other factors, many of which are outside the control of Southern Company; accordingly, there can be no assurance that such suggested results will be realized. The following factors, in addition to those discussed in Southern Company’s Annual Report on Form 10-K for the year ended Dec. 31, 2019, Quarterly Report on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020, and subsequent securities filings, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: the impact of recent and future federal and state regulatory changes; the potential effects of the continued novel coronavirus (COVID-19) pandemic; current and future litigation or regulatory investigations, proceedings, or inquiries; variations in demand for electricity and natural gas; available sources and costs of natural gas and other fuels; the ability to complete necessary or desirable pipeline expansion or infrastructure projects, limits on pipeline capacity, and operational interruptions to natural gas distribution and transmission activities; transmission constraints; the ability to control costs and avoid cost and schedule overruns during the development, construction, and operation of facilities or other projects; legal proceedings and regulatory approvals and actions related to construction projects; the ability to construct facilities in accordance with the requirements of permits and licenses (including satisfaction of Nuclear Regulatory Commission requirements), to satisfy any environmental performance standards and the requirements of tax credits and other incentives, and to integrate facilities into the Southern Company system upon completion of construction; performance of counterparties under ongoing renewable energy partnerships and development agreements; potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to Southern Company or its subsidiaries; the direct or indirect effect on the Southern Company system’s business resulting from cyber intrusion or physical attack and the threat of physical attacks; catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events, or other similar occurrences; and the direct or indirect effects on the Southern Company system’s business resulting from incidents affecting the U.S. electric grid, natural gas pipeline infrastructure, or operation of generating or storage resources. Southern Company expressly disclaims any obligation to update any forward-looking