SSE pledges to draw up 'Just Transition' plans in energy sector first

SSE has promised to set out its "principles and plans" to support a 'Just Transition' to a net zero economy for impacted workers, consumers, and communities next year, in what is believed to be the first such commitment from a UK energy utility.

The Scottish firm, which officially closed its last remaining coal-fired power station - Fiddler's Ferry in Cheshire - in April, last week issued a written statement to shareholders following calls from investors for it to deliver a formal Just Transition strategy.

SSE said its objective "where it has the influence to do so, is to support a fair transition from a high carbon economy to a net zero one and thereby command support from stakeholders so that the worst effects of climate change can be prevented".

A Just Transition, it said, should ensure current and future energy workers are "regarded with respect and given decent work", communities where energy facilities are located are consulted with as key stakeholders, and consumers are provided with affordable energy.

"The challenge is to support employees through any transition that takes place, work with regulators and policymakers on charging methodologies to share costs fairly and undertake meaningful engagement with local communities when change is being proposed," the company said. "In support of that objective, SSE will publish a statement by November 2021 of its principles and plans to support a Just Transition."

Having shifted away from coal power altogether, SSE's business now covers onshore and offshore wind farms, gas power, energy from waste, electricity transmission and distribution services, as well as business energy supplies. The firm last year sold its consumer energy services arm to OVO in a £500m deal.

SSE has set a target to cut the carbon intensity of the electricity it generates in half by 2030, by trebling its renewable energy output and focusing on hydrogen technologies, carbon capture and storage (CCS) projects, and "super-efficient" gas fired plants.

The firm's new Just Transition commitment came in response to engagement from investor groups Friends Provident Foundation and Royal Asset Management, which have both been applying increasing pressure on UK energy utilities to tackle the transition risks associated with high carbon business models and the market disruption resulting from green technologies.

The investor groups had asked SSE to consider adopting a formal Just Transition Strategy "that addresses the socioeconomic implications of your company's net zero ambition and decarbonisation strategy on workers, communities, supply chain and consumers in a way that mitigates negative impact and enhances the opportunities of the energy transition".

They specifically highlighted the potential for unexpected closures of unabated gas power stations in the 2030s as greener energy technologies and community ownership models secure a growing share of the UK electricity grid.

Calls have grown in recent years for stronger political focus on avoiding potential negative economic consequences from the shift to a net zero economy, as greener industries come to the fore at the expense of high carbon goods and services. In a sign of the type of challenges to come, last year Honda announced plans to close its car factory in Swindon in part driven by wider market shifts towards electric vehicles rather than combustion engines, in a move expected to see 3,500 jobs cut.

Colin Baines, investment engagement manager at charity Friends Provident Foundation, congratulated SSE on the "first of its kind commitment" to deliver a Just Transition plan.

"We now need others to follow SSE's lead if we are to have a rapid and smooth transition to a net-zero carbon economy," he said. "With the energy utilities market grappling with unprecedented disruption and transition, there are significant risks to be managed and opportunities to be pursued."

"For example, the UK's fifth carbon budget requires the closure or abatement of large gas power stations used for baseload by the 2030s, utilities need to start planning for this now, considering issues such as employee and community relations, worker redeployment and retraining, site reuse, and community reinvestment," Baines added. "Other investors also need to start integrating the social dimension of the transition into their climate investment strategies and shareholder engagement."

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• Net Zero Now