Partnering for sustainability

Dieter Vollkommer, Head of Corporate Sustainability, ��˿��

Strategic partnerships for sustainable energy

We’ve set ambitious sustainability targets across the entire value chain and defined the key levers for decarbonization. We have the technology, innovations, and people – now it’s time to keep pushing the boundaries of what’s possible and affordable in the energy transition through mutually beneficial partnerships with our customers. We can’t do it alone. Plus, Dieter Vollkommer offers some insights into his role as Head of Corporate Sustainability at ��˿��.

Worldwide energy demand is going to dramatically increase in the coming years, making sustainability in the energy sector a matter of urgency. So urgent that in twenty years’ time, probably nobody will highlight that a product is sustainable – it will be a given.

This is the future energy landscape our customers will face, driven by stakeholder demands and increasing sustainability regulations that require energy providers to pivot away from “business as usual” in favor of new markets. In this new landscape, sustainability will be one foundation for growth – accompanying our customers step by step on the road there will be key.

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We’re on the forefront of what’s possible in the energy transition.

When it comes to decarbonization, we aim to be the partner of choice for our customers. This also means that we take care of our own emissions to serve as an example. In fiscal year 2024, with our Climate Neutral Program, we reduced emissions of CO2 equivalents (CO2e) within our own operations by 55% compared to 2019, reaching our target for 2025 earlier than anticipated.

But this isn’t enough.

More than 99% of the company’s greenhouse gas emissions come from the customers’ use of our products. Clearly, it’s here we have the opportunity to make a major difference – and we’re already building new partnerships and working collaboratively with our customers to achieve this.

Our goal is to reduce these Scope 3 downstream emissions significantly. The SBTi framework asks us to reduce them by 28% by 2030 from a 2019 base year. In fiscal year 2023, we achieved a reduction of 27%. In fiscal year 2024, however, increased order intake made reaching our target trajectory more challenging, leading to an increase of Scope 3 emissions compared to fiscal year 2023. As a company, we need to stay profitable and at the same time contribute to limiting global warming. Shaping the energy transition is an enormous task, and we can only do our part if we’re profitable.��Our biggest levers in getting us there are strengthening energy efficiency and digitalization, increasing renewables and electrification, and enabling the fuel shift to low-carbon and carbon-neutral fuels as well as the expansion of new emission removal technologies.

Beyond 2030, we expect to see emissions from sold products to go down further, once technologies like green hydrogen and carbon capture mature and scale. But in the meantime, the shift from coal to natural gas is already making rapid cuts. For example, in fiscal year 2024, we helped Cooperative Energy convert its Morrow Power Plant in Mississippi from coal to gas with an SGT6-9000HL gas turbine, reducing their CO2 emissions by 2 million metric tons per year.

Our efforts are part of our intense cooperation with our customers, who require a wide range of products to meet the needs of a rapidly growing electricity market. Our grid and gas turbine business in particular is benefitting from this momentum, multiplying order intake at Gas Services in fiscal year 2024 and reaching a record order backlog in both our Gas Services and Grid Technologies.

At the same time, the energy sector is quickly evolving, and customers need to feel confident that the assets they’re investing in today won’t be stranded tomorrow – predictability matters! A transformer typically has a lifetime of twenty to thirty years. With proper maintenance, a gas turbine can remain operational for as long as forty. Can we widen their role in the energy transition?

As carbon-free hydrogen production scales, we offer customers like Morrow a decarbonization pathway to operate our gas turbines on 100% hydrogen by 2030, making their assets not only viable in a net-zero energy system but central to maintaining grid stability now and in the future. For hydrogen to truly become a game changer though, it will have to be available in large quantities at competitive prices. In fiscal year 2023, in a joint venture with industrial gases provider Air Liquide, we opened our Electrolyzer factory of the future as part of the ramp-up to a hydrogen economy. In fiscal year 2024, the factory increased its production of electrolyzer stacks from one to two gigawatts.

On the materials side, in September 2024, we signed an agreement with the grid operator TenneT to provide transformers with a lower carbon footprint by using 100% recycled copper for their windings. If recycled copper were used for all power transformers required worldwide to expand the electrical grid by 2040, it would save around 14 million metric tons of greenhouse gas emissions. There’s a tremendous opportunity here – for our business and for the planet!

We’re proud and confident of our role in enabling the energy sector to evolve, but we can’t do it alone. What we need now are climate-smart regulatory frameworks that offer predictability and stability for investors, while we continue to build new partnerships and collaborations with our customers and key industry players around the world, working and innovating together for a sustainable energy future.

We’re shaking up energy’s purchasing world by working together with the European grid operator TenneT to decarbonize our joint supply��chain for grid infrastructure. In July 2024, ��˿�� and TenneT entered a partnership to reduce emissions from our shared supply��chain activities by 30% by 2030. The declaration signals our commitment to go beyond legislative requirements in decarbonizing the value��chain. Measures include working to conserve raw materials and introducing other base materials including recycled or greener copper, steel,��and aluminum. By joining forces with TenneT, we’ll have a major impact on lowering the carbon footprint of power grids. Just in Germany, TenneT plans to add around 12,000 kilometers of grid expansion:��“We’re talking about immense quantities of steel, copper, and other raw materials that we need for the energy transition,” says TenneT’s Chief��Operating Officer Tim Meyerjürgens. To start decarbonizing raw materials, we’ve identified ten actions over the next five years, starting by��supplying TenneT with transformers made with 100% recycled copper - this action alone will save around 6,500 tons of emissions.

Building electrolyzers at the ��˿�� Gigawatt Electrolyzer Factory in Berlin, Germany

Demand for hydrogen reached more than 97 million metric tons per year in 2023. To date, nearly all hydrogen consumed is gray hydrogen, produced from fossil fuels. But demand for clean hydrogen is rising and projected to increase between 125 and 585 million tons per annum by 2050. This year, our new Gigawatt Electrolyzer Factory in Berlin, Germany, ramped up production of electrolyzer components. A joint venture between ��˿�� and French partner Air Liquide, the factory uses high-tech robots, automation, and digitalization to manufacture electrolyzer stacks at an industrial scale. Electrolyzers use electricity to split water into hydrogen and oxygen and are thus the central technology in producing low-emission hydrogen. By making them available in large scale, we’re helping to decarbonize industries such the maritime, road transport, chemicals, and refining industries. Starting with one gigawatt of production capacity, the factory can provide three gigawatts of electrolysis capacity from 2025 if the market requires it. With an installed capacity of three gigawatts, 300,000 tons of hydrogen could be produced – enough hydrogen to reduce emissions equivalent to a city of 280,000 inhabitants. “With the Gigafactory, we can reliably deliver and support our customers in the successful realization of even large-scale projects,” says the plant’s Head of Manufacturing Axel von Levetzow.

The switch from coal to natural gas is opening up a new era in the energy transition, offering far cleaner electricity and paving the way for the energy transition. For example, in Mississippi, USA, Cooperative Energy, a generation and transmission cooperative, converted its existing coal-fired power plant to natural gas in its Morrow Repower project. The goal was to increase flexibility and reduce emissions, and to do this, Cooperative Energy chose to use our cutting-edge SGT6-9000HL gas turbine. Together with a steam turbine retrofitted from previous coal plant operations, the new plant is capable of producing 550 megawatts of electricity and uses thermal power from the new turbine in its existing thermal plant system, making it as efficient as a new combined-cycle plant. The project was so successful that it won Power magazine’s 2024 Reinvention Award. The new plant reduces CO2 emissions by up to two million metric tons per annum compared to the coal-fired plant. And it’s helping ensure that people in the region of Mississippi will benefit from safe, reliable, and affordable power for years to come. What’s more, the SGT-9000HL is already capable of running on a volume of 50% hydrogen today and 100% hydrogen by 2030.

We aim to produce 100% recyclable wind turbines by 2040. With the rate of expansion for wind power expected to double by the end of the decade, recycling wind turbine components – or “wind circularity” – is high on our agenda. There are already established practices for efficiently recycling most turbine parts, but recycling the blades has presented a greater challenge. Usually made of fiberglass and resins, long-lasting composite materials are created that are not easily recycled. We’re changing that with our pioneering RecyclableBlade technology, the first comprehensive recycling solution ready for commercial use. All materials used for the blade can be recycled and reused in other industries, thanks to the use of a new resin. The first blades were already installed in 2021 at the offshore wind farm Kaskasi off the coast of the Germany. Eighty-one meters long, the blades can be recycled at the end of their lifespan, lowering our lifecycle emissions and giving the industry a chance to improve its footprint.

Sustainability is really about grasping business opportunities and reducing risks. That includes minimizing our climate footprint in our own operations and manufacturing, as well as the emissions from the use of our products. We consider sustainability in the decisions we make, from the innovations we pursue to the way we’re trying to conserve resources. Sustainability touches our entire company culture. It’s reflected in our health and safety targets. It’s in our diversity goals. We’re striving to be a fair and inclusive company, one where everybody can be themselves at work.

Our goal is to be climate neutral within our operations by 2030. One lever is that we’re only using renewable electricity in all our facilities around the globe, a remarkable target we reached in fiscal year 2023. We’re also focusing on reducing energy consumption and increasing electrification in our processes and buildings, and we’re transforming our entire car fleet to 100% electric vehicles. Of course, while we push for climate neutrality in our��operations, the biggest challenge is to push decarbonization up and down the value chain. If you look at our company footprint, around 99% of it comes from Scope 3 emissions from the use of sold products.

We aim to reduce Scope 3 downstream emissions by 28% by 2030 compared to 2019. This is really ambitious if one considers the way Scope 3 is calculated: In the year we sell the respective product, we calculate the emissions for the entire lifetime. As our business grows, it’s quite natural that our CO2 footprint goes up. But we can still influence Scope 3 emissions through various levers: The first one is efficiency gains with improved products and digitalization. The second is offering GHG-free products and products supporting the shift to hydrogen – this will be a huge lever. A third is enabling technologies like carbon capture and storage (CCS) to mature in the coming years; we’re already seeing projects combining gas turbines with CCS that are close to climate neutral. Also, since November 2020, we no longer offer new coal-fired projects, which made up a significant part of our overall CO2 emissions. And last but not least, by bringing more renewables into the system, we expect our customers will operate their gas turbines less and less in the future. All these elements come together to bring down our emissions. From a purely technological perspective, we’re on the forefront of what’s possible in the energy transition.

In addition, we’ve collected and processed ESG data for around 90% of our Scope 3 downstream emissions for strategic forecasting with our ESG data management solution. I think this shows our commitment to understanding and calculating Scope 3 emissions and how serious we are about managing them. This is going to become more and more relevant going forward with the new Corporate Sustainability Reporting Directive (CSRD). And as more ESG data flows into this data management system, we’ll have an entire sustainability data pool for the company in the future.