Intangible Investment

Spend on non-mature (emerging) technologies (i.e. carbon reduction technologies, except the mature technologies of hydro and nuclear fission) is rated twice as useful as spend on mature technologies, because more R&D investment is needed to develop and scale-up immature technologies. The expectation is for companies to spend an amount on low-carbon R&D equivalent to at least 5% of overall capital expenditure.

46 companies score less than 20% of the available points. By contrast, Engie spend 2.8% on non-mature carbon mitigation. It has developed an ‘innovation ecosystem’ and has global partnerships with universities, laboratories, manufacturers and start-ups.

Figures for 26 companies for total mitigation R&D spend could not be found. Currently, financial and environmental reporting standards do not require companies to report a figure for R&D and so it is typically only reported when a company has another reason to do so, e.g. a high rate of R&D spend or an expectation that it will be disclosed in some markets. Even more rarely is a split between mature and non-mature technologies reported. Of the 24 companies with a publicly available figure for climate-mitigating R&D spend, only 14 provided sufficient information to work out R&D spend on non-mature technologies.

Of the companies with publicly available figures for non-mature R&D spend, the mean average spend was 0.8% relative to overall capital expenditure (but a median of just 0.3%). The main areas of spend are low-carbon generation, battery storage, carbon capture and storage (CCS), energy efficiency & smart grids, hydrogen and synthetic/biogas.

Considering the importance of CCS to the electric utilities sector and to many company’s plans, it is concerning that only Uniper, Exelon Corporation, Duke Energy & Chugoku explicitly mention research into this technology. Companies in the countries with largest coal capacity (China – 50%; USA – 12%, India – 12%) make no mention of CCS, except Exelon and Duke (both headquartered in the USA).

This lack of disclosure on R&D investments is compounded by the issue of confidentiality, which discourages reporting on this important area. Where companies do disclose R&D it is often split by the categories which the electric utilities sector uses to understand its business e.g. generation; transmission; systems; and customer facing. As the sector decarbonises a more useful split would be between fossil fuel and low-carbon energy sources.