SBTi net-zero standard to be drafted for the power sector

Why it matters

The power sector is uniquely positioned: both a major source of emissions and a critical enabler of wider decarbonisation. If the sector successfully decarbonises, it allows industries like transport, manufacturing, and buildings to transition through electrification. However, without clear, enforceable pathways, fossil fuel lock-in could undermine both climate goals and financial stability.

By setting near- and long-term requirements, the SBTi is seeking to bridge the gap between ambition and implementation. Importantly, the inclusion of fossil fuel phase-out timelines makes this draft one of the most stringent frameworks yet for power companies.

Challenges and controversy

The draft arrives at a politically sensitive moment. In the United States, the SBTi is facing scrutiny, with 23 state attorneys general demanding information on its activities and Florida’s Attorney General launching an antitrust investigation. Critics argue that restrictions on fossil fuel financing could represent overreach.

At the same time, the sector faces practical challenges:

• How to balance grid stability with accelerated phase-outs.
• The cost and infrastructure required to scale renewable energy.
• The reliance on certification schemes for sustainable biomass brings risks of greenwashing if not robustly verified.

These tensions highlight why the consultation process, open until November 3, 2025, will likely see heated debate.

What this means for businesses

For companies operating in or linked to the power sector, the draft standard sends a clear signal: incremental change will not be enough. Key implications include:

• Fossil fuel phase-out planning: Businesses will be expected to develop and disclose clear exit strategies for unabated fossil fuel assets, with measurable milestones every five years.
• Stranded asset risk: Companies that delay decarbonisation may face declining asset values, especially in coal, oil, and gas infrastructure.
• Capital and financing pressures: Investors and lenders are increasingly steering away from fossil fuel exposure. Early movers on science-based targets will likely access more favourable capital.
• Reputational credibility: Transparent, ambitious targets build trust with regulators, customers, and stakeholders, while silence or inaction risks reputational loss.
• Opportunities in electrification: As other sectors decarbonise through electrification, power companies that lead the transition can secure new revenue streams and long-term resilience.

Conclusion

The SBTi’s draft Power Sector Net-Zero Standard represents a pivotal shift: fossil fuel reliance is being steadily written out of credible transition pathways. For power companies, this moment is less about compliance and more about positioning — aligning business sustainability strategies with a low-carbon future that investors, regulators, and markets are already steering toward.

The challenge is significant, but so too are the opportunities for those ready to lead. By combining robust transition planning with transparent communication, businesses can strengthen resilience, unlock reputational value, and seize growth in the expanding clean energy economy. Explore our net-zero course to equip your teams with the knowledge and tools to translate commitments into action and strategy into measurable results.