CDP. Module: Introduction. Page: Introduction. CDP 2015 Climate Change 2015 Information Request CC0.1

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1 CDP CDP 2015 Climate Change 2015 Information Request SSE Module: Introduction Page: Introduction CC0.1 Introduction Please give a general description and introduction to your organization. SSE's core purpose is to provide the energy people need in a reliable and sustainable way. Its strategy is to deliver the efficient operation of, and investment in, a balanced range of economically-regulated and market-based businesses in energy production, storage, transmission, distribution, supply and related services in the energy markets in Great Britain and Ireland. This means: 1) operating and investing efficiently is how SSE serves the needs of its customers, making investments to meet their long-term energy needs. This in turn allows it to earn the profit that allows it requires to remunerate its investors; 2) maintaining a balanced range of businesses means SSE does not become over-exposed to any one part of the energy sector but can pursue opportunities in each of them where appropriate; 3) production, storage, transmission, distribution, supply and related services means that there is breadth of business activity in SSE but also depth through the focus on a single sector, energy; and 4) Great Britain and Ireland give SSE a clear geographical focus, allowing it to maintain and deploy strong experience and understanding of the markets in which it operates and to focus on the needs of the customers which it serves. SSE has three key business segments: 1) Networks the economically-regulated transmission and distribution of electricity and gas to people's homes, offices and businesses, and other related networks; 2) Retail the supply of electricity, gas and other services to household and business customers; and 3) Wholesale the production and storage of energy and energy portfolio management. CC0.2

2 Reporting Year Please state the start and end date of the year for which you are reporting data. The current reporting year is the latest/most recent 12-month period for which data is reported. Enter the dates of this year first. We request data for more than one reporting period for some emission accounting questions. Please provide data for the three years prior to the current reporting year if you have not provided this information before, or if this is the first time you have answered a CDP information request. (This does not apply if you have been offered and selected the option of answering the shorter questionnaire). If you are going to provide additional years of data, please give the dates of those reporting periods here. Work backwards from the most recent reporting year. Please enter dates in following format: day(dd)/month(mm)/year(yyyy) (i.e. 31/01/2001). Enter Periods that will be disclosed Tue 01 Apr Tue 31 Mar 2015 CC0.3 Country list configuration Please select the countries for which you will be supplying data. If you are responding to the Electric Utilities module, this selection will be carried forward to assist you in completing your response. Select country United Kingdom Ireland Belgium CC0.4 Currency selection

3 Please select the currency in which you would like to submit your response. All financial information contained in the response should be in this currency. GBP( ) CC0.6 Modules As part of the request for information on behalf of investors, electric utilities, companies with electric utility activities or assets, companies in the automobile or auto component manufacture sub-industries, companies in the oil and gas sub-industries, companies in the information technology and telecommunications sectors and companies in the food, beverage and tobacco industry group should complete supplementary questions in addition to the main questionnaire. If you are in these sector groupings (according to the Global Industry Classification Standard (GICS)), the corresponding sector modules will not appear below but will automatically appear in the navigation bar when you save this page. If you want to query your classification, please respond@cdp.net. If you have not been presented with a sector module that you consider would be appropriate for your company to answer, please select the module below. If you wish to view the questions first, please see Further Information Module: Management Page: CC1. Governance CC1.1 Where is the highest level of direct responsibility for climate change within your organization? Board or individual/sub-set of the Board or other committee appointed by the Board CC1.1a Please identify the position of the individual or name of the committee with this responsibility

4 SSE's Chief Executive, Alistair Phillips-Davies, has overall lead responsibility for sustainability issues, including climate change. In discharging his responsibilities in relation to climate change, the Chief Executive is advised and assisted by senior management and a number of specific management committees. The Board is responsible for setting the overall strategic direction and key sustainability policies in support of this. The Board also reviews SSE s performance against agreed sustainability objectives. The Executive Committee implements the sustainability policy and strategy as agreed by the Board and monitors progress against specific sustainability targets and initiatives; there are seven sub-committees which assist in the effective management of these initiatives. For example, key environmental and energy efficiency targets are monitored by the Safety, Health, Environment Audit (SHEAC) and The Governance and Disclosure Committee governs sustainability management and reporting (part of the Committee s Terms of Reference). To compliment our long term environmental objectives and targets, we also produce a series of annual environmental targets which are reported against on a monthly basis. Progress against these targets is also reviewed on a quarterly basis by a Board Committee, the SHEAC and additionally by the SHE (Safety, Health & Environment) committee. In addition, SSE's Director of Sustainability identifies specific sustainability issues arising from SSE s responsibilities to its customers, communities, employees and shareholders, and develops policy in the line with the values agreed by the Board. The sustainability team and the corporate affairs team support and drive sustainability performance programmes across the organisation and report progress on sustainability activities to the full range of SSE s stakeholders. CC1.2 Do you provide incentives for the management of climate change issues, including the attainment of targets? Yes CC1.2a Please provide further details on the incentives provided for the management of climate change issues Who is entitled to benefit from these incentives? The type of incentives Incentivized performance indicator Comment All employees Monetary reward Emissions reduction project Energy reduction project Efficiency project Behaviour change related Annual appraisals for SSE employees are based around our 6 company Core Values, one of which is Sustainability, and so their individual performance in relation to sustainability is assessed, which has implications on whether or not they receive an annual incremental pay rise and / or bonus. Climate change issues will be one topic that fits into the sustainability value and employees will have specific targets (depending on their role) that help to manage or mitigate against climate change issues.

5 Who is entitled to benefit from these incentives? The type of incentives Incentivized performance indicator Comment indicator All employees Monetary reward Emissions reduction project Energy reduction project Efficiency project We have a 'License to Innovate' scheme through which any employee can submit business improving ideas. Often these relate to the environment and climate change. Individuals whose ideas are implemented are rewarded both financially and in terms of recognition. Other: Environment/sustainability managers Monetary reward Emissions reduction target Energy reduction target There are several managers in SSE whose jobs are directly related to environmental management, and therefore their salary and any incentive is linked to the fulfilment of environmental / climate change related personal targets. Corporate executive team Monetary reward Emissions reduction target Energy reduction target Behaviour change related indicator The executive team are awarded incentive payments connected with the achievement of a variety of targets, including sustainability. Board/Executive board Monetary reward Emissions reduction target Energy reduction target Behaviour change related indicator The 2014/15 Annual Bonus scheme for Executive Directors was based on personal objectives, which included the achievement of sustainability targets. Energy managers Monetary reward Energy reduction project Energy reduction target Efficiency project SSE has several energy managers whose annual incremental pay rise is linked with achieving the implementation of systems which will reduce energy consumption in order to achieve targets.

6 Who is entitled to benefit from these incentives? The type of incentives Incentivized performance indicator Comment Facility managers Monetary reward Energy reduction project Efficiency project Facilities Managers are rewarded based on achieving targets relating to numerous things, managing and reducing energy and water consumption, and promoting other carbon saving measures such as sustainable travel. All employees Recognition (nonmonetary) Behaviour change related indicator We have an annual SSE Awards ceremony, with a number of categories of awards - including Sustainability. An individual, team, or department, which has shown excellence in this area, often relating to carbon reduction, is recognised and rewarded through this event. Further Information Page: CC2. Strategy CC2.1 Please select the option that best describes your risk management procedures with regard to climate change risks and opportunities Integrated into multi-disciplinary company wide risk management processes CC2.1a Please provide further details on your risk management procedures with regard to climate change risks and opportunities Frequency of monitoring To whom are results reported? Geographical areas considered How far into the future are risks considered? Comment

7 Frequency of monitoring To whom are results reported? Geographical areas considered How far into the future are risks considered? Comment Six-monthly or more frequently Board or individual/sub-set of the Board or committee appointed by the Board SSE Group which involves UK and Ireland operations. > 6 years The Board is responsible for the overall system of risk management and internal control. It either directly or through other committees sets policies and reviews risk management performance at SSE. CC2.1b Please describe how your risk and opportunity identification processes are applied at both company and asset level Background: SSE identifies, evaluates risk at both a group (strategic) and business (asset) level by identifying and protecting the business from outcomes which could threaten the achievement of objectives; compromise the SSE SET of core values; and pose a significant threat to the reputation of the Group, affecting our relationship with customers, investors, regulators and other key stakeholders. During the course of the year, SSE has further developed its framework for risk management to increase risk awareness and to provide structure and support for risk management activities across the organisation. As part of this work, a comprehensive review of SSE s Group Principal Risks has been carried out, and full divisional and Group Risk Appetite Statements have been developed to ensure proper alignment of strategy and objectives with risk taking at all levels. The review identified 10 principal risks, and they are designed, to ensure (amongst other things) SSE is always able to address the climate change issue, as a risk or as an opportunity. For example, climate change could present significant challenges in the management of energy-related commodity prices; equally, it could present opportunities through political or regulatory action to address it. In its Annual Report, SSE acknowledges the impact of the weather and, by extension, the climate on its business. Company level risk and opportunity identification: Strategic risks are identified, evaluated and reviewed by SSE s Executive Committee. These risks are informed by business (asset) level risk assessment procedures and processes and are reviewed twice a year by the Board. Asset level risk and opportunity identification: Risks and opportunities associated with specific assets (for example power plant) are identified, evaluated and monitored by each relevant business unit within SSE. Risk registers are produced for each business unit and are fully reviewed at least every six months. CC2.1c How do you prioritize the risks and opportunities identified?

8 Prioritisation identification: All risks are assessed and prioritised on the level of concern to the business unit. This assessment takes account of the probability of occurrence, the level of impact and the level of control in place to manage and reduce the risk.. Risk review process: Business units assess and prioritise risks. These are reviewed and corresponding controls implemented by business unit leaders. Business unit risks are consolidated into the 10 principal risks across the group. The Executive Committee reviews these risks, there prioritisation and the key controls in place across the Group. The Board maintains an oversight of, and ultimate responsibility for, SSE s risk management activities. This Group Risk department works with business units on an ongoing basis to develop and improve risk management tools and processes, to ensure that business risks are identified, managed and regularly reviewed, and that risk reporting to the Board, Audit Committee and Executive Committee is comprehensive and appropriate. CC2.1d Please explain why you do not have a process in place for assessing and managing risks and opportunities from climate change, and whether you plan to introduce such a process in future Main reason for not having a process Do you plan to introduce a process? Comment CC2.2 Is climate change integrated into your business strategy? Yes CC2.2a Please describe the process of how climate change is integrated into your business strategy and any outcomes of this process i. How the business strategy has been influenced SSE's core purpose is to "provide the energy people need in a reliable and sustainable way". SSE has a set of 6 Core Values that guide employees and managers

9 in their decisions and actions. The SSE SET is: Sustainability, Service, Efficiency, Safety, Excellence and Teamwork. These values are part of SSE s appraisal process and are used to assess employees performance (including Executive Directors and Managing Directors). In response to the energy 'trilemma' (security of supply, decarbonisation and affordability), SSE adopted in April 2013 a new definition of its Sustainability core value: Our decisions and actions are ethical, responsible and balanced, helping to achieve environmental, social and economic well-being for current and future generations. This means its decision making for both operations and investment aims to reflect all three parts of the 'trilemma' and be as consistent as possible with the priorities of its customers and with the direction of public policy in the UK and Ireland. SSE believes that climate change mitigation should be driven by climate science and to do this that business and governments should implement a series of initiatives to reduce its impact, including: focusing on implementing low carbon technologies, energy efficiency programmes, introducing carbon abatement and regulations to reduce the cost of decarbonisation. SSE has a number of key objectives: 1) Help customers better control their electricity use, by helping them to reduce consumption and to consume at times of day when the carbon-intensity of electricity is lower. 2) Reduce the carbon-intensity of electricity from SSE power stations by 50% between 2005/6 and ) Provide the supporting infrastructure for the transition to a low carbon economy. 4) Develop infrastructure to support the electrification of transport/ its own transport. ii. What aspects of climate change have influenced the strategy Meeting the energy trilemma is the core part of SSE s strategy. The significant impacts of climate change to SSE are the need to mitigate the impact of climate change through a move to a low carbon economy with secure and affordable low carbon energy, adapt to the potential physical impacts of climate change and ensure operations are resilient to climate changes. For its generation business SSE aims for sustainability in energy production through a diverse generation portfolio, including the largest amount of renewable energy in the UK and Ireland. In terms of the customer facing strategy this is focused on delivering energy efficiency programmes. For SSE s operations the building and generation asset management plans take into account the potential physical impacts of climate change. iii. Key Components of Short Term Strategy Our short term (current to next three years) strategy is focused on: 1) Continued substantial investment in new renewable energy capacity to support SSE's longer term carbon intensity strategy. 2) Continued substantial investment in network infrastructure which will facilitate new network capacity for renewable energy. 3) Internal energy efficiency improvements a five year programme to reduce energy consumption from our own operations, involving a 10 million capital investment programme, behaviour change programme and installation of AMR and Smart meters. 4) Emissions collection and reporting changes review KPIs, targets, data collection processes and performance and ensure data is verified (such as Achilles CEMARS scheme). iv. Key Components of Long Term Strategy Our long term strategy (from 2017 and beyond) is to support the transition to a low carbon economy. To do this SSE has set out a renewable energy investment programme and aims to move by the end of the decade from a generation portfolio weighted towards coal and gas towards to a portfolio weighted towards renewables and gas with the aim of reducing overall carbon intensity of its generation by 50% by 2020 (baseline 2006). SSE also has and continues to make significant investments in the electricity networks and supply of energy to enable low carbon energy to be transmitted and supplied to customers. SSE has research and development programmes aimed at low carbon technologies and has long term initiatives to help customers reduce their own energy consumption by being more energy efficient.

10 v. Strategic Advantage over competitors SSE s strategic advantage is in relation to: 1) Its outstanding customer service, SSE is a sector leader in service provision and products. This extends to the products offered to address climate change issues and the services provided to its customers to reduce energy/ carbon such as ECO, Green Deal and microgeneration. 2) Its sector leading investment in renewable technology and generation capacity and balanced generation portfolio. This means that SSE is the largest generator of renewable energy in the UK. This will be a continued focus for SSE, by: commissioning and developing additional renewable energy capacity; lowering emissions from more efficient and flexible gas fired generation; delivering innovative solid fuel solutions; and reducing output from coal fired stations. vi. Substantial Business Decisions Climate change driven legislation and policies have had a major impact in the past year on SSE s business decisions, including: 1) Existing and likely decarbonisation policy framework, emissions regulations and SSE s own long term decarbonisation and business objectives have resulted in the decision to review the future of coal generation and in April 2015 SSE announced that the Ferrybridge coal fired station would close by March 2016 whilst Fiddlers Ferry continues to generate but within specific environmental and operating constraints up to ) The impact of energy efficiency measures, reduced energy demand and prevailing market conditions resulted in a 23% reduction in 2014/15 total output. 2) New operating frameworks, the Electricity Market Reform, which involves a minimum price for a tonne of carbon in the UK, long term contracts for new low carbon sources, security of supply, and maximum emissions for new generation have resulted in a change to the mix of SSE s generation portfolio with coal reducing from 46% to 33%, gas increasing from 28% to 35% and renewables contributing 26% between 2013/14 and increasing to 31% in 2014/15. 3) Since April 2007, SSE has invested around 4 billion in renewable technologies (capacity has risen to 3354MW in 2014/15 from 3326 MW in 2013/14). 4) Requirement for electricity to come from variable sources to secure supply and decarbonise the sector has also created the conditions for a change in SSE s generation mix. CC2.2b Please explain why climate change is not integrated into your business strategy CC2.2c Does your company use an internal price of carbon? Yes CC2.2d

11 Please provide details and examples of how your company uses an internal price of carbon The use of a carbon price is a key component of many of SSE s operational and capital investment decisions. The price of carbon is reflected in decisions to run generation plant and renewable generation technologies, the investments made in new and existing capital projects and how we perform in the energy markets: For example: SSE s Energy Portfolio Management team internalises the price of carbon in its energy market models, for example in 2014/15 the uplift in spark spreads combined with the April 2014 increase in the Carbon Price Support Rate resulted in greater use of gas-fired generation relative to coal. SSE s ongoing operation of coal fired power stations was reviewed in 2014/15, the cost of the Carbon Price Support, the introduction of full auctioning of EU emissions allowances along with other environmental and operational constraints resulted in the announcement that coal fired electricity generation would be reviewed in March 2015 and in April 2015 SSE announced that Ferrybridge would cease by 31 March SSE s capital investment decisions in future electricity generation are supported by the renewables obligation and in the future contracts for difference. These long term support mechanisms for low carbon generation influence the way in which SSE develops and invests in new renewable technologies. CC2.3 Do you engage in activities that could either directly or indirectly influence public policy on climate change through any of the following? (tick all that apply) Direct engagement with policy makers Trade associations Funding research organizations Other CC2.3a On what issues have you been engaging directly with policy makers? Focus of legislation Corporate Position Details of engagement Proposed legislative solution Other: Mandatory carbon reporting/ cap and trade/ carbon tax/ energy Support with minor exceptions Electricity Market Reform: The package of reforms includes the Capacity Market, the Carbon Floor Price, Contracts for Difference (CfD), and the Emissions We support the objectives of this legislation and the Government s reform package. SSE believes the Contracts for Difference (CfD) to be a viable, long term

12 Focus of legislation Corporate Position Details of engagement Proposed legislative solution efficiency/ clean energy generation/ adaptation resilience/ climate finance Cap and trade Cap and trade Support with minor exceptions Support with minor exceptions Performance Standard (EPS). Each of these components will work together to deliver the UK Government s long-term objective for the sector- for it to provide affordable, secure, low carbon electricity. SSE has been engaging with the relevant departments within the UK and Scottish Governments, particularly the lead department DECC and with other stakeholders including through our trade associations (EnergyUK, RenewableUK, Scottish Renewables, Eurelectric and the European Wind Energy Association (EWEA)) on the policy and its implementation. Reform of the EU Emissions Trading Scheme (EU ETS) SSE has engaged directly with the relevant departments in the UK and Irish Governments, European Commission, MEPs in the European Parliament and through other stakeholders including the Scottish Government, as well as through our trade associations on the introduction of the Market Stability Reserve (MSR) for the EU ETS and the continued reform of the EU ETS for Phase IV (Post 2020). SSE has supported the maintenance of the Carbon Floor Price (CFP), to predict stability and predictability to low carbon investment and fuel switching to encourage investment in new flexible gas capacity. Additionally, SSE is part of the Energy Bill Revolution Campaign that is calling for revenues from the EU ETS auctions and support mechanism for low carbon generation. However the mechanism's design changes the way that investments in renewables are evaluated by both developers and providers of finance, including SSE. SSE chose not to participate in the first CfD auction round (in December 2014), but will continue to analyse its portfolio with a view to participating in the future. SSE believes the capacity market is a critical mechanism for the Government to meet the security of electricity supply standard it has set out in legislation. SSE participated in the first capacity market auction in December Reform of the EU ETS through the introduction of the Market Stability Reserve (MSR) has been provisionally agreed by the Member States and European Parliament., SSE has been a supporter of the MSR as it will introduce a much needed link between the supply and demand of ETS allowances. As part of the agreement the MSR will start in 2019 rather than 2021 and the 900m backloaded allowances along with the expected 600m unallocated allowances will be placed straight into the MSR. The MSR will bring much needed stability to the EU ETS, allowing a robust and stable carbon price to develop which will encourage investment in low carbon and energy efficient technologies, products and services, as well as driving fuel switching for the electricity system. The Commission is currently assessing the future role of carbon leakage provisions and how they should be developed for the EU ETS for Phase IV (post 2020). SSE supports provisions that ensure that industries at genuine risk of carbon leakage are supported to a level of the best available technologies and processes, but that doesn t undermine the EU ETS or climate change mitigation efforts. SSE supports the Carbon Floor Price (CFP), which has been frozen up to 2020, and supports that the level for post 2020 is extended to give greater visibility and clarity for investors.

13 Focus of legislation Corporate Position Details of engagement Proposed legislative solution Cap and trade Energy efficiency Other: Mandatory carbon reporting/ cap and trade/ carbon tax/ energy efficiency/ clean energy generation/ adaptation resilience/ climate finance Support Support Support with minor exceptions Carbon Price Support that go to the UK Government s Treasury to fund energy efficiency for vulnerable energy consumers. Although there is no like campaign in Ireland, we support the principle there too. Climate Change Act and the 5th Carbon Budget The 5th Carbon Budget for the period 2028 to 2032.is due to be proposed by the Committee on Climate Change (CCC) for adoption by the UK Parliament in 2016, so as to set the trajectory for the UK to meet its legally binding 2050 carbon target under the Climate Change Act. We continue to engage directly with the CCC on the 5th Carbon Budget and support its analysis to ensure a cost efficient pathway for the decarbonisation of the UK economy. Energy Efficiency Directive (EED) and other energy efficiency legislation The EED is the main EU energy efficiency legislation to meet the EU energy efficiency targets for 2020 and The EED is due to be reviewed in 2017 to ensure that the 2030 energy efficiency targets can be met. SSE has been engaging with the relevant departments in the European Commission and trade associations on this Directive in the 2030 Package, and has tried to create a wider support with the energy industry towards energy efficiency to help vulnerable customers. SSE has similar engagement on other EU energy efficiency legislation aimed at meeting the 2030 target including the Energy Performance in Buildings Directive (EPBD) and the Ecodesign Directive Carbon and Energy Package new EU Greenhouse gas, renewable and energy efficiency targets for SSE has engaged directly with the relevant departments in the UK and Irish Governments, European Commission, MEPs in the European Parliament and through our trade associations about the 2030 Climate and Energy Package. SSE supports the proposals that the Climate Change Committee have concluded on the rationale and levels for carbon budgets. SSE has been supportive of energy efficiency targets, and supports a bottom up approach using expanding upon and tightening existing legislation to develop a bottom up approach to achieving all available cost effective energy efficiency measures for the economy. In October 2014 the European Council agreed the 2030 Climate and Energy Package which included- a greenhouse gas binding target of 40% against 1990 levels; a renewable energy target of 27%; an energy efficiency target of 27% and an indicative target for interconnection capacity of 10% of installed capacity by 2020 and 15% by SSE supports the 2030 Climate and Energy Package as it will provide the long term certainty for investment in the necessary infrastructure to decarbonise the UK and Irish economies. SSE will

14 Focus of legislation Corporate Position Details of engagement Proposed legislative solution Energy efficiency Other: Low carbon networks Clean energy generation Cap and trade Support with minor exceptions Support Support Support Energy Company Obligation (ECO) and Green Deal focuses on energy efficient solutions, reducing carbon emissions and helping people out of fuel poverty. SSE has engaged directly with DECC about the changes to ECO and Green Deal. In 2017, the final phase of ECO comes to an end and there current plans for a successor to replace this scheme. SSE will engage with UK government and other stakeholders on ways to improve energy efficiency. SSE has engaged directly with OFGEM and other departments on low carbon networks through demonstration projects. SSE is involved in developing new technologies to establish a framework of support for low carbon technologies which cost effectively manage energy efficiency measures on SSE's networks as a sustainable alternative for managing peak electricity demand. Renewable Energy Directive - Contains the legally backing for the 2020 renewable energy target and will contain the EU wide binding target agreed in October 2014, for at least 27% of final energy to come from renewable energy by 2030 SSE supports the proposed Market Stability Reserve (MSR) for the EU Emissions Trading Scheme (EU ETS) being considered by the EU Parliament. SSE engaged directly with relevant departments in the UK and Irish Governments, European Commission, MEPs in the European Parliament and through other stakeholders,as well as through our trade associations on the introduction of the MSR and the continued reform of the EU ETS for Phase IV (post 2020). continue to engage and support the package as it is translated into relevant legislation. SSE supports the overall aim of ECO and the Green Deal. SSE believes that energy efficiency measures are the best approach for consumers to minimise their energy bills. SSE however believes that the way in which energy efficiency measures are implemented and funded should be reviewed, so they are more progressively funded and is engaging with stakeholders to make this case. SSE fully supports the low carbon networks programmes. SSE believes there is the potential for the new technologies to be included in the future network price control framework. SSE supports an EU wide renewable energy target as it provides the long term certainty for investment in the necessary infrastructure to decarbonise the UK and Irish economies in a cost effective way. The introduction of the Market Stability Reserve (MSR) for the EU Emissions Trading Scheme (ETS) will result in the gap closing between the Carbon Price Floor and the EU ETS price, bringing the rest of the EU in line with the UK. SSE believes the proposed MSR will tackle the root cause of the problem of surplus allowances in the EU ETS and restore the EU ETS as the primary driver of decarbonisation in Europe. CC2.3b

15 Are you on the Board of any trade associations or provide funding beyond membership? Yes CC2.3c Please enter the details of those trade associations that are likely to take a position on climate change legislation Trade association Is your position on climate change consistent with theirs? Please explain the trade association's position How have you, or are you attempting to, influence the position? Eurelectric (members via Energy UK, Energy Networks Association and Electricity Association of Ireland) Energy UK and Energy Association of Ireland Confederation of British Industry (CBI) (in Northern Ireland only) European Wind Energy Association (members via RenewableUK, Scottish Renewables and Irish Wind Energy Association) International Emissions Trading Association Consistent Consistent Consistent Consistent Consistent Eurelectric s major objectives are to deliver carbon neutral electricity in Europe by 2050, ensuring a cost-effective, reliable supply through an integrated market and developing energy efficiency and the electrification of the demand side to mitigate climate change. Energy UK fully support the scientific consensus behind climate change, and as such recognise the need to decarbonise the economy, and that the energy sector is crucial to this. CBI supports energy efficiency, future proofing business against climate threats and moving businesses towards carbon neutrality by enabling the market to develop the solutions that are needed to achieve these goals. EWEA supports renewable targets, reform of the EU ETS and investment in a low carbon economy. International Emissions Trading Association advocates emissions trading globally and the EU ETS. As a member of national trade associations, SSE has strongly advocated that Eurelectric supports low carbon investment and efforts to improve energy efficiency. From June 2014, SSE s Chief Executive will be the Vice President for Eurelectric for a term of 2 years. One of the main topics on the agenda will be the international climate talks in Paris. As a member of these organisations, SSE has strongly advocated that Energy UK and Energy Association of Ireland supports low carbon investment and efforts to improve energy efficiency. SSE advocates that the CBI supports low carbon investment, policy on carbon targets/ EU ETS/ energy efficiency. As a sizeable member of the organisation, SSE has strongly advocated that EWEA supports low carbon investment and renewable targets. As a member of this organisation, SSE has strongly advocated for emissions trading globally and reform of the EU ETS. Carbon Capture and Storage Consistent The CCSA works to raise awareness, both in the SSE supports the commercial demonstration of CCS

16 Trade association Is your position on climate change consistent with theirs? Please explain the trade association's position How have you, or are you attempting to, influence the position? Association UK and internationally, of the benefits of CCS as a viable climate change mitigation option, and the role of CCS in moving the UK towards a lowcarbon economy. technology with a view to CCS contributing to a future decarbonised energy system, alongside other low carbon sources. CC2.3d Do you publicly disclose a list of all the research organizations that you fund? No CC2.3e Do you fund any research organizations to produce or disseminate public work on climate change? No CC2.3f Please describe the work and how it aligns with your own strategy on climate change CC2.3g Please provide details of the other engagement activities that you undertake

17 Coalition of Progressive European Energy Companies our work with this group of renewables friendly utilities calls upon the EU to support the cost reductions in renewable energy, by the continuation of policies and measures towards to support deployment of renewables beyond 2020, strengthening the EU ETS and modernising energy infrastructure. CC2.3h What processes do you have in place to ensure that all of your direct and indirect activities that influence policy are consistent with your overall climate change strategy? Our business strategy and sustainability value (one of six of our core values) details our overall approach on climate change policy and the activities that we undertake to influence policy and regulation on climate change. SSE has policy and public affairs specialists based in Brussels, Glasgow, Edinburgh, London, Cardiff, Belfast and Dublin who engage openly and constructively with legislators, officials and other policy makers on all aspects of energy, climate change and related environment policy. All communications across the business are managed by these experts and processes are in place to ensure consistency, quality and accuracy of communications across SSE. SSE s risk management framework ensures that all risks associated with climate change policy and regulation are identified, assessed, evaluated, recorded, monitored and reviewed to understand the impact of these changes to our business. As part of this risk management framework the significant policy risks and activities that are related to climate change policy would be identified and actions as well as key messages developed to ensure that there is a consistent approach to all activities that influence policy and that these messages are in line with our overall sustainability and climate change strategy. CC2.3i Please explain why you do not engage with policy makers CC2.4 Would your organization's board of directors support an international agreement between governments on climate change, which seeks to limit global temperature rise to under two degree Celsius from pre-industrial levels in line with IPCC scenarios such as RCP2.6? Yes CC2.4a

18 Please describe your board's position on what an effective agreement would mean for your organization and activities that you are undertaking to help deliver this agreement at the 2015 United Nations Climate Change Conference in Paris (COP 21) For SSE, an effective agreement in Paris would mean: 1) Strong signal to investors and developers to support and invest in low carbon technologies; 2) Clarity for government to set policy on climate change and other environment related legislation, providing our business with a stable political framework in which to invest in low carbon technologies; and 3) Create the conditions for, and the certainty for actions and targets for our business beyond SSE is undertaking many activities to ensure that the agreement at the 2015 UN Climate Change Conference in Paris is delivered, including: 1) Joining up with other businesses to back a WWF-UK campaign that urges the newly-elected UK government to take decisive action on climate change and move towards low carbon economy. In particular the signatories are calling for the UK Government to seek a strong global climate deal in Paris in December which limits temperature rises to below 2 C; set an ambitious 5th carbon budget to drive forward UK emissions reductions (covering period ); and establish a longterm framework for investment in the low-carbon economy, giving industry much-needed clarity over what is expected in terms of low-carbon development, and boost the confidence of green investors. 2) Engaging with UK and Irish Governments, European Commission, MEPs in the European Parliament and other stakeholders on the policy framework that moves towards a low carbon economy. For instance calling for changes to the Carbon Price Support, EU ETS, Levy Control Framework and other legislation that supports a move towards a low carbon economy and gives investors and other stakeholders greater clarity, visibility and confidence to invest in a low carbon economy. 3) Continuing to invest in renewable energy, SSE is the largest producer of renewable energy in the UK, since 2007 SSE has invested 4 b in new renewable technologies. 4) Setting its own carbon targets, taking action to achieve these targets and reporting openly and transparently about its progress against targets. Further Information Page: CC3. Targets and Initiatives CC3.1 Did you have an emissions reduction target that was active (ongoing or reached completion) in the reporting year? Absolute and intensity targets CC3.1a Please provide details of your absolute target

19 ID Scope % of emissions in scope % reduction from base year Base year Base year emissions (metric tonnes CO2e) Target year Comment Abs1 Scope 2 7% 15% Absolute reduction in carbon emissions associated with the energy use in SSE's property portfolio by 15% based on 2012 levels. CC3.1b Please provide details of your intensity target ID Scope % of emissions in scope % reduction from base year Metric Base year Normalized base year emissions Target year Comment Int1 Scope 1 71% 50% Int2 Scope 3: Business travel 40% 17% Other: tonnes CO2e per kwh grams CO2e per kilometer SSE aims to reduce the carbon intensity of the electricity it generates by 50% by 2020 (from 2005/06 levels). In 2006 the carbon intensity figure was 600 g per kwh. SSE aims to reduce the average emissions of CO2 by SSE cars to below 120g per km by In 2010/11 the figure was 145g per km. Since the target was set SSE has reviewed its scope 3 emissions to include Well To Tank emissions. This means that the contribution of SSE car emissions has gone from 40% of scope 3 emissions to 0.5%. CC3.1c Please also indicate what change in absolute emissions this intensity target reflects

20 ID Direction of change anticipated in absolute Scope 1+2 emissions at target completion? % change anticipated in absolute Scope 1+2 emissions Direction of change anticipated in absolute Scope 3 emissions at target completion? % change anticipated in absolute Scope 3 emissions Comment Int1 Decrease 50 Int2 Decrease 13 If output remained the same this would mean a reduction from 25,210 million tonnes of CO2e to 12,600 million tonnes of CO2e - a reduction of 12,600 million tonnes of CO2e. This would be a 50% reduction in relation to absolute scope 1 emissions against the baseline year of If mileage remained the same this would be a 17% reduction in CO2 per grammes per km by SSE car emissions make up around 40% of the total scope 3 emissions (when the target was set in 2011) and the target would result in a reduction of around 7% in relation to all scope 3 emissions for the baseline year of the target of 2010/11. CC3.1d For all of your targets, please provide details on the progress made in the reporting year ID % complete (time) % complete (emissions) Comment Abs1 60% 69% Int1 80% 57% The baseline emissions were 25,131 tonnes CO2 in 2011/12. In 2014/15 emissions reduced by 2,343 tonnes CO2 to 22,788 tonnes CO2. A 10% reduction from the baseline year. SSE are on target to achieve the 15% reduction in This is a result of the energy efficient behaviour change activities as well as a capital programme to replace equipment with energy efficient alternatives across the property portfolio. The baseline year was 600 g/kwh CO2 and the target figure is 300 g/ KWh. In the last year, SSE achieved a 17.3% reduction in the carbon intensity of its scope 1 emissions. The current figure is 57% lower than the base year at 470 g/ KWh. This is a 21% reduction in scope 1 carbon emissions since 2006 equivalent 12,131 million tonnes CO2 (scope 1 emissions in 2006 were 25,210 million tonnes CO2e compared to 13,079 million tonnes CO2e in 2014/15). This reduction is a result of SSE's longer term strategy of moving to a lower carbon generation fleet weighted towards gas and renewables and this means that it is on track to meet its objective of halving the carbon intensity of the electricity it generates (compared

21 ID % complete (time) % complete (emissions) Comment Int2 80% 100% to 2006) by The baseline is 2010/11 and target year is 2015/16, so we are now 4 years, 80% of the way through. The baseline figure was 145 g CO2 per km, and the target figure is 120g CO2 per km, a reduction of 25g CO2 per km. The current figure at end of 2014/15 was 117 g CO2 per km. This means that SSE has reduced the CO2 emissions from its own car fleet by 4% from 7,652 g CO2 to 7,179 kg CO2 despite mileage rising slightly by 1%. This has helped to reduce the total scope 3 emissions. This has been a result of our strategy to buy lower carbon fleet and introduce innovative vehicles into the fleet such as electric vehicles and charging points at our main offices. CC3.1e Please explain (i) why you do not have a target; and (ii) forecast how your emissions will change over the next five years CC3.2 Does the use of your goods and/or services directly enable GHG emissions to be avoided by a third party? Yes CC3.2a Please provide details of how the use of your goods and/or services directly enable GHG emissions to be avoided by a third party i.avoided emissions represent a third party s scope 1 and scope 2 emissions. ii and iii. The scope 2 emissions were avoided by, and the amount they were avoided involves:

22 Move to low carbon generation: SSE's long term strategy is to provide a sustainable energy product through a diverse generation portfolio. This is achieved through investment in renewable energy technology and a move from a portfolio weighted towards coal:renewables to one weighted towards gas:renewables. For all energy customers the high proportion of renewable energy in SSE's generation mix plays a role in helping its customers reduce scope 2 emissions. SSE has 3394 MW of renewable energy capacity in operation the UK and Ireland (with a total electricity generation capacity of 11,733 MW). Output from SSE s renewable resources was 8,466 GWh in UK and Ireland (9,019 in 2013/14). This makes SSE the largest generator of electricity from renewable sources across the UK and Ireland. SSE's coal generation was down from 16,576 GWh in 2013/14 to 9,143 GWh in 2014/15. This 45% reduction in coal generation combined with an increase in renewable generation helps to change the UK's generation mix. Customers' scope 2 emissions are reduced as carbon emissions factors are lowered. It is difficult to quantify this impact as it will be based on the average UK generation mix and SSE's contribution to this. SSE's very high level of renewable output allows SSE to enter into some significant renewable energy contracts with customers which lowers scope 2 emissions to zero for some contracts. This is difficult to quantify as the emissions saved would depend on the alternative contracts SSE customers would buy. Support of low carbon energy infrastructure: In 2014/15 SSE provided 97 new connections of new renewable generation in the north of Scotland and over 1830 MW was connected in the preceding decade. This reduces third party scope 1 emissions as third parties generate renewable energy on-site and in some circumstances export this. The amount of carbon emissions avoided is difficult to calculate as it will depend on how much energy is generated on-site by a third party. Provision of education and energy efficiency measures - Using energy more efficiently should allow SSE s customers to avoid carbon emissions and reduce their scope 1 and 2 emissions from their use of gas and electricity. SSE supports energy efficiency programmes such as Green Deal, ECO and smart metering. For example, in the first two years of ECO ending 31 March 2015, SSE has promoted the installation of almost 250,000 energy efficiency measures; helped improve energy efficiency of over 210,000 homes across Great Britain; delivered energy efficiency improvements equivalent to 4.59 million tonnes carbon dioxide saved; and provided around 850 million of notional lifetime bill savings for vulnerable customers. SSE also continues to educate its customers (in 2014/15 SSE had around 8.58 million customers and business accounts) and other third parties on the subject of sustainability, climate change and energy efficiency, through various publications, educational programmes and presentations. All these demand side management measures have helped to reduce customer s energy consumption over the past 5 years by 13%. Using a weather corrected basis, energy consumption by SSE s household customers was lowest in 2014/15 since In comparison to 2007/08 this is a 2,424,309 tonnes carbon dioxide reduction across our customer base. iiii. Methodology: Low carbon generation: The reduction of carbon emissions in the generation mix reduces the carbon conversion factors applied by third parties to calculate their scope 2 emissions. Conversion factors are calculated a year behind the current emissions reporting year and it is difficult to put a value on the scope 2 emissions avoided as a result of SSE s contribution. Education and energy efficiency measures The saving of 2,424,309 tonnes of CO2 across our customer base is calculated by taking the difference between average customer consumption in 2014/15 and 2007/8 and multiplying the difference by the grid average factor (0.494 kg per kwh) and then multiplying this by the total number of SSE's electricity customers. Calculation: 4965 kwh kwh = 1123 * = 555 * 4.37 million = 2,424,309 tonnes of CO2. iv) Certified Emission Reductions (CERs): CERs through Clean Development Mechanism (CDM) and Joint Implementation (JI) projects offer us alternative opportunities to reduce emissions on a global scale, while at the same time have economic benefits within the countries where these schemes are located. SSE is involved in schemes in Mexico, India and Guatemala. In 2014/15 SSE bought 510,403 tonnes CO2e of CERs through the CDM (further details of our purchases are