Can Utilities Rise To The Challenges Presented By Decarbonization?

Can Utilities Rise To The Challenges Presented By Decarbonization?

By Ken Silverstein

The electricity network is among the greatest inventions ever, ushering in global economic and social progress. Yet, the system faces enormous tests and presents unique challenges to the nation’s 1,600 utilities, which center on decarbonization and electrification. How will power companies cope? 

The trend toward carbon neutrality could pay big dividends for utilities. The growth of electric vehicles (EVs) and the demand for renewables are driving change — all amplified by adding energy efficiency and battery storage technologies. While it will generate more revenues, it will also require a capital investment in transmission and distribution. The good news is 70% of the largest U.S. electric and gas utilities have net-zero goals, says S&P Global Market Intelligence.

“The trend toward more sustainability is going to continue,” says Todd Ramey, senior vice president of markets for the Midwest Independent System Operator (MISO), which operates the generation and transmission system in 15 states. “My primary role is to focus on reliability in the power system and operations.”

Ramey, who presented to the United States Energy Association’s virtual press conference where this reporter was a panelist, adds that 15 years ago, MISO oversaw 1,000 megawatts of renewable energy capacity. Today, it manages 5,000 megawatts of solar power and 1,000 megawatts of battery storage.

Electricity is the lifeblood of American commerce, making up 7% of the U.S. economy. Without access to it, society shuts down. But the nation’s infrastructure is inadequate, unable to handle a tidal wave of electric vehicles and wind and solar plants. The country can reduce greenhouse gas emissions by 40% by 2030 from a 2005 baseline with a bit of help from the Inflation Reduction Act — set to kick in $369 billion for 21st-century energy and climate projects.

Will policymakers step up too?

But reliability is taken for granted — until swaths of the country go without power for extended times. Think of the Texas freeze in February 2021. With a shifting energy foundation, experts discuss the roles of distributed energy assets and baseload power that run around the clock. Since last winter, 4,200 nuclear and coal generation megawatts have retired in the nation’s midsection. There is also constrained natural gas pipeline capacity in the Northeast.

“I have members who will spend the next decade exiting from coal,” says Emily Fisher, executive vice president and general counsel for the Edison Electric Institute, at the virtual press event. “That means we are going to be dependent on natural gas, which is flexible. There will be challenges with meeting peak demand until other non-emitting technologies can deploy at scale and at a cost to serve those purposes. So, allowing us to expand the transmission is also key.”

Today, 10,000 power plants, 170,000 miles of high-voltage transmission lines, and nearly 6 million miles of low-voltage distribution lines comprise the bulk power system. It also has more than 15,000 substations. But the U.S. Department of Energy says the grid may need to expand by 60% by 2030 and triple by 2050 to meet clean energy demands.

Distributed energy resources can alleviate some of that stress, meeting 20% of the peak load by 2030, says the Brattle Group. California, for example, plans to get to 60% renewables by 2030 and to 100% by 2045. The state’s independent system operator has called distributed energy resources “absolutely critical” — a way to relieve strain on the network while using clean energy and ensuring reliability.

The Biden administration is steering the country into the green energy economy and potentially toward net zero by 2050. If utilities can rise to the challenge, they will prosper and set an example for other industries. AmerenAEE +1.1%, American ElectricAEP +1.2% Power. CenterPoint EnergyCNP +0.3%, ConEdison, Duke EnergyDUK +1%, and National Grid are among the utilities with net-zero targets.

The ambition is suitable for renewable energy, which grew 250,000 megawatts over the last decade. And more clean energy plants are coming with additional EVs, which could comprise 50% of all new sales by 2030 as nearly every carmaker strives to meet global climate standards. The decreased usage of fossil fuels means increased consumption of electricity, which could skyrocket from 20% to 60% by 2050. But that will require an expansion of the central transmission system — not to mention the addition of new onsite generation and advanced energy storage.

Is coal still relevant?

In 2021, coal, natural gas, and petroleum generated about 61% of U.S. utility-scale electricity generation. Nuclear energy fueled 19% and renewable sources ranging from hydropower to geothermal to wind and solar made up 20%. Wind energy's U.S. share grew from 0.2% in 1990 to about 12% in 2021. Meanwhile, solar energy's share was about 2.8% in 2021, up from less than 0.1% in 1990. 

“We are seeing more and more wind and solar showing up because the cost is progressively dropping,” says Ronald Schoff, a director for Electric Power Research Institute, during the discussion. Supply chain issues have changed the paradigm for the last few years, underscoring the need for a dependable system. “That means we're going to rely more heavily on our natural gas, hydropower, and nuclear assets.

“What is the right balance? I don’t know the right answer. I think it changes as the system evolves,” adds Schoff. “We must manage risk at every point to ensure reliability, affordability, and safety.”

Will we keep coal for emergency purposes or phase it out? Louis Finkel, senior vice president of government relations for the National Rural Electric Cooperative Association told the audience that his membership serves 56% of U.S. territory and 92% of the persistent poverty counties in America.

To that end, coal still supports the grid in many states. He says that going too quickly and shutting down coal plants will decrease dependability, noting that realism and reason are essential to plotting a durable energy course.

Moreover, he points to recently passed laws, including the two that provide breaks for carbon capture and storage: 45Q and the Inflation Reduction Act. 45Q gives a tax credit of $50 per ton for CO2 that is captured and sequestered and $35 a ton for CO2 that is re-utilized, while the inflation act provides production tax credits for all clean energy sources.

“They create a pretty healthy financial incentive to look at carbon capture for coal,” says Finkel. “Once we get past the first of its kind and the second of its kind, long-term economics will drive those plans.”

But John Di Stasio, president of the Large Public Power Council, argues the economics and abundance of shale gas dethroned coal. Now that global energy policies center on decarbonization, the movement will accelerate.

“The first step was coal to gas, which was a huge greenhouse gas savings,” says Di Stasio. “The next step is looking at new technologies” like developing affordable long-term battery storage and green hydrogen. "But coal probably does not need additional pressure to get it off the system.”

Carbon neutrality is vital. But so is reliability, requiring natural gas and nuclear power. At the same time, emerging technologies are making headway and will conquer more markets due to federal incentives and public will. Utility companies and transmission operators will remake an evolving electricity model — critical stakeholders in the unyielding drive to net zero.

LPPC Responds to FERC’s Final Transmission Planning Rule
LPPC Issues Statement on EPA's Final Power Plant Rule
Public Power Leaders Attend LPPC’s Inaugural Members Conference
Broad coalition floats cost containment proposal as FERC eyes final grid rule
Groups Urge Inclusion of Cost Containment in FERC Tx Planning Rule
Energy Groups Press Regulators to Scrutinize Power Grid Costs
LPPC and Advocacy Groups Advance Transmission Planning Cost Management Proposal at FERC
LPPC Discusses Electrification at USEA's 2024 State of the Energy Industry Forum
PUF Covers LPPC Grid Reliability Event with Sen. Kevin Cramer
LPPC Hosts a Discussion on Reliability with Sen. Kevin Cramer (R-ND)
Where Community Matters Most
LPPC Announces Tom Falcone, CEO of LIPA, and Jackie Flowers, Director of Utilities at Tacoma Public Utilities, as New Chair and Vice Chair
Commentary: Look no further than Long Island for a case for public power
Navigating the Path to a Sustainable and Reliable Power Supply
Clearing the Path for Permitting Reform
Leading on Clean Energy Expansion
Fitch Says Deleveraging Era Over For Public Power Utilities
LPPC Welcomes Nashville Electric Service as Newest Member
IRS guidance on renewable tax credit transferability, direct-pay provisions of IRA, garners mixed reviews
Treasury Proposes Rules on Monetizing Energy Tax Credits
Domestic Content Rules for Direct Pay Continue to Lack Clarity and Certainty
President’s Post: Permitting Reform & Protecting Direct Pay Priorities as LPPC CEOs Meet with Members of Congress
US Releases Made-in-America Rules for Clean Energy Credits
LPPC Calls for Certainty and Clarity on Domestic Content Requirements
Can Utilities Rise To The Challenges Presented By Decarbonization?
Panel Debates Impact of Renewables, Electrification on Reliability
To Electrify America, Advance Permitting Reform
LPPC Discusses Pathways to Decarbonization at USEA’s 2023 State of the Energy Industry Forum
LPPC Discusses Clean Energy Tax Credits and Decarbonization with Bloomberg Government
LPPC Provides Comments to Treasury on Clean Energy Tax Credits
President's Post: Public Power CEOs and Federal Policymakers Convene at LPPC's Post-Election Forum
LPPC CEOs Present at the Public Power Community Forum
LPPC at National Clean Energy Week
LPPC Chair and Austin Energy General Manager, Jackie Sargent, Discusses Carbon-Free Goals and More on Grid Talk
U.S. public power sector tackles emerging ESG challenges, inflation
Chair’s Post: Embracing Diversity, Equity and Inclusion to Secure our Energy Future
LPPC Submits Comments to FERC on Transmission Planning
LPPC Leads Cross-Industry Push for E-Mobility
LPPC Members Fly In to Advocate for Public Power Communities
A Preview of Energy Transition Hopes and Hurdles for 2022
API Taps New Chief Lobbyist
LPPC Signs Joint Letter on Sequestration and Direct Subsidy Bonds
Joint Public Finance Network Letter to Congress In Support of Legislation In Response to COVID-19
Letter to Congress Regarding Near-Term for Customers and Communities in Response to COVID-19
LPPC Federal Reserve Municipal Liquidity Facility Letter
Joint Trades Community Owned Utility Direct Pay Letter
Letter to Treasury of Private Use
Letter to Treasury on Priority Guidance
GridWise Alliance and Grid Infrastructure Advisory Council Letter
Tulsa World: Utility Workers—A New, Unsung Hero Emerges During Times of Crisis
S&P Global: Municipal Utilities Call For Return Of Financial Tools To Get Through Pandemic
Morning Consult: Hidden Heroes Keeping The Lights On
Utility Dive: The (Energy) Efficient Road to Small Business Recovery
S&P Global: Public Power Utilities Say They Have 'Weathered' COVID-19 Storm; S&P Adds, 'So Far'
The Bond Buyer: Power Utilities Still Plan Capital Improvements
Morning Consult: Utilities Coalition Letter Rallies Congress to Include Support for Public Power in Coronavirus Stimulus
Morning Consult: Worldwide Denial-of-Service Cyberattacks on Utilities Up Five-Fold This Summer, Data Shows
Utility Dive: Public Power Leaders See Lasting Effects from 2020 Disruptions with New Approaches to Resilience, Equity
Public Utilities Fortnightly: Saluting the Workforce at Large Public Power Council; Conversation with LPPC president John Di Stasio
E&E News: Quest for 'Common Ground' Continues as Clock Ticks
POLITICO Morning Energy: Defending from Future Cyber Attacks
Agri-Pulse: Biden's Clean Power Target Poses Stiff Challenge for Some Rural Power Providers
PV Magazine: Sunrise Brief - Leaders Urge Support for Clean Energy Tax Breaks that Benefit Public Power
POLITICO: How Much Companies That Paid No Corporate Income Tax Spent on Lobbying
Utility Dive: Utilities to DOE - More Information, Not New Regulations, Needed to Secure the Grid
The Hill: Want a Clean Energy Future? Look to the Tax Code.
2022 Public Power Community Conference: Navigating an Industry in Transition
President’s Post: Fulfilling Our Mission to Benefit Public Power and America
Keeping America Powered: Meet Utility Workers Essential To Their Communities (Part 3)
Keeping America Powered: Meet Utility Workers Essential To Their Communities (Part 2)
Keeping America Powered: Meet Utility Workers Essential To Their Communities (Part 1)
Meet Our Essential Workers: Performing a Critical Role in Our Communities
E&E News: FERC unveils transmission plan seen as key for renewables
Canary Media: The US needs to build a bigger, stronger grid. FERC has a plan for that.
Austin Energy and LIPA Leaders Take the Reins at LPPC
LPPC Urges Congress to Consider Public Financing Tools in any COVID-19 Economic Stimulus Bill
LPPC Urges Congress to Support Public Power Communities
Large Public Power Council Chair and Vice-Chair Offer Insight on Response to the Coronavirus, Plans for Re-entry
LPPC Issues Statement on Clean Energy Innovation and Deployment Act of 2020
LPPC Calls on Congress to Prioritize Public Sector Infrastructure Investment
LPPC Issues Statement Regarding EPA’s Proposed Rulemaking on Mercury and Air Toxics Standards (MATS)
Large Public Power Council Welcomes Austin Energy General Manager Jackie Sargent as New Chair, Long Island Power Authority CEO Tom Falcone Elected Vice Chair
LPPC Issues Joint Statement Regarding FERC’s Proposed Rule on Transmission Planning