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Decarbonization and How to Get There – Insights from GES

Growing recognition of the current and future impacts of climate change has made decarbonization an urgent priority for power industry stakeholders. At the Smart Electric Power Alliance (SEPA) Grid Evolution Summit last week in Washington, D.C., leaders from utilities, policymakers and technology providers discussed their plans for reducing carbon emissions – and shared ideas for transitioning to and ultimately achieving full decarbonization.

The consensus: Start now. Set bold goals. Use every tool. Collaborate.

In the morning keynote address, David Eves, Group President, Utilities, at Xcel Energy, described the Minneapolis-based utility’s goals for a carbon-free future – set in 2018 – and detailed its roadmap for achieving them. Xcel has already reduced carbon emissions by 38% from 2005 levels, with goals to reach an 80% reduction by 2030 and to be carbon-free by 2050.

Eves said four factors drove Xcel to these ambitious goals: (1) customers and communities setting their own sustainability goals – about half of the communities in Xcel’s service territory have set a goal of 100% renewables or carbon neutral by 2040 to 2050; (2) investors, who increasingly expect utilities to conform to the global consensus around limiting long-term global warming to two degrees Celsius; (3) technology advances, such as the declining cost of renewable power, that have made carbon-free energy feasible and affordable; and (4) the stark reality presented by climate science itself.

“We have to achieve this,” Eves said.

In some of Xcel’s service territories, policymakers are already demanding action. Colorado recently passed sweeping legislation mirroring Xcel’s 100% goal by 2050 and called for an updated resource plan no later than 2021 laying out a path to 80% reduction by 2030. New Mexico has called for full decarbonization by 2045.

But, Eves pointed out that Xcel provides electricity in three distinct areas of the country marked by wide geographical and political diversity: five states in the Midwest; Texas and New Mexico; and Colorado. As such, the utility has had to make a compelling economic case for their plans, rather than relying solely on policymaker support.

How will Xcel get there? Over the next 10 years, the utility is pursuing a “steel for fuel” strategy, investing in solar panels and wind turbines. New wind and solar resources will allow for early retirement of coal plants, such as two Colorado facilities that Xcel is closing a decade earlier than previously planned. The utility plans to add 5,000 megawatts of wind capacity and 8,500 MW of solar capacity by 2030 while reducing use of coal and natural gas. Xcel also will maintain nuclear power plants, which provide zero-emission dispatchable energy as renewables account for a greater share of the utility’s power portfolio.

Xcel is focusing more on utility-scale solar projects, as it is currently a more cost-effective and scalable solution compared to rooftop solar. But “DERs will be a big part of the future,” Eves added, and Xcel will continue to support community and residential solar installation. Importantly, Xcel is also working with local communities near its coal plants to help them transition when plants are retired. In Pueblo, Colorado, for example, Xcel has received approval to retire two of three coal-fired plants but is “wrapping its arms around the community” with economic incentives – such as a fixed-rate electricity contract with a local steel mill – to ensure a net increase in jobs.

Notably, Xcel is targeting 100% carbon-free rather than 100% renewable. Eves stressed that solar and wind’s seasonal nature make it crucial to maintain nuclear generation assets, which currently account for 25% of carbon-free power in the Midwest and complement increasing penetrations of renewables. “Storage alone won’t move and store the terawatt-hours required for the whole country to move energy from spring and fall to summer and winter,” he said. Xcel acknowledges that further innovations and advances in new technologies like energy storage and hydrogen fuel will be necessary to get from 80% to 100% reduction in carbon emissions by 2050.

Xcel isn’t alone among industry leaders seeking to mitigate the disruption caused by decarbonization. At the SEPA Power Players Award Gala, winners included Sacramento Municipal Utility District (SMUD), which received the Public Power Utility of the Year award for expanding their Marketplace platform to provide energy-efficient products to low-income communities at free or reduced prices. And the Power Player of the Year award went to the late Ron Nichols, President of Southern California Edison, who not only worked tirelessly for clean energy and efficient electrification, but advocated for the development of programs that benefited residents in environmentally impacted communities.

The other Power Players Awards went to Powerley, which won Change Agent of the Year award for its home energy management platform; PECI, named Visionary of the Year for helping Tenino, Wash., assess its renewable and smart grid hosting capacity and plans; EnergyHub and Arizona Public Service received the Innovative Partner of the Year award for their collaboration on the utility’s Cool Rewards smart-thermostat demand response program; Southern Maryland Electric Cooperative, named Electric Cooperative of the Year for advancing several initiatives to promote clean energy, evolve their grid, reduce costs and increase customer satisfaction; and PPL Electric Utilities, which won Investor-Owned Utility of the Year for its successful implementation of an advanced Distributed Energy Resource Management System (DERMS).

Many Paths to Decarbonization

Following Eves’ keynote, a panel titled “How Fast Can We Decarbonize?” discussed some of the challenges related to decarbonization in greater depth. Mason Emnett, Vice President, Competitive Market Policy at Exelon, urged utilities to pursue multiple, technology-neutral pathways to decarbonizing – transportation electrification, expansion of wind and solar, retention of clean power including nuclear, and “not letting perfect be the enemy of good” by pushing for progress wherever possible even in the absence of comprehensive national policies.

Howard Learner, Executive Director of the Environmental Law & Policy Center, argued that decarbonization resources should be focused on energy efficiency, demand response and solar plus storage. “They provide value for the public and they can be sold as decarbonization that is affordable.” He was less enthusiastic about long-term investments in nuclear power plants and ambitious but difficult-to-execute plans like a proposal in Chicago to convert natural gas furnaces to electric. “How much solar plus storage, efficiency and demand response could you buy for that money?”

Armond Cohen, Executive Director of the Clean Air Task Force, pointed out the renewables boom is far from over – “the country is 8% wind and solar now, but there’s lots of headroom there.” But “at some point, you have to manage seasonal variation. Daily fluctuations can be managed with batteries, but not weeks- or months-long fluctuations.” More research is needed to find ways to complement wind and solar, he said – including technologies that may not seem viable today – zero-carbon fuel, for example. “Twenty years ago, hydrogen was almost a punchline – always 20 years away, and always will be.” That’s changing, he said, thanks to technological advances that could lead to feasible implementation of clean hydrogen gas for power generation.

The panel members agreed that regulatory reform is needed to align federal and state policymakers with power sector stakeholders in pursuing the innovation needed to create new tools for a decarbonized energy system.

Collaboration and Leadership are Key

Another panel, on innovation, emphasized the importance of collaboration in pursuing shared decarbonization goals. SMUD CEO Arlen Orchard and Scott Ungerer, founder and managing director of venture capital firm Enertech Capital, described their work together on the California Mobility Center, a joint initiative between SMUD, policymakers and research institutions to develop electric and autonomous vehicle technologies.

Ungerer applauded SMUD for taking the leap and leading the creation of the center: “As the electrification of transportation is taking place, a utility can sit back and sell electrons; play at a modest level of engagement –involved with the charging infrastructure; or be bold and understand that the electrification of transportation is the single greatest opportunity for the power industry to grow in a powerful way… it’s like going from candlelight to electric light.”

Orchard said SMUD’s proactive stance was driven partly by California’s progressive regulatory policies and decarbonization goals, but also by business factors.

“As we do decarbonization, how do we provide benefits to customers and how do we make money?” he said. “We have a $7 billion investment plan that includes $2 billion in electrification, split between transportation and buildings. Both build load and potentially provide grid benefits… but just plowing money into incentives for EVs was not the right way. We wanted to spur innovation and widespread adoption, not only of EVs but shared mobility, last-mile transportation in disadvantaged communities… and promote economic growth, job formation for the whole community. Every new customer is a source of revenue.”

The closing keynote speaker, former FERC commissioner and Arkansas Public Service Commission Chairman Colette Honorable, characterized the past several years as “the best of times and the worst of times” for progress on decarbonization, but offered an optimistic outlook overall and urged utilities, regulators and other stakeholders to push forward even when the outcome is unclear.

“So much is leadership,” she said. “Being willing to risk failure first to then succeed.”

Honorable pointed out that in April 2019, the U.S. generated more energy from renewables than from coal: 22% renewable, 20% coal. “The numbers don’t lie,” she said. “They speak to us about what is real, and what is possible, and what our potential can be if we are all aligned.”

As a longtime regulator at both the state and federal levels, Honorable encouraged stakeholders to keep lines of communication open regardless of the outcomes of any single decision: “The key now is for us to now focus, not just on the headline-grabbing work but even on the tedious or mundane work that no one will ever call you up on a stage and applaud you for – but the work that is essential… to meet these carbon-free goals.”

“Make sure you’re educating them, even when you don’t agree. Even when they make dumb decisions, keep going back. That’s your job, and it’s a job that never will be done. Think of it as job security!”