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US electric power companies are expressing increasing confidence
that they can eliminate 70% to 80% of their carbon emissions by
2030, but say a technology gap will have to be bridged for them to
reach full carbon neutrality by 2050.
Data compiled by IHS Markit has identified more than 20
utilities and independent power producers with major US operations
have made carbon reduction and net-zero promises (see table at end
of article). Together, the utilities represent approximately 51% of
US power sector CO2 emissions in 2019.
The earliest pledges made by the companies date back to
2015-2016, and the most recent commitments and updates were made in
April and May 2021 during first-quarter corporate earnings
calls.
"In the last three years you've seen more utilities making these
types of announcements, and companies that had previously announced
easier goals are ratcheting up their ambitions," said Mark
Griffith, IHS Markit senior research director, North America Energy
Strategy.
By now, almost every US utility has made commitments, and many
are now on their second iteration, said Emily Fisher, general
counsel for Edison Electric Institute (EEI), the trade group for US
investor-owned utilities. "The last time we calculated, more than
90% of the generation owned by our members is covered by a forward
commitment on emissions, in some form," she told IHS Markit.
Griffith attributes the recent upgrades in commitments to two
factors. "First, there are higher expectations from Wall Street,
state regulatory commissions, and customers; utilities are
responding to their business environment," he said. "Second, it's
getting easier to do. Renewable energy's all-in costs have gone
down in the last few years. So, building more grid-scale solar and
more wind plants has become less of a cost burden to
utilities."
Public policy has been influential as well, said Fisher. "Some
states have had clean energy standards in place for a long time,
and this has helped lead to the precipitous decline in the cost of
some renewable energy technologies … and investment in them," she
said.
Targets
The most recent announcement from a US utility of a new climate
goal came on 6 May from Tennessee Valley Authority
(TVA), which said it's aiming for net-zero carbon emissions by
2050. TVA says it has the sixth-largest generation capacity in the
US at 35 GW, centered in Tennessee and serving adjoining
states.
Once one of the largest coal plant operators in the US, TVA's
plan would require closing all of its coal units but maintaining a
natural gas-fired fleet to meet its customers' needs. "We can get
to our 2035 goal of 80% carbon reduction with technology that
exists," Jim Hodges, public information officer, told IHS Markit.
"But net zero is an aspirational goal, and we need technological
advances in carbon capture and storage, energy storage, and
advanced nuclear power to make that happen."
Companies with the most accelerated plans include Avista, which has pledged
net-zero carbon by 2027, and Eversource Energy, which has
pledged net zero by 2030. For both companies, the path is
comparatively simple, Griffith explained, due to the nature of
their emissions compared with those of others in the power sector.
Eversource's New England operations are in power distribution
company, not generation, so its GHG emissions come from its truck
fleet and other activities that are relatively easy to decarbonize.
Avista, which serves customers in Idaho, Oregon, and western
Washington, already has substantial hydro, biomass, wind, and solar
resources.
But for most operators, the path is more difficult, thus leading
to the typical 2050 commitment.
Some utilities with a 2050 deadline are further on their way
than others. For example, Xcel Energy says it had reduced
its carbon emissions by 51% from its 2005 baseline by the end of
2020, and it is investing in projects that will enable it to reach
an 80% goal for 2030. But just like TVA, Xcel said full carbon
neutrality as it serves customers in the upper Midwest, Colorado,
New Mexico, and Texas is another proposition altogether. "Reducing
the remaining 20% of carbon emissions to deliver 100% carbon-free
electricity by 2050 will require technologies not yet commercially
available," it said.
FirstEnergy, which operates in
Ohio, Pennsylvania, and West Virginia, also is ahead of schedule.
It said that through November 2020 it had reduced CO2e emissions
approximately 80% from 2005 levels through retirements of
coal-fired units, selling fossil fuel generation, and implementing
technology such as scrubbers on coal units.
Southern Company said that in
2020, its GHG emissions were 52% below 2007 levels — in other
words, the company met its 2030 interim target a decade early.
Serving customers in Alabama, Georgia, Mississippi, Tennessee, and
Virginia, as well as Illinois through Nicor Gas, it issued a
statement that underlines the importance of vigilance in
maintaining emissions reductions. "While emissions reductions may
fluctuate around 50% the next few years depending on demand,
weather and other factors, the system expects to sustainably
achieve 50% reduction or greater by 2025, if not sooner," it
said.
The last 10% or 20%
IHS Markit released an assessment of the carbon reduction goals
of the largest power sector emitters in the US in January, and it
also identified a gap of about 20% to reach full net zero.
The analysis, authored by Griffith, forecast the decline in
power sector emissions from 2005 will be about 57% by 2030 and 78%
by 2050 (in the baseline "Planning Case"). Griffith added that he
believes the true gap could be lower, in the range of 5-10%,
depending on technological advances.
"No pathway to carbon neutrality is particularly cheap, and
that's why you see the commitments conditioned on the cost being
reasonable and technology being available," Griffith said. "It's
more a matter of cost and political will than absolute technology
evolution."
If carbon emissions from purchased and burned natural gas can be
removed through carbon capture, that's one option, but the
technology is costly and not readily available. Otherwise,
utilities can go all-renewable with a combination of wind, solar,
and battery storage—but that's an expensive proposition as
well.
"The evolution of technology is never linear; it's hard to
predict," said EEI's Fisher.
Similarities and differences
A deeper look at the commitments from the largest US utilities
shows agreement on some measures of progress, but some divergence
as well.
For example, most companies identified CO2 reduction as their
goal, though four operators (Dominion, Eversource, National Grid, and Southern Company) said that
total GHG emissions are their target.
The operators diverge on which sources of carbon or GHGs they
are pledging to reduce. Some companies are promising to limit only
their direct emissions from their own operations or units in which
they have a controlling share, known as Scope 1. Yet, other
companies also are promising to decarbonize the emissions of
purchased electricity, heat, and steam (Scope 2).
None to date have promised net zero for the full supply chain
and their corporate investments (Scope 3), according to EPI.
The utilities differ also on the baseline year from which they
are counting their interim target. National Grid looked back to
1990, though most utilities selected 2000 or 2005. (Keep in mind
2005 is the baseline that the US is using for its nationally
determined contribution under the Paris Agreement for its new
target of total economy reductions of 50-52% by 2030.)
The levels of reductions sought by the interim year vary as
well. For those companies that identified a mid-term goal in 2030,
the most common rate of reduction is 50%, though a few companies
such as American Electric Power (70%), CMS Energy (80%), and Evergy
(70%) picked higher goals.
Talk vs. action
Utilities' net-zero commitments are being accompanied with more
frequent and comprehensive disclosure about their emissions, as
they enhance their overall environmental, social, and governance
practices.
In those disclosures, many of the companies point out that they
are on track for their interim goals, but EPI said that this misses
the bigger picture of President Joe Biden's stated goal for all US power production to be net zero
by 2035. "Beyond NIPSCO, Xcel, WEC, and Consumers Energy in
Michigan, all other utilities that EPI assessed are intending to
decarbonize at a pace that is less than half of what would be
required to meet the incoming Biden administration's goal," it said
in a report in December
2020.
Without commenting directly on Biden's 2035 net-zero goal,
Fisher said EEI has been working with Congress and the
administration to accelerate power sector carbon reductions. EEI
has identified five priority technologies for which it's seeking
research, development, and deployment support: hydrogen, carbon
capture and storage, advanced nuclear, advanced renewables, and
battery storage.
Just as critically, it's seeking help from the administration,
Congress, and the states to streamline permitting of power
transmission lines. "The challenges for transmission are
underappreciated," Fisher said. "As we build more renewable
capacity, we need more transmission lines. It makes the system more
affordable and increases reliability."
Today, it takes, on average seven to 10 years to build a new
transmission line, from conception to completion, she said.
Biden's 2035 goal is not backed up at the moment with
legislative mandates nor specific incentives to support the
transition, but Griffith said that having a formal federal net-zero
policy in place would change the landscape significantly from the
current situation of mostly voluntary (and therefore nonbinding)
promises.
"If I was running a utility or a big energy consumer that's made
a net-zero commitment -- like Amazon or Facebook -- I'd be
interested in a national policy," Griffith said. "That's certainly
the next step. It would be legally binding and really set the
national direction and, hopefully, level the playing field by
holding all companies to the same standards. That would be a
different environment."
Below is a table that summarizes the key aspects of each
utility's pledge.
