Most major U.S. electric and gas utilities now have net-zero emissions or equivalent targets, an indication that an increasing share of the industry is making long-term plans for deep decarbonization even as the COVID-19 pandemic has cast a shadow on the broader economy.
As of Dec. 4, 21, or 70%, of the 30 largest U.S. electric and gas utilities had net-zero equivalent targets or were moving to comply with a similarly aggressive state mandate, according to a review of utilities' plans by S&P Global Market Intelligence.
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Since July 28, eight utilities have added or expanded their net-zero targets. WEC Energy Group, Inc., Entergy Corp., Ameren Corp., FirstEnergy Corp., AES Corp. and Vistra Corp. announced plans to achieve net-zero emissions by 2050.
For natural gas-related emissions, Dominion Energy Inc. moved up its timeline for achieving net-zero CO2-equivalent emissions for its gas operations to 2040, a decade ahead of its companywide target. Duke Energy Corp. tweaked its net-zero target to include net-zero methane emissions from its gas utility business by 2030.
Many of the largest U.S. utilities have been under pressure from investors seeking to ensure the companies are positioned to perform well financially amid climate-related transitional and physical risks. While many utilities are setting aggressive targets, most of them are also counting on major advances in related technologies — such as carbon capture and sequestration, advanced nuclear reactors, green hydrogen, longer-lasting battery storage, and carbon offset credits — to achieve their ambitious goals.
Amid all of this investor pressure, utilities are also grappling with the economic and customer-side usage impacts of COVID-19. Rather than drive attention away from climate change, the pandemic has heightened investor attention on the risks of climate change, said Dan Bakal, senior director of electric power at the sustainability-focused group Ceres. Ceres is also the coordinator behind the Climate Action 100+ investor initiative.
If any companies were thinking that climate change is "a fringe [environmental, social and governance] issue, it's becoming increasingly clear that a substantial portion of their shareholder base really wants to understand how they're managing climate and closing the gaps that they have in their alignment with the deep decarbonization goals that science demands," Bakal said in an interview.
The pandemic, as well as the aggressive climate campaign pledges of U.S. President-elect Joe Biden, has also shown companies need to rethink the long-term need for gas as a bridge fuel, S&P Global Ratings wrote in a couple of research papers published in September.
During the pandemic, "the U.S. power and utility sector has been largely resilient, but companies need to adjust strategies," Ratings wrote. "This is because we project gas-fired generation to peak in 2020 in view of the continuous shift to renewables, which could accelerate in case of a Biden win and his plan for a carbon-free power sector in 2035."
About the data
The list of the top 30 largest utilities by market cap has changed slightly since July. PG&E Corp. was added after it exited bankruptcy, which resulted in UGI Corporation being bumped off the list.
Market Intelligence also tweaked its methodology regarding whether a utility is deemed to have a net-zero target or equivalent goal for the purposes of this analysis.
Under the revised methodology, if a utility operates in a state with a net-zero equivalent mandate and has outlined plans for achieving the state's requirement, the utility is counted as having a net-zero equivalent target. As a result, PG&E Corp., Edison International and Sempra Energy, which are subject to and have described plans to meet California's mandate to achieve carbon-free electricity by 2045, are listed in the chart as having a net-zero target. However, some utilities listed as not having a net-zero target operate in states that have a net-zero equivalent target.