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EEI panelists: Industry moving forward despite Paris, carbon rule fate

With a nod to how rapidly the power industry has transformed in the past, key stakeholders told executives attending the Edison Electric Institute's, or EEI's, annual meeting that the industry is going to continue decarbonizing no matter what the federal policy may be at the moment.

One of those officials, DTE Energy Co. Chairman & CEO Gerry Anderson, runs a utility that has been heavily dependent on fossil fuels for generating power.

"Our sector will be well served to get out in front of this [need to decarbonize] and let the world know that we've got this one and that we'll deal with this issue," Anderson said June 12 during the event, which is being held in Boston.

Center for Climate and Energy Solutions President Bob Perciasepe kicked off a panel discussion by recounting that using natural gas to generate electricity was against the law roughly 30 years ago. Today, 30% of the power produced in the country is generated by burning that fuel, he noted.

The use of renewables to produce power similarly has become much more mainstream, Perciasepe said, noting that five cities already only allow renewable generated power and 80 others, as well as many big companies, are planning to follow suit. He therefore suggested that the power industry can change very rapidly and in surprising ways.

Sue Tierney, Senior Advisor with the Analysis Group, said a factor that will drive rapid industry change going forward is the need to undergo a "deep decarbonization" of the U.S. economy. She said cutting U.S. carbon emissions 80% by 2050 will be necessary if the U.S. is to do its part to keep global temperatures from rising on average less than 2 degrees Celsius (or 3.6 degrees Fahrenheit). That number is important because climatologists predict that if the planet warms more than 2 degrees above its average temperature before the Industrial Revolution, when humans started burning fossil fuels, the results could be catastrophic.

While accomplishing the carbon reductions achieved to date has been relatively "easy," Tierney said, getting to 80% in reductions "is going to be hard," requiring a wide range of strategies. After reviewing more than four dozen studies on the issue, Tierney said she found several common themes, including the need for greater electrification of the U.S. economy (with that power produced by nonfossil fuels), energy efficiency measures and new technologies.

Anne Smith, Managing Director of NERA Economic Consulting, suggested that just as the world long ago transitioned from burning wood to burning coal to produce power, it can transition to using renewables to produce that power. She recalled that the needed transition began in the power sector only about 10 years ago, but has accelerated greatly and is expected to continue even without regulatory mandates. But to get to the 80% level of emissions cuts will require more regulatory pressure, she predicted.

Anderson said his utility has decided to do its part, announcing about a month earlier that it is committed to cutting its carbon emissions 85% from 2005 levels by 2050. In explaining the reasoning behind the decision, he recalled that EEI worked hard to gain a consensus on the provisions it would like to see included in the U.S. Environmental Protection Agency's Clean Power Plan, many of which were included in the final rule.

Now that the Trump administration has pulled out of the Paris Agreement on climate change and the EPA is in the process of rescinding the Clean Power Plan, Anderson said the company wanted to be transparent about its future direction and show leadership on the issue. He said his utility also determined that it could cut its carbon emissions dramatically and cost effectively.

"You can have a healthy economy and a healthy environment at the same time," Anderson stated.

Anderson lamented that the U.S. is being heavily criticized internationally now that it has withdrawn from the Paris accord, considering that the power sector has cut its carbon emissions 25% over the past decade. In contrast, he said Germany has only cut its power sector emissions by 4% and its power prices have soared over the same time frame.

"We've been doing a lot better job getting on board with doing than we have with committing, and the fact that we won't commit but are doing a lot is not carrying the day. So it's an odd state of affairs," Anderson stated.

Anderson said his utility also made its new commitment to comply with the wishes of its investors and customers. He noted that 15 of DTE's major investors and 80% of its customers wanted the company to move to a cleaner energy future, as long doing so can be accomplished affordably. He said the power sector moving as a whole in the same direction will help pull in other industries, including transportation and manufacturing, and that greater reliance on clean energy will benefit the power industry economically.

During a Q&A session, Tierney said states always have been actively involved in creating energy policy, and they will continue to do so even absent federal leadership.

Anderson agreed that the downward trend in carbon emissions will continue regardless of federal policy because a major reason coal-fired power plants are retiring is that they are old and inefficient. "You can't change a 70-year-old coal plant into a 20-year-old coal plant," he stated. "These assets are getting old, and making major investments in them simply doesn't make sense anymore."

In addition, Anderson said public sentiment has changed. He asserted that the only reason customers want to generate their own power is because "they see our power [as] not as good, not as clean, not as sustainable." He said if utilities give consumers what they want, they will lose all interest in generating the power themselves.

Finally, Anderson noted that while building more energy storage can be helpful, doing so also has issues. He reported that a study conducted on how much energy storage would be needed to allow Michigan to use nothing but renewable power found that the state would need between 250 and 300 pumped storage facilities.

Building that much storage would cost 20 times what the utility has now in assets, he remarked. The other choice would be to substantially overbuild renewables, which would also be very expensive. But using nuclear power and natural gas instead is much more economic, he concluded.

"I think we're falling victim to not doing the math on storage," Anderson concluded.