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US net-zero targets require earlier coal retirements, gas emissions elimination: Deloitte

Highlights

About 40% of US IOUs have net-zero emission goals

'Zero percenters' still have no clock for 87% of coal retirements

CCS seen as key to low-carbon strategy by 34.8% of execs

Houston — The current and scheduled pace of coal-fired power plant retirements needs to speed up in the next few years and emissions from their gas-fired counterparts must be eradicated for US companies to reach their decarbonization goals, Deloitte said in a report released Sept. 21.

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In a report titled, "Utility Decarbonization Strategies: Renew, Reshape, and Refuel to Zero," Deloitte said "the math is not adding up across the phases required to achieve decarbonization in the next 30 years," and it asked, how can utilities close that gap and at what cost?

Deloitte said the current energy transition is the first transition to respond to "a global imperative:" limiting potentially catastrophic global warming to 1.5 degrees Celsius above pre-industrial levels — "a target that requires achieving net-zero carbon emissions by 2050."

It said investor-owned utilities are expected to have the greatest impact on a full transition as they account for the most electricity sales and serve three out of four power customers.

It said that out of 55 parent IOUs in the US, 43 have emission reduction targets and 22 have net-zero or carbon-free electricity goals.

Currently, the US power grid relies on carbon-emitting fossil fuels for 63% of its generation, Deloitte noted, while the US Department of Energy's Energy Information Administration "projects that the sector's emission reductions will plateau, rather than accelerate as would be needed to achieve full decarbonization by 2050."

The gaps

In the short-term, which Deloitte said is between the years 2020 and 2030, utilities "must focus on retiring or converting fossil fuel generation" and on deploying solar and wind that is paired with storage in order to provide "greater system flexibility."

Deloitte notes that "zero percenters" need a much faster pace of deployment of solar and wind resources if they are going to meet their targets.

These utilities must also speed up their planned coal retirements. The report said: "There are significant gaps between decarbonization targets and the scheduled fossil-fuel plant retirements, renewable additions and flexibility requirements."

It calculated that zero-percenters have yet to schedule the retirement of 87% of their coal capacity.

There is also a "natural gas retrofit gap," according to Deloitte.

It said that gas plant construction has been "booming" to fill the gap left by current and anticipated coal retirements, and has already replaced most of the retired coal to date.

However, gas-fired generation is "facing supply-side competition from renewables and demand-side pushback as a growing number of cities consider bans on new natural gas hookups, gas plants risk becoming stranded assets."

Deloitte said lawmakers and regulators in Virginia and New Mexico are "already pushing utilities to revise submitted integrated resource plans because they are too reliant on natural gas."

The report notes that the levelized cost of energy range for solar is lower than that of gas-fired peaking units, "as is the LCOE range for wind vis-à-vis combined cycle gas turbine plants."

Many still hoping for CCS

Helping with the fossil-fuel "fade," as Deloitte calls it, is the need to see progress on carbon capture and storage technology, as well as battery storage, pumped storage and compressed air.

Over the mid-term, between the years 2030 and 2040, utilities could "leverage demand response to avoid carbon electrons from fossil fuel peakers by shaving and shifting demand." They could also help customers increase energy efficiency.

Longer term, between the years 2040 and 2050, emerging technologies including thermal storage, green hydrogen and direct air capture "likely will be key to closing the last 20%" on the way to net-zero.

A US clean energy stimulus package and carbon tax could "change the pace of development and deployment of technologies and their costs."

Deloitte noted that "evolving carbon reduction technologies" such as carbon capture and storage could play a key role, "but a significant financing gap remains for the cost-effective deployment of CCS."

Deloitte said 34.8% of the power and utility executives it surveyed picked CCS as the technology they believe will enable a low-carbon future strategy.

The report noted, however, that the country's only commercially operational CCS project attached to a coal plant — the Petra Nova Project at NRG's W.A. Parish Generating Station near Houston — was suspended in May after falling short on economic viability.

In addition, CCS technology cannot fully abate emissions — the current potential is up to 90%, the report said — and does not address methane leaks.