As 100% renewables goals proliferate, what role for utilities?
The momentum behind demand for renewables is growing; utilities lose if they ignore it and there is much to gain in planning ahead.
Utilities and state regulators take note: As of April 1, 114 U.S. cities have officially declared they want 100% renewables for their electric power needs in the next one to two decades. That will be a big change in electricity use.
And it doesn't stop there. Over 300 U.S. localities have committed to a renewables or climate change goal, according to the World Resources Institute (WRI), part of a group awarded $70 million from Bloomberg Philanthropies to help localities address climate change. And, led by local efforts, three states have committed to 100% carbon-free. Another dozen are moving that way. But while the goals are simple, the paths to achieving them are not.
Electric utilities can play a major role in achieving these commitments to renewables and greenhouse gas emission (GHG) reductions, leaders of the push for renewables told Utility Dive. Where utilities don't get involved, economic growth is lost and utilities lose customers "to nontraditional electricity providers," according to a new white paper on localities' clean energy goals from business consultant Deloitte.
"[U]tilities that step up can help form strategies that will offer them revenue growth through solutions that are affordable and reliable."
Deloitte U.S. and Global Renewable Energy Leader and paper co-author
Where utilities do get involved, collaboration leads to innovation that helps localities meet their goals more quickly and cost-effectively. And, through meeting their obligation to serve, utilities can add to their kWh sales and open up revenue streams in areas ranging from energy efficiency to transportation electrification.
Sierra Club's Ready for 100 Campaign, which is helping to drive the growth of 100% commitments along with WRI and others, encourages "proactive discussions" between cities and utilities, Program Executive Director Jodie Van Horn told Utility Dive. Collaborations have led to "decisions by utilities to move from traditional generation to renewables."
Collaboration is in the interests of all stakeholders, Deloitte U.S. and Global Renewable Energy Leader and paper co-author Marlene Motyka, agreed. Localities "are not going to achieve their commitments without their utilities," she told Utility Dive. "And utilities that step up can help form strategies that will offer them revenue growth through solutions that are affordable and reliable."
San Diego Gas and Electric (SDG&E) is playing a key role in San Diego's Smart City initiative, Motyka pointed out. And Xcel Energy is partnering with the newly-created community of Peña Station Next to implement "the best practices in sustainability and clean energy."
But, she added, the Georgetown, Texas, municipal utility, once a banner-carrier for the 100% renewables movement, is now revealing the challenges that come with that big change in electricity use.
A push for change
Electricity customers, corporations, localities, utilities and states have declared unequivocally they want change.
An August 2018 Yale University poll showed 77% of "American adults" support regulating carbon emissions and 63% support a requirement for at least 20% renewables. Over 60% said Congress should do more to address climate change, over 55% want their governors and local officials to do more and 68% want corporations to do more.
Corporations and utilities are responding. 2017's 23 Fortune 500 companies with 100% renewables goals grew to 53 companies in 2018, WRI reported. In 2018, large energy users' 6.53 GW of renewables procurement almost doubled the existing 8.93 GW, according to the Business Renewables Center. 2018's 1.1 GW of green tariff renewables deals between utilities and their corporate customers doubled the existing total achieved to date of 1.1 GW.
The list of utilities taking action is large and growing.
Michigan's Consumers Energy plans to cut carbon emissions 80% and obtain 40% of its power from renewables by 2040. Iowa's MidAmerican Energy expects, in 2020, to become the first U.S. utility to get 100% of its power from renewables. Xcel Energy plans to eliminate 80% of its GHG emissions by 2030 and 100% by 2050 across its eight state territory. Colorado's Platte River Power Authority plans to eliminate all emissions by 2030.
"Local demand has made 100% the new normal. As long as we have a climate denier in the White House, states are up next, and the appetite seems to be there. Mandates require utilities to establish pathways to the goals."
Jodie Van Horn
Executive Director, Sierra Club Ready for 100
Political leaders are also responding. At least 211 U.S. mayors have committed to work for 100% renewables by 2035, according to the Sierra Club. Many more local leaders have high renewables or climate goals.
Hawaii, California, New Mexico, Washington, D.C. and Puerto Rico legislatures have passed 100% clean energy mandates and at least 15 governors support a 100% goal, Ready for 100's Van Horn reported. At least 11 states have bills likely to pass in 2019 or 2020 that support a 100% mandate, she added.
Paths to 100
100% goals are increasingly popular and the paths to achieving them are beginning to emerge.
More ambitious state mandates are one of Ready for 100's next objectives, Van Horn said. "Local demand has made 100% the new normal. As long as we have a climate denier in the White House, states are up next, and the appetite seems to be there. Mandates require utilities to establish pathways to the goals."
Every locality's pathway is different way, she added. "The critical factor is having a planning process that is transparent and inclusive and engages residents and businesses in setting priorities."
Of the 114 U.S. cities with 100% commitments, six (Aspen, Colorado; Burlington, Vermont; Georgetown, Texas; Greensburg, Kansas; Kodiak Island, Alaska; and Rockport, Missouri) have met them.
"It is important for utilities to be at the table when communities make energy-related decisions because utilities know the potential costs and benefits of those decisions."
SVP Advocacy & Communications and General Counsel, American Public Power Association
"Five of the six communities that have reached 100% are served by public power utilities that are community owned, community governed, and empowered to make their own decisions," American Public Power Association (APPA) Senior Vice President for Advocacy & Communications and General Counsel Delia Patterson told Utility Dive.
"It is important for utilities to be at the table when communities make energy-related decisions because utilities know the potential costs and benefits of those decisions," American Public Power Association (APPA) SVP Advocacy & Communications and General Counsel Delia Patterson told Utility Dive.
The choice to go to high levels of renewables is between the communities and their utilities, but some APPA members remain concerned about goals that leave legacy assets stranded and could compromise reliability and cost, Patterson said.
Many utilities are working with localities in ways that will protect cost and reliability, Motyka said.
What utilities can do
Cities' and utilities' interests in renewables are aligning because both want to attract the large businesses whose climate goals require access to clean energy, according to Deloitte.
Some of the biggest U.S. electric utilities and electricity consumers are collaborating in these areas through the WRI-led Clean Power Council, which brings influential utilities and large energy consumers together to brainstorm solutions.
Utility-scale and distributed renewables are reaching "price and performance parity with conventional sources" and being used to power buildings and transport, Deloitte's paper reported. Utilities can shape this load and "derive new revenue streams from it" if they proactively engage with other stakeholders.
Utilities can help determine where renewables and electric vehicle charging expands on their systems so that it happens in ways that serve consumers and protects, or even strengthens, their distribution systems.
The Los Angeles Department of Water and Power and Xcel Energy both cited local demand in recent announcements to move to 100% renewables, Ready for 100's Van Horn said. And Georgia Power cited Atlanta's 100% renewables plan in its recent proposals for proactively investing in renewables.
To support the City of San Diego's smart renewable city initiative, SDG&E has deployed smart meters and other smart technologies "enabling cost-saving behavioral adjustments," the Deloitte report said.
But some of the more ambitious utility initiatives in the renewables space focus on planned communities.
SDG&E is also overseeing an "all-solar, net-zero, smart living community" in the Scripps Ranch suburb that reveals a major opportunity for utilities, Deloitte added. SDG&E will be able to "strategically deploy" electric vehicle charging infrastructure "as grid-enhancing DER."
The Xcel-operated Peña Station Next "advanced renewable microgrid" in a Denver suburb is demonstrating "how a multi-stakeholder, solar-plus-storage microgrid can support the grid in five different use cases," Deloitte reported. The microgrid provides "renewable integration through ramp control and time shifting, peak demand reduction, arbitrage, frequency regulation, and backup power."
But while the Xcel and SDG&E projects are proceeding, there can be impediments on the path to 100%.
"Energy is complicated and there are challenges and risks in going to 100% renewables."
Deloitte U.S. and Global Renewable Energy Leader and paper co-author
The Georgetown Utility Systems (GUS) 100% renewables experience started successfully. Long-term power purchase agreements (PPAs) for West Texas wind and solar projects allowed the city to become one of the first to be powered entirely by renewable generation. The city's 2008 electricity price of $0.114/kWh fell to $0.085/kWh after it went to 100% renewables in 2017, Deloitte reported.
Then there was trouble. GUS lost $6.84 million in projected revenue when prices for wind and solar dropped in the 2018 Texas wholesale electricity market, the utility announced in late December. As a result, it was forced to increase its 40,000 customers' electricity rate by $0.0135/kWh on February 1, which will cause a $12.82/month increase in the average customer bill through September.
"Energy is complicated and there are challenges and risks in going to 100% renewables," Motyka said. But, despite arguments that Georgetown's moves were unwise, "it is not a failure, it is a lesson learned."
Another impediment on the path to 100%, perhaps strengthened by Georgetown's experience, is an uncooperative IOU that wants to slow down the transition. Both Xcel Energy in Boulder, Colorado, and Black Hills Energy, in Pueblo, Colorado, continue to refuse to relinquish control of their distribution systems to municipal authorities that want the transition to happen faster than the utility believes is safe, affordable and reliable.
The Georgetown story
The Georgetown, Texas experience shows that a major and rapid transition in generation requires utility leaders to make clear to its customer base both the short term volatility and long term certainty of power markets.
Georgetown's average cost for power "is well within the City's current rates," GUS's FAQ reported. But its one solar, one legacy natural gas and two wind contracts provide more power than the city requires. Selling the excess into the Texas electricity market worked to Georgetown's advantage when energy prices were high, but the average 2018 market price was down.
"Georgetown's problem is short-term, not long-term, and could be resolved as soon as this year."
Chapter Conservation Director, Sierra Club Lone Star
The oversupply will be resolved by contractual provisions in 2028, but market prices will not remain depressed that long, the FAQ added. Last year's $6.84 million shortfall will be more than offset by a $10 million-plus annual savings beginning in 2021, when a contract with a local natural gas power plant expires.
And, though "energy-saving technologies" have lowered GUS's electricity demand, consumption is projected to grow as the region's population grows and economic expansion leads to more use of power.
"Georgetown's problem is short-term, not long-term, and could be resolved as soon as this year," Sierra Club Lone Star Chapter Conservation Director Cyrus Reed told Utility Dive. "We have a lot of growth, especially in that region of West Texas, because of oil and gas industry expansion."
Georgetown is not the only model for going to 100% renewables, Reed added. Austin Energy is taking a longer-term approach, with a 65% renewables by 2027 goal.
"To protect rates, we are moving more slowly than Georgetown did."
Manager of Market Operations and Risk Management, Austin Energy
"When Georgetown first went 100%, we got a lot of questions about why we couldn't do it, but now we are getting questions about the risks of 65% renewables," Austin Energy Manager of Market Operations and Risk Management Michael Enger told Utility Dive.
"We are confident we can get to 65% by 2027, but higher levels of intermittent resources may create more rate volatility," Enger said. "To protect rates, we are moving more slowly than Georgetown did. We are closing out contracts on thermal plants, and doing dollar cost averaging to take advantage of new lower priced renewables PPAs that offset older PPAs' higher costs."
Austin Energy is also diversifying procurements geographically. "Resources and load are constantly changing, creating changes in supply and demand and grid congestion," Enger said. "With our diversified portfolio, if pricing is depressed in one region of the grid, generation in another region will offset it."
Austin Energy does detailed planning to prepare local leaders and customers for any risks in the renewables levels they propose, he added. "We engage the City Council and other stakeholders early in the planning process, and work with them on their proposals, and we make it clear the future is unknown."
Planning for possibilities
As Georgetown and Austin show in different ways, a major transition in energy consumption can be smoother with planning and preparation. Georgia Power is one of the first major IOUs to proactively do that planning and preparation.
In its 2019 integrated resource plan, Georgia Power proposed procuring 950 MW of renewables for which it has no designated off-taker, spokesperson John Kraft told Utility Dive.
This customer renewable supply procurement program is modeled after 2016's successful commercial-industrial renewable energy development program, Kraft said. "Georgia Power is committed to working with customers, other stakeholders and its regulators to meet anticipated renewables demand, including the City of Atlanta's 100% goal."
"The transition from an old energy economy into the renewable age is not about ideology, it is about economics, but in the last year or two, those two things have aligned."
President, Guzman Energy
This new type of proactive planning is becoming more common, President of Guzman Energy Chris Riley told Utility Dive. "The transition from an old energy economy into the renewable age is not about ideology, it is about economics, but in the last year or two, those two things have aligned."
Guzman's procurement work with utilities, such as New Mexico's Kit Carson Electric Cooperative and Colorado's Delta-Montrose Electric Association, has shown that smart planning makes it possible in many markets to build a highly reliable, low-cost and cost-effective portfolio of 70% to 80% renewables right now, Riley said. The commitments Xcel Energy and others have made to get to 100% by 2035 or beyond "is a bet on where technology innovation and future prices will go. It is a good bet and we would take it."
Following the current technology curve, "we will absolutely be able to reach 100% cost-effectively in the next two decades," Ready for 100's Van Horn said. "We can work toward 80% renewables, which researchers say is now feasible, and plan for 100%, and improvements in technologies over that time will make it possible to get the rest of the way."
An earlier version of this story incorrectly said the World Resources Institute had received $70 million from Bloomberg Philanthropies to help localities with cimate and renewable energy goals. WRI is one of several partners that received funding as part of the American Cities Climate Challenge program.