What are the top utilities for renewables and efficiency?
There is a wide range of performance even amongst companies in similar operating environments and market structures.
Renewable energy and energy efficiency are key to any transition to a clean energy future.
"Utilities have an important role to play" in dealing with climate change and deploying more renewables and efficiency, Dan Bakal, director of the Electric Power Program at Ceres, told Utility Dive in an interview. "They've got the relationship with the customer and they also have access to capital and they have also demonstrated they can deliver effective programs and services to customers."
Despite the clear promise of clean energy resources, utilities are deploying renewables and efficiency in fits and spurts amid concerns about stranded assets and grid reliability. But some utilities are deploying renewables and efficiency faster than others.
How utilities rank on clean energy
That's the focus of a new report from Ceres, a non-profit sustainability advocacy organization, and Clean Edge, a cleantech market research and consulting firm. The organization's Benchmarking Utility Clean Energy report ranks the 32 largest investor-owned electric utility companies according to renewable and efficiency deployments. These 32 companies and their subsidiaries accounted for about 68% of U.S. retail electricity sales in 2012, the report said.
“Our analysis shows that some utilities are beginning to deliver substantial amounts of clean energy and energy efficiency, while others are lagging,” said Mindy Lubber, president of Ceres.
The report found “wide disparities […] in the extent to which electric utilities currently deliver renewable energy and energy efficiency,” the authors explained.
Five of the 32 companies – NV Energy, Xcel Energy, Pacific Gas & Electric (PG&E), Sempra Energy (parent to San Diego Gas & Electric) and Edison International (parent to Southern California Edison – “accounted for nearly 54% of renewable energy sales,” according to the report. Renewables accounted for about 17-21% of these five companies’ retail electricity sales in 2012.
The top companies for energy efficiency were PG&E, Edison, Northeast Utilities, Pinnacle West (parent to Arizona Public Service), Sempra Energy, Portland General Electric and Puget Sound Energy, according to both Ceres' incremental and cumulative annual energy efficiency savings. Each of the top five companies for incremental energy efficiency savings "achieved savings of approximately 1.5% of retail electric sales, or higher, which EPA estimates is achievable in its recently proposed Clean Power Plan."
But the question remains: What are these companies doing to advance clean energy more than their peers?
What drives clean energy investment by utilities
Renewables and efficiency are “increasingly economically feasible options,” according to Ceres, and state policies are “a key driver” for investment in these resources. The top-ranked utilities are “typically based in regions with aggressive policy goals,” such as the ambitious state renewable portfolio standards set in the West and bold state energy efficiency targets set in the Northeast.
But while acknowledging that different regions have different characteristics, market structures and policy mechanisms, Ceres found that some utilities are simply doing more than others to advance clean energy. “Even among companies in similar market and regulatory environments,” the report reads, “there is a range of performance, suggesting that strong state-level policies are not the only factor in utility investment in clean energy.”
Increasingly, customers of all load shapes and sizes are demanding cleaner energy from their electricity providers. And if the utility won’t give it to them, the customer today has the option of replacing some or even all of their utility-delivered power – either through local power purchasing entities such as community choice aggregators in California or distributed generation such as residential solar leases.
“U.S. electricity consumers today face an expanding array of choices for managing their energy bills and obtaining targeted energy services in the quantity, quality, and locations that they desire,” former FERC Chairman Jon Wellinghoff wrote in an introduction to the report. “[T]hese consumer choices are transforming the U.S. electric energy landscape.”
“Traditional utilities and third parties will compete to offer consumers a range of customized energy-related products and services that extends far beyond today’s electricity service—and probably sooner than we think,” Wellinghoff added.
But while increasingly aggressive environmental policies and the growing demand for cleaner energy options are all piling pressure on the traditional utility business model, some utilities are making a name for themselves by standing above the rest.
A recent U.S. Department of Energy study found that “renewables could feasibly provide 80 percent of the nation’s energy by 2050,” Wellinghoff points out. “The main obstacle is not the price tag (which is comparable to a business-as-usual scenario) or the technical challenges, though both are considerable. Rather, it is largely a question of leadership, market structures and political will.”
Xcel Energy leads by example
Some utilities are simply doing more because they understand where the country is headed.
"How utilities actually deliver the energy efficiency programs and renewable energy to their customers is an important part of their business and will become an ever-increasingly important part of their business going forward," Ceres' Bakal told Utility Dive.
Look, for example, at Xcel Energy. Xcel owns four vertically-integrated, rate-regulated utilities that operate in eight states, with a generation mix that is made up of 46% coal but also over 5,000 MW of wind.
Like just about any other U.S. utility, Xcel wants the EPA to give utilities “enough time” to reduce emissions “in a way that is cost-effective for our customers,” CEO Ben Fowke said in an interview with EnergyWire. "We are in the middle of a major infrastructure refresh here at Xcel Energy, and I think I speak for the industry as well, you don't want to pile on [costs]. So you have to give us the value of time to transition."
But while all the usual concerns about reducing emissions remain, Xcel has reduced CO2 emissions by “more than 20% since 2005,” Fowke said. “In fact, we believe we’ll reduce carbon by 30% by 2020,” well ahead of EPA targets.
Fowke pointed to natural gas, nuclear and “increasingly more affordable” renewables as key to complying with the newly proposed EPA rules. The industry simply needs to work more closely with regulators and policymakers at the state level to get the rules right and turn the energy transition into a business opportunity, not an existential challenge, for utilities.
“We have these opportunities to start moving towards a cleaner, less-intensive carbon future and not hurt the economic pocketbooks of our customers,” Fowke said. “But we've got to do it in a fair, equitable and practical manner.”
Industry faces 'period of major transformation'
Despite the positive strides Xcel has taken in advancing its clean energy strategy, there is still more to be done.
"I give Xcel high marks on leadership on wind power, demand management and clean energy transmission," Michael Noble, executive director of Fresh Energy, a clean energy advocacy group in Minnesota, told EnergyWire. "[But] Xcel is stuck in neutral on rooftop solar, demand response in wholesale markets, electric vehicles and distribution system innovation."
Fowke acknowledged that Xcel will "increasingly have to incorporate distributed generation and other alternative forms of generation into our long-term planning mix" as customers demand choices. The issue, he said, lies in "getting the rules right."
"We still need that grid, and somebody needs to pay for it, and our rate design really hasn't evolved as quickly as the technology," Fowke explained. "Unless you're completely disconnecting from the grid, you need to have that grid there. You're using it just as much as somebody that is a more traditional customer. In fact, you're using it more because you're importing, exporting and you're asking the grid to do a lot of things."
Like any other utility today, Xcel faces tough choices as to how to invest in light of an increasingly uncertain future. "We're making decisions today that we're going to live with for 20 or 30 years," Fowke said. "It's kind of the nature of our business."
Xcel may be ahead of the game, but the every utility is beginning to deal with the same challenges. The industry "is entering a period of major transformation," said Jon Wellinghoff. "Ignoring this clean energy shift is dangerous for both the traditional utility business and the environment.”
So what about the utilities who are lagging behind on renewables and efficiency? Utility Dive will take a closer look at them – and why they're trailing utilities like Xcel Energy – next week.