Decarbonization is a topic that presents dramatic long-term change for electric utilities. The goal to achieve significant GHG emissions reduction over a 10- to 30-year horizon also requires utility leaders to take a portfolio-based view of GHG reduction. Early efforts to decarbonize suggest a need to look more closely at a broader spectrum of initiatives to reduce carbon while optimizing around cost and viability, and prioritization of a portfolio of initiatives that have the highest overall potential for attainment.
Utility planners have a history of excellence at contingency planning to ensure that transmission, distribution, and generation facilities are driven by informed resiliency strategies, operational efficiency, and risk mitigation. This area of excellence forms a basis for new thinking around decarbonization planning, one that accelerates near-term strategies rather than a deferred strategy that pushes cost and operational change of decarbonization into the future. Across the country, there are strong examples of utilities that are leveraging the success of T&D planning to guide a decarbonization portfolio strategy.
According to the U.S. Energy Information Administration, the U.S. electric grid relies on fossil fuels for 60% of generation. Many utilities are on a path to reduce fossil fuel-based electricity generation that they own or procure. With electricity generation accounting for 25% of GHG emissions, reduction of fossil-fuel based generation is a critical baseline effort, but electric utilities can and do play a leadership role in a significant part of the remainder of causes of GHG emissions. Utilities are tackling the challenge of decarbonization at many levels. For example, the GHG-contributing category of transportation contributes 29% of U.S. carbon emissions according to the EPA.
Transportation electrification's role in decarbonization
Utility efforts to support the conversion of a consumer-owned and commercial-owned vehicles from gas or diesel to electric is critical to a decarbonization portfolio approach to reducing GHG emissions. Because one of the biggest barriers to commercial electric vehicle (EV) adoption is the charging infrastructure, any efforts to streamline and accelerate EV charging power infrastructure is a highly effective contribution to a decarbonization portfolio.
Electric utilities are the clear enablers of power delivery for EV charging infrastructure and are increasingly lowering the economic barrier to EV charging infrastructure through "Charging Make-Ready" programs which have a quantifiable positive impact on decarbonization. Take for example Con Edison's PowerReady program where they provide incentives to offset EV charger costs, or Southern California Edison's Charge Ready program that not only covers significant portions of the make ready cost but will even provide design and construction services to support their clients.
With a decarbonization portfolio perspective, electric utilities across the country are getting increasingly innovative to target industrial as well as commercial and residential customer segments that contribute 36% of GHG. Examples of this include utility collaborations with airports, ports, rail, and federal facilities, with initiatives to enable "beneficial electrification" of existing fossil-fuel equipment and technologies ranging from building heat to industrial cranes to warehouse forklifts. As these initiatives drive deeper into the ecosystem of fossil fuel-using vehicles, equipment and technologies, electric utilities are increasingly stepping into a leadership position, acting as an active advisor to advance the decarbonization portfolio mindset across their entire customer base.
The result is a force multiplier that engages customers and utilities in a beneficial collaboration that creates a win-win scenario where customers reduce costs and lower carbon emissions while at the same time aligning their use of electric power to a utility's resiliency objectives. In the case of EVs and charging, this is called "managed charging," where education, outreach, and intelligent rate design incentivize customers to charge at optimal times of the day where the grid has adequate capacity (also, called "off-peak"). Investing in Charging Make-Ready programs, paired with managed charging tactics, opens the door for utilities to leverage EV charging as a grid stabilization measure which brings about multiple benefits: effective grid resiliency planning, GHG reductions, and potential customer financial benefits (through long-term downward rate pressure).
Electric utilities are also turning their attention to building electrification as another decarbonization strategy where similar tactics could be deployed. State and local mandates, such as the recent passage of the 2022 California Building Standards, are paving the way for further opportunities for utilities to expand their decarbonization portfolio approach.
Evaluating these benefit streams at a portfolio level is key for the utility to make effective decisions in accelerating our path to decarbonizing our economy. A comprehensive portfolio approach to achieving ambitious GHG reduction goals is the pathway to a more sustainable future.
How utility, corporate, and public sector are taking action
On October 19 and 21, West Monroe will be hosting a discussion where utility, government, and corporate industry leaders will engage in a series of insightful discussions around decarbonization and its impact on commerce, infrastructure, and society. Sign up to join the conversation.
If you are interested in learning more about what is happening in the industry related to decarbonization, please feel free to contact authors Andrew Dillon and Carolyn Weiner for a more detailed discussion.