Decarbonization Strategies: Supporting Utilities Investment in Infrastructure
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- Feb 1, 2020 2:20 am GMTJan 27, 2020 1:29 am GMT
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This item is part of the Predictions & Trends - Special Issue - 01/2020, click here for more
Utilities are well positioned to point to legislation requiring investment in the decarbonization of generation, transmission and distribution, and end-use technologies.
Twenty-nineteen (2019), will be remembered as a year of action for governments around the globe, and citizens taking action to reduce carbon emissions to combat continued warming of the atmosphere. The Paris Agreement addressing greenhouse gas emissions (GHG) mitigation, agreed to in December 2015 and now representing a commitment of 195 countries participating in the United Nations Framework Convention on Climate Change (UNFCCC), calls for limiting the increase in global average temperature below 2 °C above pre-industrial levels. Governments throughout the world and states, on their own in the US, are enacting and proposing legislation consistent with the Paris Agreement, and codifying carbon reduction goals complete with timelines and processes and strategies for achieving them.
States in the US are providing financial incentives, disincentives, market development mechanisms, and technical and logistical support for decarbonization by businesses, industry, transportation, and consumers.
Some 23 states have adopted policies or laws to decarbonize electricity generation, while others are pursuing strategies to decarbonize all sectors of the economy, including transportation. Strategies include the enactment of legislation establishing carbon reduction goals with target dates and setting up processes to drive public and private investment decisions toward decarbonization technologies. Table 1 lists a sampling of states with aggressive laws and or polices addressing climate change and decarbonization, with several states highlighted herein.
Governments throughout the world and states, on their own in the US, are enacting and proposing legislation consistent with the Paris Agreement, and codifying carbon reduction goals complete with timelines and processes and strategies for achieving them.
California, Illinois, Hawaii, New York, and a handful of other states are recognizing the need to take action to address the growing threat of a warming climate. The processes being put in place, and the strategies called for, are intended to reduce carbon emissions while maintaining a reliable and resilient energy system.
In June 2019, New York Governor Andrew Cuomo signed the Climate Leadership and Community Protection Act (CLCPA), establishing a process and framework for decreasing greenhouse gas emissions, increasing electricity production from renewable energy resources, and improving energy efficiency. States in the US are providing financial incentives, disincentives, market development mechanisms, and technical and logistical support for decarbonization by businesses, industry, transportation, and consumers. Financial incentives often include tax credits, rebates, grants, and financing, often with low-cost loans.
Disincentives include strategies for internalizing the cost of carbon through a cap-and-trade program (California, and Northeast and New England states, and European Union), and requiring businesses, or having businesses volunteering to include various levels of a carbon tax in their financial and economic analysis when comparing investment alternatives. The implication being that an investment alternative with higher carbon emissions would have a higher cost, and therefore require a higher internal rate of return on investment. This is intended to capture the long-term carbon emission impacts of long-lived assets in the event a carbon tax is ever enacted̶̶ -- acting as a sort of insurance policy against what would turn out to be a much higher costs investment if a carbon tax is enacted. Disincentives can also include stricter environmental siting requirements or outright prohibiting investments in fossil fuel combustion technologies e.g., City of Berkeley, CA prohibition on new natural gas use in heating and cooling in new buildings.
Market development mechanisms include efforts to support increasing supplies of clean and renewable energy technologies and practices and reducing consumer and business demand for carbon emitting technologies and behaviors. These can include making mass transit more readily available, easier, and more affordable, and increased support for vehicle electrification and charging infrastructure. These do not always need to take the form of financial incentives, as they can include increasing awareness of the benefits of electrification through marketing and public advocacy programs and educational initiatives.
Identifying the most cost-effective locations for placing electric vehicle charging stations along major roadways with enough utility distribution infrastructure to support them would go a long way in accelerating time to market for electrifying transportation.
Technical and logistical support can take many forms. Providing whole building energy audits at the time of building occupancy and identifying all cost-effective energy efficiency, demand reduction, and distributed energy resource potential to building owners could go a long way in encouraging investments in energy reduction technologies and renewable energy self-generation. Take for example, government identifying preferable sites for locating small- and large-scale renewable energy resources̶ -this would eliminate the need for multiple developers to conduct duplicative studies to find the best locations for these recourses, thereby reducing the up-front cost for developers. Identifying the most cost-effective locations for placing electric vehicle charging stations along major roadways with enough utility distribution infrastructure to support them would go a long way in accelerating time to market for electrifying transportation.
On December 11, 2019, the European Commission released a plan to drive its 28 countries in the European Union (EU) toward “climate neutrality” by 2050, meaning that carbon emissions will have no “net” on global warming. Any remaining emissions in 2050 would be offset by sequestration strategies resulting in a net-zero emission profile. EU countries make up the world’s largest economic bloc and rank third behind China and the United States in contributions to climate change. Previously, under the Paris climate agreement, the European Union committed to curbing its emissions 40 percent below 1990 levels by 2030 and set no definite goal for 2050. The European Green Deal raises the 2030 target to 50 percent reductions and sets the 2050 target at 100 percent. It’s a drastic increase in climate change ambition from the bloc.
EU countries make up the world’s largest economic bloc and rank third behind China and the United States in contributions to climate change.
California for years has been the most aggressive state pursuing carbon reductions through legislation across all sectors of the economy, dating back to 1998. California is the first state in the US to require all newly built single-family homes and multifamily residences of up to three stories to generate part of its electricity load through use of solar. Provisions exist for community solar to serve multiple residences’ solar needs from a single solar installation.
In July 2019, the city of Berkeley, California passed a city ordinance prohibiting the use of natural gas in most new buildings, effective January 1, 2020. Many more cities are considering a similar ban. The Berkeley City Council had evaluated a proposal for requiring installations of new cooking, water heating, and or building heating systems to use technologies which do not burn natural gas, and subsequently settled on phasing out gas water heater systems in new buildings and requiring new buildings to use electric heat pump hot water heaters (requiring an amendment to the state energy code). The effect of the ordinance when fully implemented is that builders will be prohibited from applying for permits for land uses that include gas infrastructure on the customer side of the meter (gas piping to heat water, space, food, etc.).
Illinois Governor J.B. Pritzker signed a law in August 2019 repealing the Kyoto Protocol Act of 1998, which was perceived as limiting state action to curb greenhouse gas emissions, thereby allowing Illinois to take its own actions to slow climate change. Earlier in the year, Governor Pritzker signed an Executive Order (EO-2019-06) joining the US Climate Alliance (group of states committed to reducing GHG emissions consistent with the United Nations Paris Agreement, agreeing in part to take actions that advance the goals of the Paris Agreement, tracking and reporting on progress made, and adopting new and advancing existing policies to reduce carbon emissions and promoting clean energy deployment.
In 2017 Hawaii became the first state in the nation to enact legislation committed to implementing portions of the Paris Agreement.
In July 2017, Hawaii Governor David Ige and Hawaii’s county mayors and representatives gathered for the signing of two bills and a mayors’ agreement that support the commitments and goals of the Paris Agreement, making Hawaii the first state in the nation to enact legislation committed to implementing portions of the Paris Agreement. SB 559 (Act 032) expands strategies and mechanisms to reduce greenhouse gas emissions statewide in alignment with the principles and goals adopted in the Paris Agreement, while HB 1578 (Act 033) established the Carbon Farming Task Force to identify agricultural and aquacultural practices to improve soil health and promote carbon sequestration. Coupled with Hawaii’s aggressive clean and renewable energy goals and the State’s successes, Hawaii is a worldwide leader for demonstrating the power of conviction, driving toward decarbonization.
Codifying decarbonization goals in law and creating processes and outreach for partnerships between energy providers, customers, and developers will ensure real progress is made.
As written in the July 2019 issue of this column, aspirations for decarbonization are laudable and necessary for envisioning change that is possible and working toward goals of the Paris Agreement. Plans and goals are laudable and necessary for driving change. Public policy and government support through legislation provide the foundation for real change. Codifying decarbonization goals in law and creating processes and outreach for partnerships between energy providers, customers, and developers will ensure real progress is made.
Alignment among diverse stakeholders, whether climate-change believers or deniers, and a clear call to action are necessary to bring about the positive economic, environmental, and social change the United States and like-minded countries are already benefiting from, through investments in decarbonization technologies.
It’s clear that to achieve aggressive decarbonization goals significantly more public and private investment is needed. Alignment among diverse stakeholders, whether climate-change believers or deniers, and a clear call to action are necessary to bring about the positive economic, environmental, and social change the United States and like-minded countries are already benefiting from, through investments in decarbonization technologies. Utilities are well positioned to point to legislation requiring investment in the decarbonization of generation, transmission and distribution, and end-use technologies. The investment needed to support decarbonization while maintaining the integrity and resiliency of our energy systems is large, and policy makers and regulators need to play their part in providing a regulatory environment that supports such investment.
LAW: California’s cap-and-trade program through 2030[i]
To reduce GHG emissions through the establishment, administration, and enforcement of the California Greenhouse Gas Cap-and-Trade Program by applying an aggregate greenhouse gas allowance budget on covered entities and providing a trading mechanism for compliance instruments.
LAW: AB 617, the Community Air Protection Program (CAPP)[ii]
To reduce exposure in communities most impacted by air pollution by working closely with local air districts, community groups, community members, environmental organizations, and regulated industries to develop a new community-focused action framework for community air protection and emissions reduction.
LAW: AB 262, the Buy Clean California Act[iii]
The world’s first legislative action addressing carbon emissions from imported manufacturing materials. Requires state agencies and companies to consider the embedded carbon emissions, reduce carbon emissions and force their suppliers to clean up their operations from the factory to the end customer.
After January 1, 2022, the program will be reviewed and adjusted and every three years thereafter
LAW: SB 100[iv]
To achieve 60 percent renewable energy by 2030 and 100 percent carbon-free energy by 2045 with economy-wide carbon neutrality. In long terms it also requires cleaning up transportation and industrial processes.
2030 - 2045
LAW: SB 6599, the
Climate Leadership and Community Protection Act (CLCPA)[v]
To progressively achieve 100 percent carbon-free electricity by 2040 and net-zero emissions economy-wide by 2050. GHG emissions from all anthropogenic sources to be reduced 100 percent over 1990 levels by 2050, with an incremental target of at least a 40 percent reduction in climate pollution by 2030 to avoid the most severe impacts of climate change. To be in line with the Clean Energy Standard (CES) and a minimum of 35 percent of all state climate and clean energy spending, including funds from the Regional Greenhouse Gas Initiative (RGGI), the state’s Clean Energy Fund (CEF), and any future initiatives established by this program will go to disadvantaged communities.
2040 - 2050
LAW: Int. No. 1253-C, Commitment to achieve certain reductions in greenhouse gas emissions by 2050[vi]
Requires large buildings to reduce GHG emissions 40 percent by 2030 and 80 percent by 2050. Addresses large buildings over 25,000 square feet and phases in caps on greenhouse gas emissions starting in 2024. Beginning in 2030, intensity limits will fall and approximately 75 percent of buildings will have to make improvements. Emissions caps will fall again in 2035, 2040 and by 2050. Houses of worship and multi-family buildings with rent-regulated units will be required to carry out lower-cost prescribed energy-saving measures.
Phased from 2024 - 2050
SB 5116, supporting Washington's clean energy economy and transitioning to a clean, affordable, and reliable energy future[vii]
To phase out coal by 2025; achieve 80 percent clean power sector emissions by 2030; and reach 100 percent clean power by 2045. Reducing GHG emissions economy-wide, increasing energy efficiency in buildings and promoting transportation electrification. It also includes incentives for low-income energy assistance programs and direct customer ownership in distributed energy resources.
To gradually reduce GHG emissions 26 percent by 2025, 50 percent by 2030 and 90 percent by 2050. Setting the reduction of GHG for large investor-owned utilities by 80 percent below 2005 levels by 2030 and targeting 100 percent clean electricity by 2040. Includes provisions ranging from the integration of the social cost of carbon in utility decision-making and electric vehicle infrastructure to new building codes and energy efficiency standards for appliances.
2025 - 2050
HB 623, Renewable Portfolio Standards and Clean Energy Initiative[x]
Increases renewable portfolio standards to 30 percent by the end of 2020, 70 percent by the end of 2040, and 100 percent by the end 2045 and becoming carbon neutral. Also requires evaluation of the impact of renewable portfolio standard on the energy prices offered by renewable energy developers and the cost of fossil fuel volatility.
2020 - 2045
HB 1578, Relating to climate change[xi]
Establishes the Carbon Farming Task Force to identify agricultural and aquacultural practices to improve soil health and promote carbon sequestration in the State's agricultural and aquacultural sectors.
LAW: SB 559, Relating to climate change[xii]
Expands strategies and mechanisms to reduce GHG emissions statewide in alignment with the principles and goals adopted in the Paris Agreement. Also includes setting goals and strategies for mitigation and adaptation, identifying vulnerabilities across all sectors, assessing existing efforts and capacity of existing resources to address goals, and tracking and reporting on progress.
LAW: S.P. 457 - L.D. 1494, An Act To Reform Maine's Renewable Portfolio Standard[xiii]
To increase consumption of electricity in the State from renewable resources to 80 percent by 2030 and to 100 percent by 2050.
2030 - 2050
LAW: S.P. 565 - L.D. 1711, An Act To Promote Solar Energy Projects and Distributed Generation Resources in Maine[xiv]
Creates two separate but complimentary incentives, one for commercial and institutional customers and another for community-shared projects, with prices set competitively and declining in subsequent procurements. The bill removes the net energy billing account and size cap; requires that community-shared projects serve low- and moderate-income customers; encourages development of landfill and brownfield projects and may incentivize the pairing with energy storage.
From 2020 onwards
LAW: S.P. 550 - L.D. 1679, An Act To Establish the Maine Climate Change Council To Assist Maine To Mitigate, Prepare for and Adapt to Climate Change[xv]
Establishes the Maine Climate Change Council to assist Maine to mitigate, prepare for and adapt to climate change; revises the required GHG emissions reductions and updates the state climate action plan every 4 years after December 2020.
From 2020 onwards
SB-489, the Energy Transition Act[xvi]
Requires 100 percent carbon-free electricity by 2045. Renewable energy shall comprise minimum 40 percent of each public utility's total retail sales of electricity to New Mexico customers by January 2025, minimum 50 percent by January 2030, minimum 80 percent by January 2040 and 100 percent by January 2045.
2025 - 2045
SB-358, An act relating to renewable energy[xvii]
Requires the state to generate 50 percent of its electricity from renewable resources by 2030 and aim for 100 percent carbon-free resources by 2050. Goal to add over 1 GW of solar and 100 MW of battery storage to its generation mix by 2023.
S-3207, An act concerning the reduction of greenhouse gases and amending (and supplementing) P.L.2007[xviii]
Reduces climate pollutants and limits the level of Statewide GHG emissions and GHG emissions from electricity generated outside the State but consumed in the State, to the 1990 level or below those emissions by the year 2020, and reduces those emissions to 80 percent below the 2006 level by the year 2050. Includes development of comprehensive strategy to reduce emissions of short-lived climate pollutants in the State.
2020 - 2050
District of Columbia
LAW: B22-0904 (Law 22-257), Clean Energy DC Omnibus Amendment Act of 2018[xix]
Increases the Renewable Portfolio Standard to 100 percent by 2032 and mandating 100 percent of the electricity sold in State come from renewable sources. Doubles the required amount of solar energy deployed, makes significant improvements to the energy efficiency of existing, provides energy bill assistance to support low- and moderate-income residents, requires all public transportation and privately owned fleet vehicles to become emissions-free by 2045 and funds the DC Green Bank to attract private investment in clean energy projects.
To 2032 (2045)
Sets energy-saving targets and approaches energy efficiency alongside renewables in response to climate change and resilience challenges. Establishes to save 30 percent of electricity by 2040 and to meet 100 percent of its supply with renewable energy by 2050. Also aligns utility incentives with expansion of efficiency and other clean resources.
EO 38, Relating to Clean Energy in Wisconsin [xxii]
To achieve by 2050 that all electricity consumed in the State will be 100 percent carbon-free and to fulfill carbon reduction goals of the 2015 Paris Climate Accord. Also includes developing of energy efficiency, sustainability and renewable energy standards for all new and excising state facilities and office buildings.
The new Path to Clean Energy proposal includes legislative package that would put Minnesota on a path to 100 percent clean energy by 2050. The proposal requires utilities to prioritize saving energy through efficiency upgrades while investing in clean energy sources over conventional fossil fuel when a utility purposes a project to generate new electricity.
 Berkeley City Council. (July 9, 2019). Action Calendar: Adopt an Ordinance adding a new Chapter 12.80 to the Berkeley Municipal Code Prohibiting Natural Gas Infrastructure in New Buildings.