by Darren Springer, COO BED Despite federal rollbacks on climate policy, we still have a path toward impactful climate action. Through the transformation of a 19th Century industry – the electric utility sector – into a 21st Century catalyst for beneficial change, we can make a meaningful impact on the fight against global climate change. In a forthcoming article in the William & Mary Environmental Law and Policy Review, I outline how smartly-regulated utilities, coupled with innovative technologies, can move us more quickly toward our climate goals.
The utility industry began with electric lighting companies, born in the 1800s from the brilliance of inventors and entrepreneurs with well-known names such as Edison and Westinghouse and Tesla. Electricity today powers not only our lights, but also our appliances, laptops, smartphones, and so many other conveniences of modern life.
During the majority of the last century, the industry was focused not on innovation, but on scale – bigger power plants and more poles and wires – in an effort to lower costs to consumers. In fact, as recently as 2001, an energy task force led by then-Vice President Dick Cheney recommended building up to 1,900 new large power plants to meet projected new demand.
But the era of ever-larger scale, it turns out, is over. Due to many factors, including increased energy efficiency, the new demand did not materialize. Today, the U.S. Energy Information Administration projects growth in electric sales of just 0.6 percent annually through 2040. This trend, combined with new opportunities for utility customers to install solar and battery storage to reduce (or even eliminate) their reliance on the grid, has created an existential crisis for the utility industry.
The Edison Electric Institute, representing investor-owned utilities nationwide, has raised concerns about a “utility death spiral” as a result of these new trends. Some observers have compared utilities to the landline telephone companies that lost customers to the wireless industry. In some parts of the country, utilities unfortunately have advocated for rearguard actions against the solar industry in a misplaced attempt to slow the death spiral.
Instead of a death spiral, however, utilities have an opportunity to build a sustainable business model through strategic electrification of the heating and transportation sectors. Both sectors are dominated by fossil fuels, and in Vermont they constitute the bulk of our greenhouse gas emissions. Both sectors also are ripe for disruption from new and clean electric technologies, such as cold-climate heat pumps and electric vehicles.
For example, consider the economic and environmental benefits of electric vehicles. In Vermont, an electric vehicle driver can pay the equivalent of $1.50 per gallon or less to charge a vehicle. That vehicle can charge using local renewable power generation instead of imported fossil fuel gasoline or diesel. And critically, if the electric vehicle is charged primarily during off-peak hours when electricity is cheap and plentiful, it is drawing more kilowatt hours without the need for costly grid upgrades. This scenario can put downward pressure on electric rates, benefitting all utility customers.
Analysis from the Brattle Group shows what is possible nationwide. Its report finds that, as we move to a clean grid, strategic electrification of the heating and transportation sectors could reduce greenhouse gas emissions by more than 70 percent compared to 2015 levels. If paired with complementary policies, the U.S. would be on a path to meet our 2050 emission reduction goals. Also, strategic electrification would create new utility investment opportunities in 21st Century infrastructure such as electric vehicle charging stations, addressing the death spiral concerns.
The challenge is that current utility regulation may be ill-suited to advancing strategic electrification. In some states, such as Kansas, utility proposals to significantly expand electric vehicle charging station investment have been rejected by regulators, who would prefer third parties such as automakers to take the lead. However, some automakers are fighting to roll back federal fuel economy standards that have advanced the electric vehicle market in the first place. If strategic electrification is to be successful, we need new policies that support utility efforts to move in this new direction.
In Vermont, we have a model through our Renewable Energy Standard (RES). Under the RES Tier 3 program, electric utilities offer customers incentives to reduce fossil fuel use in the heating and transportation sectors. Examples include utility rebates for electric vehicles and incentives for cold-climate heat pumps. Vermont utilities are supporting innovative approaches, such as deployment of the state’s first electric commuter buses and line extensions providing electric service that replaces fossil fuels for seasonal sugar maple operations.
Critically, many of these new programs offer support for low- and moderate-income Vermonters to participate, including enhanced incentives for electric vehicles. For utility-led energy transformation to work, it must include opportunity for all.
Vermont utilities have the unique prospect of embracing a new business model under our RES that offers significant benefits for our economy and environment. Twenty-nine states have renewable energy standards and could look to adopt the Vermont model, increasing the impact nationwide even as federal policy lags.
We have the capacity to demonstrate that the electric utility is now an indispensable climate change fighter capable of transforming our energy system for the 21st Century.
Darren Springer of Burlington is Chief Operating Officer and Manager for Strategy and Innovation at the Burlington Electric Department. He also currently serves as a Policy Fellow on Climate Change and Renewable Energy at the University of Vermont Center for Research on Vermont. Previously, he served as Chief of Staff to Governor Peter Shumlin, Deputy Commissioner at the Vermont Public Service Department, and Senior Policy Advisor and Chief Counsel to Senator Bernie Sanders. Find the entire law review article at http://www.burlingtonelectric.com/pdf/BeneficialDisruption-Springer.pdf.