It’s Taken Time, But Electric Utilities Are Warming Up To Climate Change

Ken Silverstein

AUG 1, 2017 @ 08:31 AM 

In 1968, bombs were dropping in Vietnam. But a different kind of bomb was about to dropped here at home — one that put the country’s utility industry on notice that the burning of fossil fuels would lead to climate change. Now, though, much of the industry is working to tackle those environmental challenges.

The Energy and Policy Institute has issued a report pointing out that scientists first warned the electric power sector of the greenhouse effect at the Edison Electric Institute’s annual convention in 1968. That’s when Dr. Donald F. Hornig, a science advisor to President Lyndon B. Johnson, enlightened the gathering that rising temperatures could lead to aberrant weather patterns, melting ice caps and the erosion of crops that would lead to food shortages.

“Such a change in the carbon dioxide level might, therefore, produce major consequences on the climate – possibly even triggering catastrophic effects such as have occurred from time to time in the past,” Hornig said, at the time.

While the Energy and Policy Institute acknowledges that the data in 1968 was limited, it quickly notes that by 1971, the industry’s research arm, the Electric Power Research Institute, concluded that the burning of fossil fuels leads to global warming. And the research continued, the advocacy group says, noting that between 1985 and 1988, both the Edison Electric Institute and the electric power industry’s research arm, said that climate change would “significantly” alter the electric power sector.

The paper goes on to say that industry members did testify before Congress in the late 1980s that the possibility did exist that rising temperatures could harm agriculture and human health. But they said, at that time, any prognostications would be unfruitful and “premature.”

It then takes aim at specific utilities, which the Energy and Policy Institute said have stood in the way in the way progress. The time: the 1990s, when coal still reigned supreme and when the coal-dependent utilities had fought clean air regulations clamping down on emissions. But as the years passed, many of those same utilities had lost the relevant court battles and had begun to acquiesce to either equipping their coal units with expensive technologies or to retiring them.

“We will need to decrease our carbon footprint over the long-term and we will need to work with our stakeholders to have this happen,” says Steve Young, chief financial officer for Duke, in a interview with this writer.

To be sure, it’s taken decades for the utility sector to evolve and to incorporate not just today’s science into its business plans but also its cutting-edge technologies. Not just Duke Energy but also American Electric Power and Southern Co. are shedding their older coal units and replacing them with combined-cycle natural gas plants as well as and wind and solar energy.

In fact, power plants emissions have decreased dramatically, says the sustainability organization Ceres, in a June 2017 report. That includes sulfur dioxide, nitrogen dioxide and carbon dioxide, which the group says its slightly more than 1990 levels. Those emissions peaked in 2007, it adds, but have been falling since then.

Why the decline? Ceres says that of the 100 largest utilities — which account for 85% of the electricity generated — they still rely mostly on coal at 34% and then natural gas at 32%. Nuclear is next at 23% while hydro-electricity is 6%. But that is notably different from 10 years earlier when coal made up 52% and natural gas comprised 17%. Renewables, excluding hydro, were 1%.

Certainly, the newfound supply of shale gas coupled with stricter regulations on coal fired power plants have encouraged the shift from coal to natural gas. But the falling price of both wind and solar technologies is also encouraging those investments, along with favorable tax laws.

At the same time, utilities are getting pressured from all sides to offer better, cheaper and cleaner products — market demands that are leading to the development of on site distributed power that is delivered by localized microgrids. That is changing the business paradigm.

Consider Ergon Energy Corp., in Australia: In that utility’s territory, rooftop solar photovoltaics have a density rate of 23 percent while in the country as a whole, they have a penetration factor of 30 percent.

“So distributed generation or distributed energy resources for Ergon is helping us defer the traditional investments,” says former Chief Executive Ian McLeod. The aim of diverting capital to smart technologies, he adds, is to increase the network’s utilization factor from around 40 percent to as much as 80 percent. Between 2010 and 2015, he says that the business either deferred or avoided $664 million worth of utility infrastructure.

The utility sector may have been slow to accept the science behind climate change. But market forces are now causing them to warm up to the cause.