Dan Bakal is the senior program director for the Climate and Energy team at Ceres.
As our nation marks the 54th Earth Day next week, and we face the urgency of addressing climate change and the risks that it poses to our communities and our economy, we must acknowledge the vital role that the power sector needs to play to facilitate the transition to clean energy.
With the Inflation Reduction Act spurring $464 billion in investment from the private sector in clean energy projects and other technological improvements across the electric power sector, the time is ripe for utilities to play a larger role as leaders in moving the country towards a more sustainable efficient, and equitable energy future.
It is no secret that underrepresented communities are disproportionately affected by climate change. Many of these marginalized groups receive the brunt of extreme weather events, including floods, fires and hurricanes, and research has found that low-income households in the U.S. have longer and more difficult post-disaster recoveries with longer-term negative financial impacts. At the same time, these groups are exposed to higher levels of pollution from dirty power plants, refineries and diesel truck emissions.
They also face obstacles to accessing clean energy technologies compared with more affluent communities. Utilities should support electrification of transport, buildings and industry because it is both in their own financial interests and that of their shareholders. Electrification means more capital invested by power companies. If done right, electrification will be a low-cost option that can benefit consumers. This includes pursuing strategies such as deep hybrid electrification to manage electric grid capacity needs and avoid cost escalation to consumers.
Technologies like heat pumps and electric vehicles are highly efficient, have lower operating costs and are becoming more affordable. The expanding infrastructure for these advancements will depend on the power sector.
So, what can power companies do to support this evolution?
Power companies should develop decarbonization strategies in line with 1.5°C pathways.
To accomplish this, utilities need to maximize the opportunities afforded by the Inflation Reduction Act and the Infrastructure Investment and Jobs Act. They also need to consistently support policies, like the EPA’s 111 rule to curb emissions from new and existing power plants.
Time and again the EPA has had a successful track record in forecasting the feasibility of pollution control standards despite claims that they will be too expensive or too difficult to meet. In fact, we found that the standards themselves can help drive innovation and progress while growing the economy, reducing costs and improving public health.
Given the increasing urgency of the financial risks of the changing climate, utilities companies must engage more proactively with state and federal policymakers.
For example, we know that new and upgraded transmission is critical to achieving our decarbonization goals and avoiding the worst impacts of an overheating planet, so utilities should play a constructive role in supporting development of transmission and not simply protect their service territories from external forces.
While utilities can be involved in climate policy engagement and advocate for policies that support meaningful climate commitments, many frequently also undercut that support through lobbying at the state and local level. For example, a recent Ceres report looked at the policy engagement of 12 of the largest utilities in the U.S and found that all have lobbied both for and against Paris-aligned policies over the last three years.
Power companies should also actively engage with industry associations to influence these groups’ advocacy on climate policies.
It is critical that companies assess their trade associations’ climate lobbying and engage with them so that these influential organizations reflect the views of their member companies and advocate in favor of their long-term interests.
The power sector’s sustainability plans must also comprehensively incorporate justice and equity, specifically access and affordability, as these are fundamental requirements for building a viable system.
While climate change poses enormous risk, it also presents tremendous opportunities — but all must have access to these opportunities. For example, utilities should provide upfront support to low-to-moderate income customers for residential electrification and decarbonization measures to prevent them from being stuck on the existing fossil fuel systems, which face the prospect of higher costs due to a shrinking customer base and reduced gas usage.
Energy equity creates multiple shared benefits among the customer, utility and those who invest in the utility company, helping optimize the overall system. This will lead to tangible benefits, including lower energy bills, improved air quality, better health and job opportunities.
As we reflect on another upcoming Earth Day, we must recognize that environmental sustainability and financial stability go hand in hand, and that electrification powered by utilities will lead to a brighter future.
