Most of the biggest U.S. utilities have promised to eliminate their carbon emissions by midcentury. New research asserts that most have undermined those goals by keeping coal plants running and building new natural-gas plants planned to operate for decades to come. 

A new report from the Sierra Club finds that almost no U.S. utilities are on track to reduce carbon dioxide emissions by 80 percent by 2030 compared to a 2005 baseline, the target needed to prevent global warming beyond 1.5 degrees Celsius, as called for in the Paris Agreement

Instead, most utilities’ integrated resource plans (IRPs), which set their generation investment pathways over a decade-plus horizon, will put them on a path to much more modest carbon reductions, the report concludes. 

The analysis underscores the gap between the policy imperatives of the environmental community and the Biden-Harris administration, which has set a goal of zero carbon emissions from the U.S. electricity sector by 2035, and the cost imperatives of U.S. utilities that still rely on coal and natural gas for most of their generation capacity. 

The report gives some of its worst marks to some of the biggest utilities with goals to be net-zero carbon by 2050, including FirstEnergyDuke EnergyDominion Energy and utilities operated by Southern Company. These utilities’ IRPs indicate little difference between their decarbonization pathways and those of utilities that haven’t set zero-carbon pledges, such as Berkshire Hathaway Energy, NextEra Energy and PPL Corp.

Another group falling in the midrange of scores include some with zero-carbon commitments such as Xcel EnergyPortland General ElectricAmerenArizona Public Service and Entergy, as well as some that don’t, including American Electric Power (AEP) and Tri-State Generation and Transmission. 

Only a handful of utilities received grades above a "C" under Sierra Club's methodology, among them Puget Sound Energy and Great River Energy. And only two — Northern Indiana Public Service Co.and AEP’s Public Service Company of Oklahoma — won an “A” grade, by pledging to close all coal plants by 2030 and not build any new gas plants. 

Taken as a group, the 50 utility holding companies studied have a total of 100,000 megawatts of new wind and solar in their IRPs, Sierra Club Electric Sector Analyst Cara Bottorff said in a Tuesday press conference. But that's only one-fifth the amount that would be required to replace their existing or planned fossil fuel generation over the coming decade, she said. 

"Despite the pressing deadline of 2030, utilities are either not moving fast enough toward these goals or not moving at all," said John Romankiewicz, senior analyst for Sierra Club’s Beyond Coal campaign.

From decarbonization imperatives to utility realities

Utilities responded to Sierra Club’s analysis by highlighting the high costs and reliability disruptions that could come with a too-rapid abandonment of fossil-fuel-fired power plants, which provide the chief source of dispatchable energy to the grids they serve. 

Duke Energy’s IRP for its North and South Carolina utilities, for example, provides six “pathways” for halving its carbon emissions by 2030 and reaching net-zero carbon by 2050. All but one call for new natural gas plants. 

The one scenario that avoids them would raise 15-year revenue requirements to about $108 billion, compared to between $80 billion and $84 billion for its base cases, which, according to the utility, would add another $20 per month to the average customer bill increases of $23 to $25 per month already included in its base cases. 

The gas-free scenario is also reliant on the greatest mix of as-yet-untested technologies such as long-duration energy storage or small modular nuclear reactors — and it would involve keeping some of its coal plants open past 2030, to ensure it can provide reliable power in the winter when solar power is scarce. 

"Achieving the clean energy transition we and these organizations envision will require supportive policy," Duke spokesperson Erin Culbert said in an email. "We are working with stakeholders and policymakers on a cost-effective path forward for the Carolinas’ energy transition that’s equitable for all. While we welcome all perspectives, not all parties have the same responsibility we do for providing energy that’s cleaner, reliable and affordable."

The same challenges hold true for other utilities that don’t already get a significant share of their energy from hydropower or nuclear power, the two primary carbon-free resources in the country. Wind and solar power accounted for just above 10 percent of U.S. generation capacity in 2020, according to federal data. 

Still, an increasing body of research indicates that U.S. utilities can reduce their reliance on natural gas-fired power plants by investing in energy storage to capture excess wind and solar power for times when it’s in shorter supply, and expanding the country’s transmission grid to move power from where it’s being generated at a surplus to where it’s needed. 

A study from UC Berkeley and GridLab last summer indicated that shifting to a U.S. grid that relies on natural gas for only 10 percent of annual production by 2035 could yield a lower-cost electricity supply than the status quo approach contained in countrywide utility IRPs. But hitting this target would require 1,100 gigawatts of new wind and solar, amounting to the addition of about 70 gigawatts per year. That's more than triple the additions completed in any one year to date, and it would require more than $100 billion in new transmission investment, according to the report's authors. 

Environmental advocates have long argued that utilities that lock in new natural-gas construction today may be burdening their ratepayers with stranded costs in the future. That could happen as a result of federal or state policies that ban or restrict their use. But it could also come about as renewable energy, and the cost of batteries and other technologies to store it, fall to levels that make them cost-competitive with natural-gas-fired power. 

That’s the argument made in a report released this week by the Energy Transition Institute, which calculated that Duke Energy’s plans for new natural-gas power plants for its Carolinas utilities could saddle customers with $4.8 billion in stranded costs over the next 15 years. 

"The Sierra Club's report shows just how far Duke Energy is falling short of meeting its commitment” to rapid decarbonization, Tyler Fitch, lead author of the report and Southeast Regulatory Manager for the solar advocacy nonprofit Vote Solar, said in a statement. 

What’s to be done? 

Hitting the right balance between rapid decarbonization and cost controls will be a major challenge for utilities in the U.S. and around the world. A September report from Deloitte highlights the steps that fossil-fuel-dependent utilities could take to achieve it, starting with sequencing major capital investments in terms of which technologies are cost-effective today versus those that require more development to reach commercialization. 

Finding ways to get customers to match their electricity consumption patterns to new renewable-driven supply patterns will also be critical, particularly as electric vehicles and electric heating replace fossil fuels in transportation and buildings. That will require mass-market technology deployments, energy rates that encourage off-peak and discourage on-peak usage, and a major buy-in from consumers used to always-available electricity supplies. 

Other long-term solutions, such as a build-out of infrastructure to convert excess clean energy to green hydrogen to replace natural gas and other fossil fuels, or carbon capture and storage technology to allow their continued use, remain uncertain at commercial scale. 

But financial structures to support utilities making the shift will also be critical, industry observers say — and those will require state and federal policy actions. Utilities could get state permission to issue ratepayer-backed bonds to cover the costs of undepreciated coal plants and support communities losing jobs from their closure. 

State and federal incentives for energy storage, demand management and carbon-neutral fuel production could ease the costs borne by utilities and their ratepayers in deploying those technologies before they’re cost-effective against existing fossil-fueled alternatives. 

And federal carbon pricing or clean energy standards could increase the cost of remaining wedded to fossil fuels and make their alternatives more attractive, a way of financially internalizing the externalities of the climate change impacts of carbon emissions. 

Notably, one of the Sierra Club’s co-authors, University of California, Santa Barbara political science professor Leah Stokes, is in the midst of creating a proposal for how a Democratic party-controlled U.S. Congress could pass legislation enacting parts of the Biden-Harris administration’s clean energy standard through the budget reconciliation process, which could serve to set this policy into federal law.  

“We cannot just rely on voluntary corporate pledges from utilities,” Stokes said in Tuesday’s press conference. “We need federal action on this issue.”