by Julia Pyper
June 16, 2018

A group of CEOs from the nation’s largest investor-owned utilities took to the stage at the Edison Electric Institute Annual Convention in early June to discuss the latest opportunities and challenges facing their companies. 

Duke Energy CEO Lynn Good, who was just elected to serve as EEI Chairman for 2018-2019, kicked off the conversation by highlighting her top priority as the leader of the association: to further promote utilities as a customer-centric industry.

“As I think about the transformation that's underway — the new technologies that are being introduced, the fact that our customers are expecting more from us — the history of undifferentiated products and running a bulk power system will really minimize our transformation if we just leave it there,” she said. 

“But if we go beyond it and really embrace the notion of customer experience and customer value in a way that I know that we're capable of, I believe we will transform in a way that delivers great value…exceeding expectations, [providing] more choices, more channels, more technologies,” Good added.

As regulated entities, a lot of what investor-owned utilities do is subject to policy debate. So in this week’s column, we’re going to look at energy industry trends and priorities from the utility CEO’s perspective. 

Electric vehicles

More and more utilities are getting on board with electric vehicles. So it’s no surprise EVs were a hot topic at the EEI convention. 

Good said EVs are a “tremendous opportunity” for utilities that takes advantage of the work these companies have already done to decarbonize the electricity system.

“We have an opportunity to take a leadership position to continue to drive decarbonization by assisting, supporting and investing in charging infrastructure that will allow that progress continue,” the Duke CEO said.

Christopher Crane, CEO of Exelon Corp., said his utility is helping to encourage EV adoption by offering a $3,000 rebate for the Nissan Leaf to employees and customers of subsidiary Commonwealth Edison. 

On the infrastructure front, he noted that Exelon subsidiaries in Maryland are currently requesting regulatory approval for a $104 million EV charging program that has the backing of environmental groups and other stakeholders. If approved, the charging system would be second only to California’s, Crane said. 

While the plan is still waiting for the green light, Crane said getting outside groups on board with the proposal will help to ensure it’s a success. 

“Coalitions are the better way they do it,” he said. “If you can work with the environmental groups, the consumer advocates, and the technology providers, I think we can do a much better job with electrification.”

Xcel Energy CEO Ben Fowke noted that when customers charge their EVs on Xcel’s system, they’re able to reduce their transportation emissions by 60-70 percent when compared to a gasoline-powered vehicle — plus, they save money. As Xcel’s energy mix gets cleaner over the next decade, Fowke said customers will see more like a 95 percent carbon reduction.

“The key is seeding that infrastructure and helping customers make that transition,” he said. It’s still early days for rolling out EV charging stations in Xcel territory, but the utility wants to “be the leader” in that effort and is currently participating in various gubernatorial task forces to study the EV infrastructure issue, Fowke added. 

Xcel is looking to expand home EV charging installations and set up a convenient way for customers to take advantage of different electricity rates. “More to come on that,” said Fowke, “but we're excited about the possibilities.”

The evolving energy mix

The electric power sector has made enormous progress on decarbonization, with the shift away from coal and toward natural gas and renewables. For many utility customers, however, the transition isn’t happening fast enough. 

In many communities, there’s increased pressure for utilities to get all the way to a 100 percent renewable energy mix. Just this week, sources told GTM that California’s SB100 bill is on track to get a hearing. But this isn’t just a California phenomenon. From small Texas towns to giant corporations, commitments to 100 percent renewables are spreading rapidly.

The CEO panel at the EEI convention said they strongly embrace cleaner energy resources, but are wary of getting to 100 percent.

"The technology is changing faster in our sector that we've ever seen it before — the advancement of storage, the efficiency of renewables — but the reality is that it's dark at night and the wind doesn't blow. Having a one-hour or four-hour capacity for storage will not allow us to maintain the reliability we need across the system,” said Chris Crane, CEO of Exelon Corp. 

The utility sector can and will continue to decarbonize, he said. “But we have to look at the resiliency.”

Resilience is a term the Trump administration has used a lot recently to justify federal action to shore up coal and nuclear power plants. Crane said he generally supports these efforts. Exelon is the largest nuclear power plant owner in the U.S. and would benefit significantly from new measures to prevent its plants from closing. 

In an earlier interview with Utility Dive, Crane reportedly said there is "no grid emergency” to justify a coal and nuclear bailout. He clarified those comments on stage at EEI. 

As utilities across the nation increasingly shift to natural gas and renewables, “getting the market design right and looking at the resiliency is really a requirement that we need federal intervention on,” Crane said.

He praised the Trump administration for taking action on grid resilience, but added that he didn’t have enough information to pass judgement on the Trump administration’s latest coal and nuclear power proposal, which was revealed in a leaked memo. In the meantime, Crane said he has high hopes for the Federal Energy Regulatory Commission’s proceeding launched in January to “holistically examine the resilience of the bulk power system.”

Xcel’s Fowke struck a similar tone in his comments. He touted Xcel Colorado’s new plan to retire two coal-fired units roughly a decade ahead of schedule and add approximately 1,800 megawatts of renewable energy. But he underscored that nuclear power is an important part of Xcel’s overall decarbonization strategy. 

“The endgame is carbon reduction,” he said. “And we all know nuclear is 100 percent carbon-free.”

Coal, meanwhile, is on the way out. 

“I will tell you, it's not a matter of if we're going to retire our coal fleet in this nation, it's just a matter of when,” Fowke said.

But that doesn’t mean 100 percent renewables is around the corner, he added.

“We’re working with cities and communities through our Renewable Connect program and other programs to help meet their sustainability goals,” Fowke said. "But what I'm worried about, and what we're working on together now at EEI, is starting to educate folks that 100 percent renewables is…not that easy.”

“Messaging that is important because this industry is leading the clean energy transition, but we are never going to sacrifice reliability and affordability. And a lot of times infrastructure trails transformations, so we have to be careful with that,” he said.

Duke’s Lynn Good said her utility has achieved a 30 percent carbon reduction by closing older coal plants and adopting natural gas and renewables. By 2030, Duke will have achieved a 40 percent carbon reduction, she said. But the Southeast utility’s energy resource mix will continue to be very diverse, including the six nuclear plants Duke owns and operates in the Carolinas.

The 100 percent renewables movement makes it seem as though utilities can just connect the batteries and solar and eliminate carbon emissions. But according to Good, “We don't have all of the tools today that we will have in 2035, so why would we move too aggressively in a direction with an incomplete set of tools?”

“I think this industry has demonstrated that we will keep moving,” she added. “We'll keep moving with battery technology, we'll keep living with distributed energy resources, we'll keep moving with investments in our grid in order to make it more efficient and reliable [and to] create capacity for more renewables. But let's be thoughtful about it so that we maintain this incredibly rich asset of a grid and an electric system that's 99 percent reliable in this country and affordable for our citizens.”

Renewables, reliability and customer trust

Greg Abel, chairman of Berkshire Hathaway Energy, dealt with a little razzing on stage at the EEI conference for his Iowa utility’s announcement that it plans to generate 100 percent renewable energy for its customers. MidAmerican Energy, one of four utilities that Berkshire owns, will produce enough renewable energy to equal what its customers consume on an annual basis. The other CEOs didn’t seem to love this concept.

“Backstage I was getting beat up a little, but [it was] well deserved” Abel joked.

The tension stemmed from the fact that MidAmerican will have to rely on neighboring utilities in order to make its 100 percent renewable energy program possible.

“If you look at it where they are right now in Iowa, it would be a little over 50 percent [renewable]. We're continuing to build out a substantial program that by 2020 will be 100 percent, so it'll be perfectly matched at that point in time,” Abel said.

“That can't be done without the right system in place, because we're very dependent upon other states being a shock absorber at times,” he continued.

“Chris, I’m not sure that's a smile,” he joked to Exelon’s Crane.

Abel went on to note that NV Energy plans to offer a similar 100 percent renewables program. The utility currently has 17 percent renewables mix, with a recently announced plan to reach 34 percent.

“I know our team has visions then to double it again, so it'll be very dependent upon the other states around us [for] how we can achieve these things and how the systems interplay with the other resources,” he said. “Maybe we simplify it, but it's a dream and we want to be able articulate it and pursue it.”

“I'm still reeling from the shock absorber comment,” Crane joked.

“This is the complication in the design of markets in the states being in different in [regional transmission organizations] next to each other in how we look at the integration of the resiliency and the economics of the environment of the system we operate,” he continued. "So when Iowa is not using that [renewable energy], it flows east into Illinois and it has price effects on the market in Illinois."

“So the way the prices are formed, these pricing signals tell the plants and the state to shut down or pay them less for their output,” he said, referring to Illinois’ nuclear and fossil fuel power plants. “Getting the market design right and looking at grid resiliency is really a requirement that we need federal intervention on.”

Utilities don't have resource planning in which they need to say which type of power they need across the regional grid system — be it baseload or peaking power or renewables. That's why it's important “what the administration is doing now on really pushing not only price formation to make sure the units are adequately compensated, but [also] the resiliency review from the unintended consequences of driving plants out of the stack that we need for reliability,” Crane said.

Pat Vincent-Collawn, chairman, president and CEO of Public Service Co. of New Mexico, the outgoing EEI chairman, said the challenge for investor-owned utilities is to convince their customers they’re moving in the right direction and making the right decisions about their resource mix — including the need for carbon-free nuclear power as well as natural gas.

Duke’s Lynn Good responded that the utility industry has been behind the scenes “for far too long.”

“We're only engaged when you start your service and then we send you a bill, and I don't think that's enough,” she said. Good reiterated her goal as the new EEI chairman is to engage more with customers.

“Because we're filled with lawyers, engineers and financial people, we're going to need some help on messaging,” Good added. “I think that's a real opportunity for us.”