Decarbonization is a complex and challenging process that requires a radical transformation of our energy system and our society. However, it is also a feasible and desirable process that can deliver multiple benefits for our planet and our people. By debunking the myths and presenting the facts about decarbonization, we hope to inspire and inform more action and support for this vital cause.
The NPUC (National Public Utilities Council) annual utility decarbonization report 2023 has identified six reasons for decarbonizing utilities calling it the “Grounds for Change”. Here is my analysis of them:
| 1 | Mounting Levels of CO2: The 2023 IPCC (Intergovernmental Panel on Climate Change) report warns that as CO2 concentrations and global temperatures continue to rise, there is a pressing need for immediate action toward decarbonization across all sectors. Specifically for utilities, shifting away from emission-intensive electricity sources is more important than ever before. | FACT: There is now enough evidence pointing to this as a fact. Global temperature is rising. The oceans are getting warmer. The ice sheets are shrinking. Glaciers are retreating. Sea levels are rising. Extreme weather events are increasing in frequency.[1] |
| 2 | Growing Demand: With population growth, electrification, and increased industrial activity, electricity demand across the globe is rising each year. Decarbonizing the electricity sector could trigger decarbonization in other sectors that rely on electricity, resulting in a domino effect. | FACT: Both points are factual. Between 1980 and 2022, electricity consumption more than tripled, while the global population reached almost eight billion people. Growth in industrialization and electricity access across the globe have further boosted electricity demand.[2] |
| 3 | The ESG Advantage: The adoption of sustainable practices can attract climate-conscious investors, enhance brand reputation, boost investor confidence, and strengthen relationships with regulators. | Part FACT and part MYTH: Customers, boards and investors are increasingly focused on ESG. However, many investors are hesitant to accept a lower rate of return in exchange for ESG benefits[3]. Many utilities are part of competitive markets where capital chases returns. No concrete evidence exists that people who invest in utilities are ESG-conscious. This becomes even more true across the world where most utilities are government owned. |
| 4 | Monetary Incentives: Utilities can reap significant monetary advantages from decarbonization. Examples of such advantages include lower fuel costs, increased revenue streams (e.g., through the sale of renewable energy credits), reduced regulatory costs, and increased opportunities to obtain tax credits. In turn, consumers also stand to benefit from lower costs or rebates as a result of more competitive pricing. | More MYTH than FACT: This is questionable since most utilities are heavily regulated requiring them to pass costs or benefits back to the rate-base. Also, lower costs for the customer have not yet been borne out due to significantly higher delivery costs. On the other hand, in the US, utilities have many new federal incentives to encourage them to make different investment choices. Regulatory reform is needed to create a just transition that is reliable and fair to ratepayers. |
| 5 | Electrified Transport: As the transportation fleet electrifies worldwide, the two sectors contributing the most to GHG emissions, electricity, and transportation, are merging. Decarbonizing electricity can decarbonize the use phase emissions of all electric vehicles (EVs). | Mostly FACT: Electrifying transportation will reduce carbon emissions, improve air quality, lower EV operating costs, enhance grid stability by providing new sources of demand response, energy storage and ancillary services, and increase energy security by reducing reliance on imported oil and diversifying energy sources. |
| 6 | Energy Security: The Russia-Ukraine conflict of 2022 demonstrated that dependence on foreign oil and gas can trigger economic shockwaves. Embracing clean energy sources like wind, solar, and nuclear enhances energy security, reducing dependency on other nations and protecting against fossil fuel price volatility and supply disruptions. | More MYTH than FACT: Nuclear is not a solution for all countries, which leaves other clean energy sources like solar and wind, which are intermittent. So, where does energy security come from for countries where nuclear generation is not an option? Can we make up the difference with energy efficiency and conservation? Or is hydrogen or carbon capture the answers? There is no one-size-fits-all solution for every country. |
[1] https://climate.nasa.gov/evidence/
[2] https://ourworldindata.org/energy-production-consumption
[3] https://www.pwc.com/gx/en/services/audit-assurance/corporate-reporting/esg-investor-survey.html
These are only six issues surrounding decarbonization. When we start to analyze them, more questions quickly emerge…
We may not all be able to relocate to Mars (cough – Elon Musk – cough), but we are thoughtful engineers who can solve complex problems. Let’s not forget that before the International Space Station, the Panama Canal, the Internet, or the automobile, electricity was discovered by scientists and harnessed and improved by engineers over the last 100+ years. Electricity is the foundation for all our modern technologies and has improved the quality of life, health, safety, and productivity of millions worldwide.
Today, we are called to help transition our electricity systems by decarbonizing them and positively impacting our environment and society for ourselves and future generations.
That, my friends, is all FACT!
