Cutting the Carbon Cord: A Tale Of Two Utilities

On the cusp of official “entry into force” of the groundbreaking Paris Agreement on climate change, it’s a great time to take a look at how the United States is positioned to drive the Agreement’s objectives forward. With a recently proposed Integrated Resource Plan from Dominion Resources in Virginia and an agreement struck by Xcel Energy in Minnesota, we have two salient examples to evaluate how U.S. power companies are aligning their strategies – or not – with the U.S. Environmental Protection Agency’s Clean Power Plan, a lynchpin of the U.S. commitment under the Paris Agreement.

In its plan, Dominion compares different options for compliance with the Clean Power Plan using either rate-based or mass-based approaches. Rate-based approaches aim to reduce the carbon intensity of electricity (lbs/MWh), whereas mass-based approaches aim to reduce actual carbon emissions. Either approach technically is allowed under the Clean Power Plan, within certain bounds. The striking takeaway is that Dominion could comply with the Clean Power Plan using a rate-based approach, even while its actualcarbon dioxide emissions could nearly double – an obvious concern in fulfilling U.S. goals under the Paris Agreement. The company would do this primarily by adding new natural gas power plants, which would lower its emissions rate (lbs/MwH), while increasing total carbon emissions from 27 million tons per year in 2012 to 49 million tons per year in 2041.

Though it may technically be able to comply with the letter of the Clean Power Plan pursuant to this approach, the potential increase in Dominion’s carbon emissions would be contrary to the Plan’s objectives, creating obvious headwinds for meeting our decarbonization commitments under the Paris Agreement. The EPA needs to address these concerns by ensuring that these kinds of emissions loopholes do not exist, while still retaining flexibility to allow states and utilities to advance optimal decarbonization plans.

Dominion’s problematic approach, which could lock in long-lived higher-carbon infrastructure that would undermine over-arching carbon pollution reduction objectives, also highlights the importance of companies ‘stress testing’ their long-term strategies against the Paris Agreement’s specific goal limiting average global temperature rise to two-degrees Celsius or less. This two-degree stress testing is only just beginning to happen.

It’s important to keep in mind that Dominion does not lack for cleaner, more cost-effective options for advancing the Clean Power Plan’s objectives. Ceres’ recent Benchmarking Utility Clean Energy report showed that Dominion ranked 24th among the nation’s 30 largest utilities on delivering renewable energy and last, 30^th, on energy efficiency. Dominion clearly can and should do more on both of these fronts.

Meanwhile, Xcel Energy’s recent news stands in stark contrast to Dominion’s approach. Under a recent agreement in Minnesota, Xcel plans to achieve a 60 percent greenhouse gas emissions reduction by 2030 by retiring old coal plants. The company is also upping its investments in wind and solar, as well as energy efficiency. The plan represents a dramatic – and welcome – shift for a company that still generates about 60 percent of its electricity in all of its states from coal.

While it isn’t yet entirely clear how Xcel’s plan aligns with the Paris accord, the company clearly is positioning itself well for the future.

Other companies should take note, and pursue options that are calibrated for long-term resilience in a world newly committed to rapid decarbonization under the Paris Agreement.