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The Clean Power Plan: The Power Sector's Stepping Stone to the Future

The electric power sector will be closely watching this week’s D.C. Circuit Court of Appeals hearing on the Clean Power Plan and eagerly awaiting the clarity that the court, and likely the U.S. Supreme Court, will provide.
by Dan BakalCeres Posted on Sep 26, 2016

The electric power sector will be closely watching this week’s D.C. Circuit Court of Appeals hearing on the Clean Power Plan and eagerly awaiting the clarity that the court, and likely the U.S. Supreme Court, will provide.

Regardless of where the legal debate lands, however, a few points are becoming increasingly clear:

First, the Paris Climate Agreement will soon be entered into force, bringing more heft to its ambitious goal of limiting global warming to well below 2°C. That means that the U.S. power sector will need to achieve greenhouse gas reductions beyond the expectations of the Clean Power Plan, which calls for a 30 percent cutback in carbon pollution by 2030.

The credit rating agency Moody’s made exactly this point when it announced in June that it would begin analyzing carbon transition risk based on scenarios consistent with the Paris Agreement, and noted the especially high carbon risk exposure of the power sector.

On the positive side, the US power sector is already decarbonizing and the actual goals included in the Clean Power Plan are becoming much more feasible and cost-effective due to plummeting solar and wind production costs, as well as improved energy efficiency.

Second, it’s not just the electric power sector that should be paying attention. For the first time since 1979, GHG emissions from cars and other modes of transportation recently surpassed those from the power sector, increasing the likelihood that the power sector will have a key role to play in reducing transport emissions, via electric vehicles.

While power companies should absolutely be paying close attention to the court deliberations, they also need to think holistically and long range about the role they play in the global push toward carbon neutrality by mid-century. That’s why it’s encouraging to see major power companies – even ones that have expressed concerns about elements of the Clean Power Plan – making meaningful long-range commitments to lower their carbon footprints. For example:

  • NRG Energy, the country’s fourth largest CO2 emitter, has set science-based GHG reduction targets of 50 percent by 2030 and 90 percent by 2050;
  • Xcel Energy, with 60 percent of its 2014 power generation coming from coal, has established a target of reducing its greenhouse gas emissions by 60% by 2030, well beyond Clean Power Plan goals;
  • Energy provider National Grid, with operations in the U.S. and the U.K., has set GHG goals of 45% by 2020 and 80% by 2050, and has already reduced its US footprint by 65% below 1990 levels by 2013;
  • Global power company Enel has committed to reduce its carbon intensity by 25% between 2007 and 2020, and to achieve carbon neutrality by 2050.

 

While these are all encouraging signs, other major players are taking a less helpful, wait-and-see approach. The nation’s three biggest carbon emitters, AEP, Duke Energy, and Southern Company, have all been reducing their carbon footprints, but should take the next step and perform some robust 2°C scenario analyses, align their business plans with the low risk scenario and set ambitious long-term greenhouse gas goals.

The bottom line: all of our nation’s electric utilities need to be onboard to make the Paris Climate Agreement an achievable reality, and they should recognize the important role that the Clean Power Plan can play in setting us on the proper path.

Read the post at Ceres

Meet the Expert

Dan Bakal

Dan oversees Ceres’ electric power and coal research, shareholder engagement, and furthers the understanding of environmental risks, with a particular focus on climate risk. He works closely with Ceres coalition members, including environmental, investor, labor and public interest groups, to engage in dialogues with electric power companies, which often involve a comprehensive review of environmental policies, performance, and disclosure practices.

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