State Policies Drive Utilities to Invest in Clean Energy Boom
Midwest utilities are embracing renewable energy and energy efficiency and supportive state policy is a major driver of this trend.
A new Ceres report ranking 30 of the nation’s largest electric utilities shows that the top performing utilities on renewable energy sales and energy efficiency savings are typically based in states and regions with more ambitious clean energy policies.
While most of the top scorers are on the coasts, Midwest utilities are catching up, thanks to some important state policy trends. For example, Xcel Energy saw a 15 percent jump in renewable energy sales from 2012 to 2014. Strong renewable portfolio standards in Minnesota and Colorado, where Xcel Energy has a significant presence, were key catalysts for the jump in green energy, which now accounts for 21 percent of its overall sales. Both states are pushing to get 30 percent or more of their energy from renewables. Federal tax credits and innovation in the industry are also helping increase utility clean energy deployment by driving down the prices of renewables. Now, wind, solar, and energy efficiency are some of the cheapest forms of energy throughout the Midwest.
Meanwhile, Michigan is benefiting from policies that reduce energy waste and encourage customers to save energy. Michigan’s two major utilities – DTE Energy and CMS Energy – are both achieving over one percent in incremental energy savings each year due to the state’s energy optimization standard, which requires utilities to reduce electricity sales by one percent each year. DTE Energy and CMS Energy ranked 6th and 11th in the report’s energy efficiency scores, with DTE achieving 1.45 percent in energy savings in 2014 and CMS Energy 1.21 percent in 2014.
The standards are a proven winner for Michigan consumers. According to the Public Service Commission, ratepayers save more than $4 for every $1 of investment in energy efficiency. They also help the state avoid having to build costly new power plants and tap into one of the least cost energy resources—the energy we don’t use or need to produce.
While Michigan is making strong progress on clean energy – DTE and CMS both exceeded the state’s 10 percent renewable energy standard in 2015 – the legislature can take even bolder action when it considers comprehensive energy legislation later this year. When lawmakers reconvene, they should consider a proposal to achieve a combined renewable energy and energy efficiency goal of 35 percent by 2023 and—a move that will shield businesses and consumers from volatile fossil fuel prices and achieve bigger savings.
No doubt, clean energy is here to stay. Utilities shifting towards clean energy will be best positioned to cope with federal policies pushing the power sector to reduce its reliance on fossil fuels. As states begin to implement the EPA’s Clean Power Plan—aimed at reducing power sector carbon pollution by a third—states with existing clean energy policies will have an easier time complying with the new rules, since they already have clean energy included in their long range planning.
Utilities in Ohio will have a tougher time complying with the Clean Power Plan since state lawmakers passed a freeze on renewable energy and weakened its energy efficiency standard in 2014. Ceres analysis shows that Ohio’s electric utilities were making significant clean energy progress from 2012 through 2014 in ramping up renewable energy and energy efficiency. That progress will be curtailed if the freeze is not lifted.
The clear conclusion of Ceres analysis is that clean energy policies are spurring utility clean energy investments and the states that have been ambitious are seeing the rewards—lower carbon pollution, thousands of new jobs, and reduced costs for consumers.
Alli Gold Roberts is a Manager on Ceres' Policy Program. Follow her on Twitter @alligroberts.