SAVED BY ZERO? ENERGY INDUSTRY UPDATE - ScottMadden
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ENERGY INDUSTRY UPDATE SAVED BY ZERO? Volume 21 - Issue 1
Executive Summary: Saved by Zero? ............................................................................................................... 3
CONTENTS
1. Massachusetts' Decarbonization Roadmap ............................................................................................ 4
2. Energy and Utility Sector Themes .............................................................................................................. 22
3. Fleet Electrification ........................................................................................................................................... 33
4. Weather and System Performance: Test Cases .................................................................................... 42
5. The Critical Role of Transmission in the Net-Zero Transition ......................................................... 50
6. The Energy Industry in Charts ...................................................................................................................... 62
Glossary ......................................................................................................................................................................... 63
Recent Insights ........................................................................................................................................................... 65
Energy Practice: ScottMadden Knows Energy .............................................................................................. 66
EXECUTIVE SUMMARY
Saved by Zero?
As The Fixx’s 1980s hit says, “maybe someday, saved by zero.” A growing number of commitments to net-zero targets have been made over the
past several years, and federal policy is increasingly supportive. Before being “saved by zero,” energy industry stakeholders are now shifting their
focus from “whether” to “how” these commitments can be fulfilled. Energy and utility companies are now considering the actions, trade-offs, and
complexities that are emerging in moving toward these goals. Those considerations include required effort and cost to achieve net-zero, potential
strategies, and potential effects of transition.
Some Highlights of This ScottMadden Energy Industry Update
Required Massachusetts achieved its 2020 emissions-reduction targets. Now the state has created a cross-sector roadmap, outlining
Effort several potential pathways to reach its long-term emissions-reduction goals. Electric and gas utilities should look closely
to Zero at this and other decarbonization roadmaps to understand various alternatives and scrutinize embedded assumptions.
As the power sector has significantly reduced its carbon emissions footprint, the transportation sector remains a
meaningful contributor to carbon emissions. Fleet electrification could play an important role in a net-zero strategy.
Strategies Electric utilities can be a key partner in this transition and should begin planning now.
to Zero
Transmission development is being recognized as a critical piece of the net-zero transition, linking large-scale renewable
resources with demand centers. Many advocates for aggressive clean energy goals are highlighting the complementary
roles played by large-scale clean energy development and power transmission expansion.
Recent weather events in California and Texas have exposed planning, process, and resource gaps in power systems. As
Potential the net-zero resource mix continues to change with increasing variable and gas-fired resources, resource planners may
Effects need to consider greater tail risk in their planning scenarios.
of Transition
to Zero Over the past several months, energy and utility companies have been discussing their 2020 performance and
expectations for 2021 and beyond. Emerging themes include a refocus on core utility operations and pursuit of investment
opportunities in clean energy.
Executive Summary: Saved by Zero? 3
Massachusetts’ Decarbonization Roadmap Massachusetts outlines a comprehensive cross-sector carbon-reduction legislation, as it uses an analytical roadmap to evaluate options.
Decarbonization and Net-Zero Emissions: The Backdrop
Certain
It has been
U.S.nearly
states,25
municipalities,
years since FERC
and utilities—along
issued Order 888,
withestablishing
emerging federal
open KEY TAKEAWAYS
policy—press
access to the on
bulk with
transmission
aspirationsnetwork
for decarbonization
and just moreofthan
the 20
energy
yearssector
since across
FERC
promulgated
all fuel types. Order 2000, calling for the establishment of regional transmission Recently, several studies
organizations (RTO). have scoped out approaches
To date, the focus has been on power sector decarbonization. But as a significant to achieve net-zero
number
Over that oftime,
greenhouse
large parts
gas of
(GHG)
the United
emissions
States—as
reductions
well have
as Canada—have
been achieved in that
GHG emissions by 2050.
established
sector in certain
bid-based
regions,
markets
attention
for energy
is now turning
and related
to other
services.
sectors
These
for (largely)
markets have
Massachusetts has taken the
encouraged technological
energy-related GHG emissionsinnovation
reductions.
and asset turnover in the power generation
sector and, along with declining fuel prices, helped lower power prices over the next step in its emissions-
In
pastlate
202020,
years.Massachusetts
The non-RTO proposed
West has various pathways
tested this thatthrough
construct would transition the
its competing reductions journey, releasing
Commonwealth
imbalance markets. to economy-wide net-zero emissions by 2050. This action follows a multi-sector 2050 roadmap
on the heels of New York’s well-publicized Climate Leadership and Community for a net-zero emissions state
Protection
Setting aside Actissues
enactedandin
effects
June 2019.
of the pandemic, as we entered 2020 some economy.
markets were feeling the strains of policy differences and commodity preferences
among states, federal and state governments, and stakeholders in those markets.
The Commonwealth is looking
Figure 1.1: Statesare:
Key questions CleanCanEnergy
marketsand GHG Emissions
endure Reduction
amidst these frictions,Goals
should they evolve,
to utilities to articulate the
and, if so, in what way?
MT ND
ways they are going to meet
near-term goals and align
WA ME
AK
SD plans with its decarbonization
WY VT
MN
NH
roadmap.
IA WI
OR ID NE MI NY MA
IL RI
CA NV UT IN OH PA
CT
CO
NJ The Commonwealth has
KS
WV DE
MD
also issued for comment a
MO KY VA
HI AZ NM
TX
OK
AR TN NC D.C. policy outline for its 2030
MS AL GA SC interim target (45% below
LA 1990 levels), consistent with
Official law
or order
Aspirational or
awaiting finalization
FL MASSACHUSETTS its longer-term goals and
Gov. Baker signed into
Aggressive law March 26
approaches.
Moderate comprehensive climate
Minor change legislation
calling for net-zero While these activities are
No goal emissions by 2050
intended to spur action,
stakeholders will need to
Note: Data as of April, 2021
devote more attention to
Source: S&P Global Platts
identifying specific actions and
impacts, both intended and
unintended.
Massachusetts’ Decarbonization Roadmap 5
Considering Long-Term Goals:
An Introductory Roadmap Lexicon
The 2050 Decarbonization Roadmap
Having achieved meaningful GHG reductions through the Global The structure of the Roadmap comprises four
Warming Solutions Act's first milestone of 2020, the Commonwealth has key elements: pillars, pathways, sectors, and
now shifted focus to 2050. The 2050 Decarbonization Roadmap (the strategies.
Roadmap), released in December 2020 by the Executive Office of Energy
and Environmental Affairs (EEA), is an input in planning Massachusetts’ - Pillars: Four key complementary “pillars
of decarbonization” identified in previous
go-forward strategy.
deep decarbonization studies—specifically
The Roadmap envisions a net-zero emissions target and an 85% reduction end-use energy (transitioned away
of state GHG emissions from 1990 levels by 2050. Subject to finalization, from fossil fuels), energy efficiency and
flexibility, energy supply decarbonization,
the EEA asserts that the proposed Roadmap “identifies cost-effective and
and carbon sequestration.
equitable pathways and strategies” to achieve the 2050 target. Analysis in
the Roadmap includes: - Pathways: Different emissions-reduction
scenarios/specific technological transitions
- Integrated, cross-sector energy system analysis exploring eight distinct to achieve net-zero by 2050; also used to
net-zero emissions reductions “pathways” to 2050. evaluate different technological evolutions,
- Sector-specific analyses focused on buildings, transportation, advancements, and constraints.
non-energy emissions, and the carbon sequestration potential of - Sectors: Key parts of the economy for
Massachusetts’ natural and working lands, as well as a separate which emissions reductions are targeted,
economic and health impact analysis. but with a holistic view, recognizing
current and future physical and
In tandem with the Roadmap, the Commonwealth has pursued aligned and
technological interdependencies in such
inter-related policy and regulatory activities for the near term.
areas as transportation, buildings, energy
- The MA EEA also released in December the interim Clean Energy and supply, non-energy, and land use.
Climate Plan for 2030 (2030 CECP), a policy action plan to achieve
- Strategies: Specific areas where actions
the 2030 emissions limit while maximizing Massachusetts’ ability to
can be taken to achieve 2050 (and 2030)
achieve net-zero by 2050.
goals within sectors, including light-duty
- Separately, Massachusetts’ utility regulator, the Department of Public transportation, residential and commercial
Utilities (DPU), initiated an inquiry (D.P.U. 20-80) in late October 2020 buildings, electric and gas system changes,
to examine the role of local gas distribution companies (LDCs) in and natural carbon sequestration.
achieving the 2050 climate goals.
The Roadmap outlines eight distinct emissions
- Specifically, the DPU will explore strategies to enable transitioning reductions pathways (see Fig. 1.6). Key
to Massachusetts net-zero while safeguarding ratepayer interests; distinctions between the pathways are the
ensuring safe, reliable, and cost-effective natural gas service; and constraints on (or availability of) resource
potentially recasting the role of LDCs. strategies, including efficiency, offshore wind,
distributed energy resources, low-carbon
- By early March 2022, an independent consultant’s report will be
piped gas, and thermal power generation.
submitted along with LDC-specific strategies to support GHG
reductions, with each of these LDC-specific filings subject to a hearing
and next steps.
6 Massachusetts’ Decarbonization Roadmap
Figure 1.2: Selected Massachusetts Decarbonization Policy Activity (2008–2020)
The Global Warming Solutions Act (GWSA)
and Green Communities Act are signed into law.
Masschusetts becomes one of the first states in the
nation to formally commit to a regulatory program
requiring GHG emissions reductions (at least 25% 2008
below 1990 levels in 2020, and at least 80% below
1990 levels in 2050) and to comprehensively reform
its energy policy and procurement framework to Publication of the Clean Energy and Climate Plan
align with that goal. for 2020. The Commonwealth's first comprehensive
climate action plan outlined an integrated portfolio
2010
of policies designed to ensure the achievement of
the interim 2020 emissions limit.
Governor Baker signs Executive Order 569
establishing an integrated climate strategy for the
Commonwealth and An Act to Promote Energy 2016
Diversity authorizing large procurements of offshore
wind and hydroelectric resources.
Governor Baker signs into law An Act to Advance
2018 Clean Energy, setting new targets for offshore wind,
solar, and storage technologies.
Publication of the Decarbonization Roadmap to
2050 and the Clean Energy and Climate Plan for
2030, outlining the long-term strategies and near- 2020
term actions for the Commonwealth to achieve net-
zero emissions.
In March, Governor Baker signed comprehensive
climate change legislation that codifies the
Commonwealth's commitment to achieve net-zero
2021 emissions in 2050, updating the GWSA. It also
authorizes the establishment of an emissions limit of
no less than 50% for 2030 and no less than 75% for
2040.
Source: Massachusetts EEA Massachusetts’ Decarbonization Roadmap 7
High-Level Findings and Observations of the Massachusetts EEA Roadmap
The Roadmap looks across sectors with a view toward highest emissions-reduction gains. It dimensions emissions by sector: electricity (19% of
GHG emissions), buildings (27%), transportation (42%; light-duty vehicles alone contribute 27%), industrial (5%), and other/non-energy (8%).
Some common characteristics of net-zero strategies include the following, consistent with the aforementioned pillars:
- Widespread electrification of vehicles and space heating/building services
- A balanced portfolio of clean generation technologies—particularly offshore wind—across a New England regional footprint, as well as land-
based and rooftop solar, significant amounts of imported, low-carbon electricity, energy storage, and new high-voltage transmission
- Overall reduction in energy supply and demand (i.e., increased energy efficiency)
- Negative emissions natural “sinks” in the form of the Commonwealth’s forested land, as well as technologies such as direct air capture
The report identifies some areas (aviation, marine, and rail, for example) that will be harder to decarbonize, certainly by 2050.
Key findings of Roadmap investment and benefits include the following:
- Substantial investment will be required over the coming decades, but the Roadmap assumes that approximately $4.5 billion in health and
other benefits will more than offset this cost.
- The analysis assumes shifting toward local non-emitting energy production will come with local economic benefits.
- It does note that total required investment can be minimized by transitioning as existing capital stock reaches end-of-service life. However,
as turnover points come infrequently (measured in decades) (see Fig. 1.3), the report notes that the pace of transformation “may feel
uncomfortably fast.”
Figure 1.3: Assumed Lifetime of Common Energy-Related Infrastructure
Bulb
Appliance
AC & Furnance
Vehicle
Commercial Boiler
Power Plant
Pipeline
2020 2030 2040 2050
Source: Roadmap
8 Massachusetts’ Decarbonization Roadmap
The "All Options" Pathway as a Net-Zero Baseline
When developing pathways, the Roadmap looks at a reference case (without net-zero targets); an All Options case, which assumes flexibility
to employ the most economic decarbonization levers; and alternative cases, which selectively limit or expand those levers to show how
technology evolutions or constraints could make the transition easier or more difficult.‡ A description of the cases and key characteristics is
shown at Fig. 1.6.
The All Options pathway is presented as a point of comparison rather than an endorsed pathway and may not be the most economical route.
But the All Options pathway is presented by the EEA as a framework for discussion of sector strategies and additional policy engagement as
stakeholders, regulators, and policymakers investigate possible actions.
Figure 1.4: Key Assumptions in the Roadmaps "All Options" Pathway
Massachusetts behind-the meter solar in 2050 7 GWs
Medium (load-shedding demand response, but less vehicle-to-grid, flexible
Flexible end-use loads
space and water heading demand than DER Breakthrough pathway)
Building & industry electrification High
Energy efficiency High
Captured CO2 export No
Intraregional transmission cost $5,600/MW-mile within New England; $9,400/MW-mile to Quebec
New gas power plants None assumed in Massachusetts
Economic; assumes NREL Annual Technology Baseline "Low" offshore wind
New offshore wind power plants
technology cost
New nuclear power plants None assumed
Existing nuclear Maintain
Use of fossil fuels Constrained by emissions
Massachusetts’ Decarbonization Roadmap 9
Figure 1.5: Massachusetts Roadmap "All Options" Pathway Energy Projections for 2050
The Roadmap's All Options pathway assumes significant reduction in overall energy consumption by 2050,
Energy Flows* with a dramatic shift away from fossil fuel sources.
Energy Demand Rapid transformation of the energy system has impacts on Decarbonized energy system costs are not significantly higher
Energy Costs
and Supply energy services and supply. than the costs associated with a 2050 fossil-based system.
Notes: *The two figures above showing Roadmap energy flows illustrate key changes
The Roadmap's All Options pathway (an "all of the above" strategy) in energy supply and end use from 2020 to 2050. On the left of each figure are
energy sources. The height of a bar indicates the relative quantity of energy
projects signficant changes in the amount and type of energy supply used. The right of each figure indicates the energy use sectors like transportation
and demand, as well as a modest increase in energy costs. and buildings. The middle of each figure shows energy transformations.
Source: Roadmap
10 Massachusetts’ Decarbonization RoadmapFigure 1.6A: Summary of Roadmap Pathways
Difference from All Key Finding of
Pathway Key Characteristic Research Question Defining Assumptions
Options Pathway Roadmap Analysis
All Options Baseline analysis— Under the most “Benchmark Deep electrification
model selecting likely assumptions, compliant” and broad
greatest number of what is the least- decarbonization renewable buildout
economic resources cost deployment pathway, create a reliable
to meet emissions of energy system using midpoint energy system only
limits using baseline technologies that assumptions across marginally more
cost assumptions achieves deep most technical expensive than
decarbonization? parameters today’s.
DER High deployment of +10 GWs behind- What are the 17 GWs of Additional demand
Breakthrough behind-the-meter the-meter solar impacts of greater behind-the-meter flexibility lowers
solar and flexible deployment of solar deployed in local electricity
loads behind-the-meter MA in 2050, as system upgrade
solar and flexible opposed to costs; very high
end uses? 7 GWs rates of rooftop
Higher level solar reduce—but do
of flexible end not eliminate—the
Least Cost
uses, especially need for ground-
vehicle-to-grid mounted solar.
Regional Lower-cost electric Intraregional What can greater Lower Additional
Coordination/ transmission + transmission: access to regional transmission transmission
Expansion export of captured resources costs increases access
CO2 $2,300/MW- contribute as part of to, and the ability
mile within New Captured carbon
decarbonization? exports allowed to share, additional
England low-cost clean
for geological
$4,700 (50% sequestration energy resources
more) per MW- outside New across the
mile to Quebec England Northeast, lowering
overall costs.
OSW Region constrained 30 GWs Northeast What are the Northeast offshore Clean resources,
Constrained to 30 GWs of cap, with mid (vs. consequences of wind capacity is including new
offshore wind low) technology limited development capped regionally at nuclear power, must
(near-shore siting costs; new nuclear is in offshore wind? 30 GWs. be built to serve
difficult; high price; economical MA. Costs increased
approvals delayed; modestly.
etc.)
Source: Roadmap
Massachusetts’ Decarbonization Roadmap 11Figure 1.6B: Summary of Roadmap Pathways (Cont.)
Difference from All Defining Key Finding of
Pathway Key Characteristic Research Question
Options Pathway Assumptions Roadmap Analysis
Pipeline Gas Low Low What are the Building Requires a substantial increase
electrification of electrification impacts of electrification is in imported low-carbon fuels,
pipeline gas uses of pipeline gas continued mostly limited possibly above technically
in buildings and applications reliance on to conversion feasible quantities. Most of this
industry natural gas from oil in the fuel goes to high-value sectors
in buildings? near term, with to compensate for continued
What role can a slower rates of emissions from buildings using
decarbonized gas gas-to-heat pump a fossil/clean fuel blend.
product play in a conversion in the
net-zero MA? long term.
Limited Envelope No efficiency What are the Efficiency gains Limiting efficiency gains
Energy efficiency gains gains across energy, resource, are reduced to results in a higher demand for
Efficiency remain at current buildings, and transmission about one-third zero-carbon electricity and
levels industry, and and distribution of those achieved fuel resources. Costs increase
transportation needs that arise in the All Options significantly.
from deferring pathway in
investments in buildings and
efficiency? aviation.
100% Fossil fuels All nuclear What does a No fossil Reliance on zero-carbon fuels
Renewable fully replaced retired; no fossil 100% renewable fuels allowed; needed for grid balancing and
throughout fuels in 2050 energy strategy zero-carbon end uses leads to dramatically
economy with across electricity combustion higher costs in 2050; demand
carbon neutral and all fuels fuels allowed may exceed feasible supply.
fuel; nuclear require in terms for electricity It would likely require
retired of resources, generation by technological breakthroughs,
Highest Cost
storage, and thermal power yet to be identified, to meet
costs? plants. resource constraints and
contain costs.
No Thermal Forced retirement New gas plants What resources All thermal Substantially higher reliance
of all gas and disallowed will be needed capacity retired on solar power, particularly
oil electricity everywhere if thermal by 2050. ground-mounted, and new,
generation generation is long-duration utility-scale
not available to energy storage to provide
provide reliability grid balancing, leading to
services? dramatically higher costs.
Source: Roadmap
12 Massachusetts’ Decarbonization RoadmapEarly Analysis of Massachusetts Figure 1.7: Gross Energy System Cost: No Decarbonization vs. All Options (Annual $ Billions)
Roadmap Costs $30 Other
$27.2 $27.6 Oil Products
As momentum toward decarbonization $25.6
$25.1 Natural Gas
activities gathers in Massachusetts $25 $23.9 $23.6 $24.0 $23.7 Zero Carbon Gas Imports
and elsewhere, utilities, regulators, and $22.4 Zero Carbon Liquid Imports
Annual Cost in 2018$B
other stakeholders are increasingly Hydro Purchases
$20
considering the cost of developing Offshore Wind
or converting significant amounts of Rooftop Solar
infrastructure to alternative energy $15 Ground-Mounted Solar
Biomass Power Plants
sources.
In-State Fuels Production
$10 Gas Power Plants
The Roadmap does not discuss costs
Gas Pipelines
except at a societal level and compared
Electricity Transmission
with projected health benefits. But the $5
Electricity Distribution
Roadmap technical report does identify Electricity Storage
costs in three ways: Demand-Side Costs
$0
- Gross cost: Annual spending on
ce
ns
les
gh
cy
al
ed
as
n
tio
rm
eG
en
ien
tio
ain
rou
ab
ina
The
fer
Op
ew
ffic
elin
str
kth
ord
energy, particularly comparing the
Re
Con
All
en
dE
No
Pip
rea
l Co
%R
ite
nd
RB
reference case (no decarbonization)
Lim
na
100
Wi
DE
gio
re
Re
sho
on fuels and capital versus a shift to
Off
Source: Roadmap
new capital equipment (see Fig. 1.7)
- Net cost: Compares annual costs
for other pathways versus the Figure 1.8: Roadmap Estimated Average Societal Electricity Rate Among Pathways ($/MWh)
All Options baseline scenario
(not versus a no decarbonization $164 $164
$151
alternative). The Roadmap's $142
$131 $133 $132 $133 $135 $133
modeled diversion in costs between $129
Roadmap
pathways tend to occur in the latter
estimated
$/MWh
part (2040+) of the forecast period.
costs are highly
- Electric and gas rates: Estimates a assumptions
societal electricity rate, assuming dependent.
greater electric volumetric demand
and decreased gas volumes over
time after an early period of
n
ns
s
gh
as
cy
0
0
0
al
ed
ble
tio
202
203
204
significant capital investment
eG
tio
rm
ien
ou
ain
ina
a
Op
The
r
ew
elin
ffic
kth
str
ord
All
en
dE
Con
(see Fig. 1.8). The rates it uses do
Pip
rea
No
l Co
%R
ite
RB
nd
na
Lim
100
not account for market-clearing Wi
DE
gio
re
Re
sho
prices and are averages of all
Off
customer classes.
All Options 2050
Source: Roadmap
Massachusetts’ Decarbonization Roadmap 13Getting a Handle on Figure 1.9 shows how near- Figure 1.9: Indicative 2021-2030 Capital Investment (National)
term net-zero investment for a Net-Zero Path (from Recent Studies) ($ Billions)
Transition Cost: More
Work Ahead might be allocated. Near-term
Source: National Academies Study
BUILDINGS ELECTRICITY
investment would be for five ($950 billion) ($905 billion)
The Roadmap report, key actions:
as with other scenario
analyses, raises questions - Improve efficiency and
about ultimate cost and energy productivity
affordability for customers. - Electrify energy Existing building
services in the buildings, envelope retrofits, 530 Solar, 310
Several other recent studies transportation, and
Natural
gas power
have identified “deep industrial sectors w/CCS, 10
decarbonization” pathways,
some of which use the same - Decarbonize electricity Efficient Building
EnergyPATHWAYS model appliances system
used in the Roadmap. All
- Build critical Heat pumps equipment,
110
controls,
80
(space & water
infrastructure heating), 200 INDUSTRY
contemplate significant Efficient new buildings, 30 Wind, 300
($60 billion)
capital investment, - Innovate to “complete NETWORKS VEHICLES Industrial
Electricity
($811 billion) ($250 billion) efficiency, 30
particularly in the next 10 the low-carbon toolkit” distribution, 20
CO2
EV chargers, 10 transportation, EVs & Electric boilers, 10
years. 70 FCVs -
While higher than business CO2 storage, 10 Medium
& heavy
Cement w/CCS, 10
Natural Gas to
A report by the National as usual, the studies Electricity
transmission, 150 EVs - Light Duty, 190
duty,
60
H2 w/CCS, 10
Academies of Sciences, characterize the incremental
Notes: Illustration as depicted in original report. Blocks are not to dollar scale.
Engineering, and Medicine, cost as modest when Totals indicated not fully represented by sector blocks.
summarizing existing compared with overall gross
literature on U.S. net- domestic product, typically
Figure 1.10: A Comparison of Indicators from
zero pathways, estimates about a percentage higher. Three Recent Decarbonization Studies
incremental capital Importantly, costs and
investments of $2 trillion trade-offs are based upon 2030 2050
over the next decade, and assumptions over a long- Key Metric 2015 EI DDPP NZA EI DDPP NZA
$4 trillion to $6 trillion term horizon—for example, Final Annual
through 2050 beyond a
Energy Demand 97 129 80 64–67 125 65 50–56
energy productivity gains, (quads)
$22.4 trillion “business-as- cost of existing and new Percent
usual” baseline. Demand- technologies, and energy Non-emitting 18 60 55 62–77 100 85 98–100
electricity
side investment would commodity prices. Those
Electricity
comprise about 60% of the assumptions can drive share of final
28 44 32 21–25 73 60 38–51
energy demand
investment through 2030. significantly different visions (percent)
of the energy system future Building energy
state (see Fig. 1.10). demand 18 17 16.4 18–19 11 13 13–15
(quads/yr)
EV share of
light-duty
vehicle stock 1 47 44 6–17 100 100 61–96
(percent)
Source: National Academies Study
14 Massachusetts’ Decarbonization Roadmap (see Sources for this section for report acronym references)Getting Myopic: Pursuing Figure 1.11: 2030 CECP Targeted Emissions Reductions by Sector
Decarbonization in the Next Decade
GHG Reductions in
Sector Gross GHG Emissions (MtCO2e)
As noted earlier, Massachusetts has 2030 (from 2017)
other near-term activities focused 1990 2017 2030
on decarbonization. Its 2030 CECP,
released for public comment, attempts Transportation 30.5 30.5 22.5–22.7 7.8–8.1
to identify policy measures to move
Buildings 23.8 19.7 10.3 9.4
Massachusetts to its 2030 goal of 45%
emissions reductions from 1990. Electricity 28.1 13.6 8.5–9.4 4.2–5.1
The 2030 CECP proposes a suite of Industrial & Non-Energy 12.0 9.2 7.8–9.7 (0.5)*–1.4
strategies that will yield reductions
across sectors, with the potential Total 94.5 73.0 49.1–52.1 20.9–23.9
reductions noted in Figure 1.11. Policy
actions are focused on transportation, % Reduction From 1990 - 23% 45%–48%
buildings, and energy supply, with *Negative reduction indicates an increase – this reflects partial mitigation of emissions growth
modest activity in industrial and non-
Source: 2030 CECP
energy sectors and in land use. The
EEA’s proposed metrics and tools for
emissions-reductions actions are more
Figure 1.12: 2030 CECP Reduction Strategies for Key Sectors
fully described in Figure 1.12.
EEA notes that uncertainties for the Transportation Buildings Electricity
2030 policy are equipment stock
$130M for clean Electric space heating in 7 GWs of clean energy
lifespans and the potential for their transportation systems one million households and projects, including
replacement before the end of useful life 300M-400M square ft. of 3.2 GWs solar, 3.2 GWs
750,000 zero-emission
and technology readiness. vehicles (ZEV) on the road
commercial real estate offshore wind, and 1 GW
transmission to Quebec
Rates and programs to ~20% reduction in fuel oil
allow for electric vehicle carbon intensity 2 MtCO2e limit on emissions
from imported electricity
participation in electric 5% reduction in pipeline
markets natural gas carbon intensity Distribution-level grid
upgrades
~20% reduction in carbon Deep energy retrofit in 20%
intensity of diesel fuel of building stock
Pilot medium-duty/ Passive, high-performance
heavy-duty ZEV programs building envelope
efficiency in new
Stabilize vehicle-miles
construction
traveled, even with larger
fleet
7.8–8.1 MtCO2e reduction 9.4 MtCO2e reduction 4.2–5.1 MtCO2e reduction
Source: 2030 CECP
Massachusetts’ Decarbonization Roadmap 15Taking a Closer Look at Natural Gas Utility Implications
The 2030 CECP acknowledges that it has not evaluated the cost of specific policies, but rather estimated them generally for suites of policies
through the Roadmap.
One area of particular focus for 2030 is thermal electrification in buildings, which has a direct and potentially significant impact on the natural
gas industry. It is unclear, however, what this specific transition policy will cost and how those costs will be socialized.
D.P.U. 20-80 is intended to address the implications of the Roadmap for natural gas utilities in the Commonwealth across proposed carbon-
reduction pathways. Actions required under the proceeding include:
- Quantify the costs and actual economy-wide emissions reductions in “transitioning the natural gas system”
- Discuss potential mechanisms for cost recovery or responsibility for cost incurrence, as well as potential mitigation
- Quantify electrification strategies, including key assumptions and GHG emissions-reduction calculations (including for power generation)
- Discuss qualitative factors to consider, including public safety, reliability, economic development, equity, emissions reductions, and timing
- Recommend specific initiatives, actions, and milestones to reduce GHGs from gas sale and distribution
D.P.U. 20-80 will take some of the high-level analysis performed for the Roadmap and narrow the lens on gas utilities.
16 Massachusetts’ Decarbonization RoadmapNorth Carolina: Different State, Different Regime,
Different Approach
In North Carolina, Governor Roy Cooper has relied on an
executive order and stakeholder groups to shape and influence
Figure 1.13: Selected Climate-Related Activities in North Carolina
climate and energy policy.
In October 2018, the governor signed Executive Order 80, which
directed the state to address climate change and transition to a 2018
clean energy economy. In the near-term, the executive order set
the following goals for the state by 2025: October 2018: Governor Roy Cooper signs
Executive Order 80.
- Reduce statewide GHG emissions to 40% below 2005 levels.
- Increase registered zero-emission vehicles (ZEV) to at least 2019
80,000.
September 2019: DOA releases Motor Fleet
- Reduce energy consumption per square foot in state-owned ZEV Plan.
buildings by at least 40% from fiscal year 2002-2003 levels.
September 2019: Duke Energy announces
The executive order also laid the foundation for more robust goal of achieving net-zero carbon emissions
action by directing state agencies to develop longer-term
from electric generation by 2050.
targets and plans. With nearly 70% of GHG emissions coming
from the electric power sector and transportation, notable October 2019: DEQ releases NC Clean
directives included: Energy Plan.
- NC Department of Transportation to develop a NC ZEV Plan October 2019: DOT releases NC ZEV Plan.
designed to increase the number of ZEVs to at least 80,000
by 2025, establish interstate and intrastate ZEV corridors,
and increase installation of ZEV infrastructure. 2020
- NC Department of Administration to develop a NC Motor July 2020: NC Electric Cooperatives pledge
Fleet ZEV Plan that identifies the types of trips for which net-zero carbon by 2050.
a ZEV is feasible, recommend infrastructure, and develop
procurement options and strategies. December 2020: Stakeholder group
releases NC Energy Regulatory Process
- NC Department of Environmental Quality to develop a Summary Report.
NC Clean Energy Plan that “fosters and encourages the
utilization of clean energy resources…and development of a
modern and resilient grid.” 2021
Additional directives within the executive order tasked state March 2021: Stakeholders discuss major
agencies to produce the following additional reports: a climate energy legislation.
risk assessment and resiliency plan; a GHG inventory; clean
energy and clean transportation workforce assessments; and a
comprehensive energy, water, and utility conservation program
in state buildings.
Massachusetts’ Decarbonization Roadmap 17State Agencies and Stakeholder Groups Map the Path Forward
The NC ZEV Plan organized actions in four categories: education, - An ensuing stakeholder process arose to design specific policy
convenience (e.g., fast charging), affordability, and policy. Early recommendations. The group reached general agreement and
actions include coordinating ride-and-drive events, facilitating fast recommended the following legislative package:
charging collaboration, and establishing consistent wayfinding
Adopt a performance-based regulatory framework that
signage.
includes a multi-year rate plan, revenue decoupling, and
The NC Motor Fleet Plan used telematics data to identify 572 performance incentive mechanisms (PIMs).
traditional, gas-powered vehicles that could be replaced by electric
Expand securitization to electric utilities to retire
vehicles, thereby saving the state an estimated $3.8 million and
undepreciated assets, in addition to current authorization
reducing emissions by 22,000 metric tons over the lifetime of the
related to storm recovery costs.
vehicles.
Study the benefits and costs of wholesale market reform and
As for the electric sector, the NC Clean Energy Plan established a
their impacts on the North Carolina electricity system.
goal to reduce GHG emissions 70% below 2005 levels by 2030 and
to attain carbon neutrality by 2050. Expand procurement practices to utilize competitive
procurement as a tool for electric utilities to meet energy
- An overarching theme across the wide-ranging
recommendations was an interest in establishing a “21st century and capacity needs identified in integrated resource plans.
regulatory model that [incentivizes] business decisions that
Stakeholders have since begun negotiating major energy legislation
benefit both the utilities and public in creating an energy system
to be considered by the North Carolina legislature.
that is clean, affordable, reliable, and equitable.”
Figure 1.14: North Carolina Greenhouse Gas Emissions by Sector
Note: *Industry includes fossil fuel combustion, natural gas and oil processes, and industrial processes.
Source: NC Dept. of Environmental Quality
18 Massachusetts’ Decarbonization RoadmapKey Observations Concerning
North Carolina’s Approach
The actions and ensuing targets set
by Governor Roy Cooper create
short-, medium-, and long-term goals.
Achieving incremental milestones
will require continuous improvement
and investments in both ZEV
infrastructure and renewable or net-
zero technologies.
The focus on the electric power and
transportation sectors addresses the
largest sources of GHG emissions
but also reduces the number of
stakeholders that must pursue near- or
medium-term actions.
Despite being initiated by an
executive order, the process has
aligned stakeholders on a set of policy
reforms that may institutionalize
new electric utility business models
with performance-based ratemaking,
decoupling, and PIMs.
Despite the absence of a legislative
mandate, major electric utilities serving
North Carolina customers, notably Duke
Energy and North Carolina Electric
Cooperatives, have announced the
goal of net-zero carbon by 2050. What
makes their voluntary commitments
notable is that these utilities accounted
for nearly 85% of the state’s retail
electricity sales in 2019.
Massachusetts’ Decarbonization Roadmap 19What This Means for Energy and Utility Companies
While the Roadmap and similar analyses serve as tabletop exercises - What opportunities for investment (and returns) can come from
for envisioning decarbonization, the real work is left to the energy transition?
and utility industries to assess growth opportunities, potential costs,
- How will the costs of transition investments be allocated among
and deployment actions needed to implement policy directives.
customer classes or socialized more broadly, and what new rate
Utilities should look closely at proposed transition actions and ask: or pricing schemes are required?
- What assumptions are driving different pathways? Do they - How much capital is needed to fund energy system investments,
assume technology breakthroughs? Some examples: and where will it come from?
Availability and deliverability of imported clean energy In addition to addressing the questions above, and others, utilities
will need to consider long-term targets as they make investment
Behavioral changes (e.g., EV adoption, ridesharing) and business model decisions over the next decade.
Stock turnover and ability and cost to retrofit
Availability of resources, including trained personnel, at scale
during the contemplated timeframes
Heat pump efficiency
Dispatchability and capacity availability of different power
generation resources
Potential Actions for Utilities Considering Decarbonization
Opportunities: Consider where investment might afford business opportunities to roll out new products and services, generate
higher margins, improve system performance, or otherwise grow the business.
Interim Targets: Identify interim “no-regrets” strategies that preserve real options as technology and other transitional aspects
evolve.
Signposts: Articulate key indicators that could serve as status markers of whether transition cost, difficulty, or timing are
different than originally contemplated and require plan adjustment.
Scope, Cost, and Prioritization: Prioritize “bang-for-the-buck” investments with a capital plan and resource allocation strategy.
Rate Strategy: Identify key features of existing regulatory and rate structures that require readjustment to provide net-zero
utility and customer incentives.
20 Massachusetts’ Decarbonization RoadmapNotes: Sources:
IMPLICATIONS ‡Analysis started with the end-state emissions goal www.mass.gov/service-details/global-warming-solutions-
and used “back-cast” modeling to understand the act-background; www.mass.gov/info-details/ghg-
It is a long road to 2050, and pressure transformations needed to get to 2050. It modeled emissions-and-mitigation-policies; www.mass.gov/service-
is building in some states to reconfigure pathways, taking into account energy supply and demand details/gwsa-implementation-progress; Massachusetts
and emissions input/output on an hourly and annual level, S.2995, passed Jan. 4, 2021; Massachusetts Executive
infrastructure in key energy-consuming
cost assumptions, and expected turnover of capital stock Office of Energy and Environmental Affairs (EEA),
and producing segments of the Massachusetts 2050 Decarbonization Roadmap Study
(power plant, boilers, vehicles, etc.).
economy. Near term, utilities should (Dec. 2020) (includes the Roadmap Report and associated
look closely at proposed policy technical analyses) (Roadmap); EEA, Interim Clean Energy
and Climate Plan for 2030 (Dec. 30, 2020) (2030 CECP);
roadmaps to determine recommended Massachusetts Dept. of Public Utilities, D.P.U. 20-80, Vote
actions and embedded assumptions, and Order Opening Investigation into the Role of Gas Local
considering implementation issues, Distribution Companies as the Commonwealth Achieves
Its Target 2050 Climate Goals (Oct. 29, 2020); National
including customer cost, expected pace Academies of Sciences, Engineering, and Medicine,
of action, and possible barriers. They Accelerating Decarbonization of the U.S. Energy System
should also identify potential growth (Feb. 2, 2021) (National Academies Study); Megawatt Daily;
NRDC; Foley Hoag; North Carolina Executive Order 80
opportunities as the energy system is
(signed Oct. 29, 2018); NC Department of Administration,
reconfigured. NC Motor Fleet ZEV Plan (Sept. 2019); NC Department
of Transportation, North Carolina ZEV Plan: A Strategic
Plan for Accelerating Electric Vehicle Adoption in North
Carolina (Oct. 2019); NC Department of Environmental
Quality, NC Clean Energy Plan: Transitioning to a 21st
Century Electricity System (Oct. 2019); and RMI and RAP,
North Carolina Energy Regulatory Process: In Fulfillment of
the North Carolina Clean Energy Plan B-1 Recommendation
(Dec. 2020); WRAL, “Secret Talks Underway on Potential
Major NC Energy Bill” (Mar. 10, 2021);
Reports referenced in Figure 1.10 are: Energy Innovation,
“Net-Zero Emissions Scenario” (2020), Policy Solutions,
available at https://us.energypolicy.solutions/scenarios/
home (EI); Evolved Energy Research, U.S. Deep
Decarbonization Pathways Project, 350 PPM Pathways for
the United States (2019) (DDPP); Larson, et al. Net-Zero
America by 2050: Potential Pathways, Deployments and
Impacts (forthcoming), Princeton University (Dec. 2020),
preliminary results summary available at https://www.
dropbox.com/s/kyz1d2b6h90vjyn/Preliminary%20Results.
pdf?dl=0 (NZA). All reports were cited in the National
Academies Study referenced above.
Massachusetts’ Decarbonization Roadmap 21Energy and Utility Sector Themes Cost control and increasing capex emerge as cross-energy sector priorities.
Turning the Corner
Over
It has the past
been several
nearly months,
25 years energy
since FERCand utility
issued companies
Order have beenopen
888, establishing discussing KEY TAKEAWAYS
their
accessperformances in 2020 and network
to the bulk transmission expectations for 2021
and just moreandthanbeyond.
20 years since FERC
promulgated Order 2000, calling for the establishment of regional transmission After a difficult pandemic year,
In our review of
organizations selected companies’ comments to investors, almost all companies
(RTO). utilities hope for improving
discussed two significant common items:
conditions and increasing
Over that time, large parts of the United States—as well as Canada—have
- First, most acknowledged the efforts of the workforce in performing well
established bid-based markets for energy and related services. These markets have
revenues from commercial and
despite the constraints of the COVID-19 pandemic. Many said that financial industrial customers.
encouraged technological innovation and asset turnover in the power generation
performance was better than expected given the circumstances.
sector and, along with declining fuel prices, helped lower power prices over the
- Second,
past 20 years. Theare
firms non-RTO West referencing
increasingly has tested this construct through
environmental, social, its
andcompeting Many companies deployed
governance
imbalance (ESG) strategies. Many discussed social justice and equity
markets.
cost control measures in 2020
activities and workforce diversity initiatives. Most referenced clean energy
Setting
and aside issues and effects ofobjectives
GHG emissions-reduction the pandemic, as we
as well, withentered 2020 some
some focused on and hope to maintain cost
markets were feeling
frameworks the strains
for reporting of policy
climate differences and commodity preferences
performance. discipline going forward.
among states, federal and state governments, and stakeholders in those markets.
More detailed discussion
Key questions of company
are: Can markets priorities
endure and strategies
amidst these frictions, appears
should theyon the
evolve,
following pages.
and, if so, in what way? The energy and utility sector
continues to deploy capital
strategically and reposition
business portfolios, many
to pure-play, rate-regulated
operations.
While capital investment
has continued to grow for
infrastructure upgrades and
GHG reduction initiatives,
some analysts see downside
risks if energy demand growth
disappoints, if regulatory lag
becomes an issue, or if balance
sheets are weak.
Energy and Utility Sector Themes 23Looking for Stock Price Growth Figure 2.1: Selected Energy Sector Normalized Equity Indices - Five Years (1/1/2016–3/31/2021)
(Jan. 1, 2016 = 100%)
Setting aside the unusual
250%
economic conditions of the past
year, utilities have been lagging
the overall market index as well 200%
as higher growth sectors such S&P 500
as financials, technology, and S&P 500 Electric
healthcare. 150%
Index Value
Utilities Sub
Ind Index
Relatively strong economic S&P 500
growth over the past few years 100% Multi-Utilities
and recent bullish outlooks for SNL Gas Utility
economic rebound have caused Alerian
50%
some observers to believe that Midstream U.S.
utilities’ defensive characteristics—
absent a growth story—may cause 0%
1/4/16
3/4/16
5/4/16
7/4/16
9/4/16
11/4/16
1/4/17
3/4/17
5/4/17
7/4/17
9/4/17
11/4/17
1/4/18
3/4/18
5/4/18
7/4/18
9/4/18
11/4/18
1/4/19
3/4/19
5/4/19
7/4/19
9/4/19
11/4/19
1/4/20
3/4/20
5/4/20
7/4/20
9/4/20
11/4/20
1/4/21
3/4/21
valuations to continue to lag other
sectors.
Sources: S&P Global Market Intelligence data; ScottMadden analysis
A look back at relative energy and
utilities’ index values versus the
broader S&P 500 index is shown Figure 2.2: Selected Energy Sector Normalized Indices - Three Years (1/1/2018–3/31/2021)
on Figures 2.1 and 2.2. (Jan. 1, 2018 = 100%)
160%
Looking ahead, Figure 2.3
captures estimated EPS growth in 140%
selected U.S. utilities versus their
forward (2022) price-earnings 120%
S&P 500
multiple. This analysis indicates
100% S&P 500 Electric
that many utilities may be
Index Value
Utilities Sub
undervalued. 80%
Ind Index
S&P 500
60% Multi-Utilities
SNL Gas Utility
40%
Alerian
Midstream U.S.
20%
0%
1/2/18
2/2/18
3/2/18
4/2/18
5/2/18
6/2/18
7/2/18
8/2/18
9/2/18
10/2/18
11/2/18
12/2/18
1/2/19
2/2/19
3/2/19
4/2/19
5/2/19
6/2/19
7/2/19
8/2/19
9/2/19
10/2/19
11/2/19
12/2/19
1/2/20
2/2/20
3/2/20
4/2/20
5/2/20
6/2/20
7/2/20
8/2/20
9/2/20
10/2/20
11/2/20
12/2/20
1/2/21
2/2/21
3/2/21
Sources: S&P Global Market Intelligence data; ScottMadden analysis
24 Energy and Utility Sector ThemesFigure 2.3: Earnings vs. Price/Equity Multiple Outlook for Selected U.S. Utilities
14%
Stocks in this quadrant have
NJR
lower P/E ratios and stronger
12% relative long-term earning growth SR
potential and could be considered
fundamentally undervalued. SJI
Estimated Long-Term EPS Growth Rate (%)
10%
NEE
CPK AWK
AGR
8% AEE
EVRG CMS
PCG
ATO OTTR SJW
MDU ES
NFG ETR D WTRG AWR
SRE
AEP ALE WEC
6% FE DTE LNT PNM
XEL
SWX AVA
BKH NI OGS
DUK NWE SO
4% POR
EIX PNW PEG HE CWT
PPL IDA
Multi-utility
CNP ED Stocks in this quadrant have higher P/E
2%
OGE NWN ratios and lower relative long-term
earnings growth and could be
considered fundamentally overvalued.
0%
0 5 10 15 20 25 30 35 40
Forward P/E Ratio - Calendar Year 2022
Electric Utility Gas Utility Multi-Utility Water Utility
Notes: For the 12 months ended Dec. 31, 2022. As of Feb. 26, 2021. Comments are per S&P.
Source: S&P Capital IQ
Energy and Utility Sector Themes 25Deploying, and Redeploying, Figure 2.4: Investor-Owned Utility Historical and Figure 2.5: Investor-Owned Utility
Capital Projected Capex (as of Oct. 2020) 2019-2020 Projected
Functional Capex
139.8
Despite the challenges of the $140 B
132.2 $139.8 B
$135.6 B
COVID-19 pandemic, capital $130 B 124.1 125.8 $140 B
119.2
spending in the utility industry $120 B
112.5 113.1 $120 B $37.4 B 27%
$38.1 B 28%
continued apace in 2020 (see $110 B
104.0
Fig. 2.4). According to U.S. $100 B 96.1
$100 B
$ Billions
$ Billions
90.3 90.3
government figures, the annual $90 B $80 B $39.0 B 29% $41.8 B 30%
amount of electric power industry $80 B 74.3
78.6
$60 B
construction in 2020 did not dip $70 B
$25.7 B 19% $25.9 B 19%
below $73B (Fig. 2.6). $60 B
$40 B
$23.5 B 17%
Among investor-owned electric $50 B $20 B $23.6 B 17%
$2.5 B 2%
$40 B $3.5 B 3%
utilities, year-end capex 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 $0 B $7.0 B 5% $8.8 B 6%
projections as of October 2020 2019P 2020P
Projections as of October 2019 as of October 2020
Actuals
(Oct. 2020)
projected a 3% increase over 2019
Generation Distribution Transmission
levels. Spending among functional
Gas-Related Regulatory Compliance Other
areas was relatively steady,
with a slight decrease in the Notes: According to EEI, at the industry level, projected capex is consistently overestimated for the first year's projection
(by 5%-7%) and underestimated in the second year (by 6%-10%) and in the third year (by 20%-25%). Each annual
generation portion of spend and a functional projection above is compiled during the reported calendar year and not revised to align with actual total.
slight increase in the distribution So 2019 totals do not align between the EEI charts above. Data as of October 2020.
segment (see Fig. 2.5). Source: EEI
Meanwhile, with significant
amounts of liquidity in the Figure 2.6: Monthly Value of Private Construction Put in Place – Electric Sector
financial system and continued
low interest rates, transaction $90
Estimated Annual Values
activity has largely been smaller 2018: $70.4B 2019: $76.9B 2020: $78.7B COVID-19 Pandemic Period
$80
asset-by-asset transactions,
$70
punctuated by larger spinoffs,
divestitures, and strategic $60
$ Billions
minority investments by private $50
equity players (see Fig. 2.7). $40
These transactions reflect
$30
movement toward simpler pure-
$20
play, rate-regulated businesses
for some, while acquirors may see $10
opportunity to pick up potentially $0
Feb-18
Oct-18
Feb-19
Oct-19
Feb-20
Oct-20
Feb-21
Jan-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Jan-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Jan-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Jan-21
Nov-18
Dec-18
Nov-19
Dec-19
Nov-20
Dec-20
undervalued unregulated
businesses and fossil fuel assets.
Note: These are estimated annual rates based upon monthly activity.
Sources: U.S. Census Bureau; ScottMadden analysis
26 Energy and Utility Sector ThemesFigure 2.7: Selected Significant ($1B+) Asset, Spinoff, and Corporate Transactions (Jan. 2019-Apr. 2021)
$9
Completed
$8
Announced
$7
Transaction Value ($B)
$6
$5
$4
$3
$2
$1
$0
Sempra Sempra Amerigas Duke El Paso PG&E Brookfield AltaGas Pattern Brookfield Terraform Bay State Direct Equinor PNM Duke Narragansett Sempra
Wind Renewables, Partners Commercial Electric Co. Electric Infrastructure Canada Energy Renewable Power Gas Co. Energy Empire and Resources Energy Electric Co. Global
Assets LLC Renewable T&D Assets Corp. Group Corp. Assets Beacon Wind Indiana,
Portfolio Projects LLC
Announced 2019 2020 2021
Industry
Transaction Type A C C A C A S C C S M A C A C M C M
Buyer Type EU EU GU F F Muni - F F - F CU M O&G EU F EU F
Legend
Industry Transaction Type Buyer Type
Combination utility A – Asset acquisition CU – Combination utility
C – Corporate acquisition EU – Electric utility or affiliate
Electric utility M – Acquisition of minority stake F – Financial investor
Notes: Transaction value includes
S – Spinoff or split-off GU – Gas utility or affiliate purchase consideration such as
Gas utility M – Merchant energy provider assumed debt. Transaction status
as of April 8, 2021.
Muni – Municipality
Renewable energy Sources: S&P Global Market Intelligence;
O&G – Integrated oil & gas company
ScottMadden analysis
Energy and Utility Sector Themes 27CEO Themes: Messages to Stakeholders
A selected sample of messages from investor presentations and earnings calls revealed a few themes, slightly differentiated by sectors, as
shown in Figure 2.8.
Figure 2.8: Utility Management Themes, Priorities, and Strategies by Sector
Gas Local Midstream Combination Combination Integrated
Distribution Companies Gas Companies Delivery-Only Utilities* Utilities** Electric Utilities
Natural gas is not going away anytime Dramatically improved Significant [emissions- Reducing or Actively manage our portfolio of
soon. But we are reinvesting today credit metrics, with reduction efforts] to the unwinding exposure assets and companies to enable
to prepare for and capitalize on the “strong cash generation region [are] customers’ to the midstream gas this movement [to clean energy],
transition toward decarbonization. and capital discipline energy efficiency initiatives,… sector; simplifying while ensuring our balance sheet
moving toward goal significantly expand[ing] zero- to focus on pure- and credit metrics strength…
Our north star and vision forward is being
to improve leverage emissions vehicle charging play state-regulated Asset optimization will continue
a carbon-neutral energy provider by
metrics.” infrastructure and reduc[ing] utility operations. as we focus on core growth
2050.
the number of homes heated opportunities.
We continue to execute our well-
Actively researching
with oil. Most significant,…at
Sale of two gas
established regulatory strategy
opportunities that will
least 4,000 MWs of offshore
LDC businesses as As we mature in our continuous
complement extensive an efficient way to improvement efforts, we aspire to
focused on annual filing mechanisms, wind facilities.
midstream assets recycle capital and permanently reduce O&M costs
which mitigate the incremental impact
of customer bills while reducing
and enhance role in a Strengthen core utility delivery invest in growth and redeploy those resources.
future transition to a business; grow existing clean accretive to utility
[regulatory] lag.
low-carbon economy, energy businesses and pursue businesses.
Develop innovative solutions
that include large-scale battery
As innovation like RNG and hydrogen including electrification additional clean energy growth
Future growth from storage, carbon capture and
scale, the existing gas distribution system of compression assets, opportunities consistent with
the new clean energy sequestration, and hydrogen-
will deliver more and more decarbonized potential carbon our risk appetite; and pursue
future investments based strategies.
fuel, dramatically reducing emissions capture and storage additional regulated growth
behind-the-meter,
without a massive build-out of new opportunities, and long- opportunities to add value in
to infrastructure
Long-term capital investment plan
infrastructure. term opportunities like the evolving industry. includes annual projected rate
opportunities
hydrogen transportation base growth at our state-regulated
Safety, reliability, and affordability make and storage.
Announced a series of supporting
utilities of >5%, with a continued
natural gas a preferred fuel source. Eight integrated transactions electrification of
emphasis on transmission,
out of 10 homeowners in our service Maintaining cost intended to simplify our transportation and
transportation and distribution,
territory prefer natural gas.... There is discipline, achieving energy infrastructure a growing mix of
modernization, and resilience.
a strong recognition that natural gas is expense and sustaining businesses under one growth renewables in the
affordable, efficient, and preferable to capital savings, getting platform...intended to create distribution system, Stability of multi-year rate plans
electricity for heating and cooking. more efficient and cost scale and strategic alignment to expanding the allows focus on efficiency in the
effective. …[and] selling a non-controlling existing aging business…while [maintaining]
Over the last 10 years, we have invested interest to a strategic partner…. infrastructure strong credit ratings and balance
more than $11B company-wide to Diversification across
[W]e’re allocating capital replacement sheet [and]…consistent access to
modernize our pipeline infrastructure, multiple commodities,
into the lower-risk portion programs. the capital markets.
more than 80% of which was allocated to magnitude of
of the energy value chain
safety. transportation and
in…cross-border renewable
Kicked off grid Substantial economic
storage assets, depth enhancement decarbonization of the electricity,
We have not seen any bans... across of marketing activities,
opportunities, large-scale
projects, including transportation, and industrial
our service territory. We stay in close integrated LNG projects, and
and cost control efforts. securing a mechanism sectors is possible, which
contact through our stakeholder other investments in energy
for recovery. represents a potential investment
engagement strategy, our local public networks.
opportunity of trillions of dollars
affairs and operating teams with our city
in the coming decades.
jurisdictions, [and] our state legislators
as well.
Notes: *Combination delivery-only utilities deliver gas and electricity but do not own and operate power generation facilities. **Combination utilities are electric and gas utilities that
own and operate power generation and transmission facilities that serve customers in a traditional integrated utility structure or as provider of last resort supplier.
Sources: Selected utility earnings calls and investor presentations
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