Cities Can Tackle Clean Energy Goals By Focusing on Utility Planning
Many local governments, businesses and electric utilities in the United States are setting ambitious clean energy targets as they increasingly recognize the need for a low-carbon future. Today, one-fifth of the world’s largest corporations have committed to net-zero targets, nearly 200 local governments in the U.S. have established commitments to power their communities with 100% clean and renewable energy, and 361 electric utilities have set clean energy or carbon reduction goals.
Yet more action is needed to make this future a reality.
As of 2020, the U.S. electricity mix consisted of 60% carbon-emitting generation, 20% renewable energy and 20% nuclear. To transition the power sector to low-carbon resources and help achieve these ambitious targets, utility long-term resource planning processes present an important engagement opportunity to influence the future grid. Through these long-term resource plans, also known as integrated resource plans (IRPs), electric utilities plan how to meet future energy demand and examine which energy options can deliver safe, reliable power at the lowest cost over the next 10 to 20 years.
While corporations and local governments can sometimes purchase renewable energy directly from their utility or other retail providers, IRPs impact access to clean energy by influencing the underlying grid mix and, in some cases, the availability of renewable energy purchasing options — all of which influences how customers can achieve their related energy targets. IRPs can also address priorities such as energy efficiency, electrification and equity issues, such as equal access to resources, energy burden and affordability.
How Local Governments are Already Engaging with Utilities
Recognizing this key opportunity, customers — including local governments — are increasingly becoming involved in utility resource planning processes to accelerate the clean energy transition. The City of Atlanta engaged in their utility’s 2019 IRP process during the regulatory approval stage by submitting comments requesting greater renewable energy resources and energy efficiency measures. As a result of Atlanta’s and other large-scale customers’ engagement, the utility doubled the amount of renewable energy it was planning to purchase.
Local governments are also working with their peers, magnifying their voices. In North Carolina, 14 local governments submitted comments to the North Carolina Utilities Commission illustrating how their electric utility’s IRP influenced their ability to achieve their greenhouse gas emissions reduction goals, encouraging different modeling practices and more holistic analyses of system-wide benefits of renewables.
Some local governments are also using IRP processes to advance other community priorities alongside their climate targets. The City of Minneapolis centered its entire IRP comment on equity, encouraging its utility, Xcel Energy, to support a just and equitable workforce transition to clean energy, address disproportionate climate and pollution impacts on low-income communities and communities of color, and make its programs more equitable. In response to the initial feedback and comments received during the regulatory approval process, Xcel Energy decided to replace their anticipated construction of a natural gas plant with new renewables.
Barriers to Clean Energy in Utility Planning Processes
Engaging in resource planning processes can be confusing and time-consuming, particularly for local governments or other customers without significant capacity. To help local governments navigate the process, WRI developed a resource — the IRP Support Package — which provides a foundational understanding of IRP processes and helps customers determine how to engage. In addition, the Institute for Market Transformation released a report that provides additional IRP guidance.
As customers engage in utility resource planning processes, it’s important to realize there may be barriers that limit the role of renewable energy. Clearly identifying these barriers can help utilities, local governments and corporations meet their clean energy goals and a recent WRI report aims to help, highlighting barriers to clean energy in IRPs and opportunities to overcome them. Barriers vary regionally and by utility, yet several common barriers persist.
The first is outdated and unfounded assumptions regarding solar technology: In IRPs, utilities try to forecast what resources they will need to meet uncertain future conditions, and therefore rely on various assumptions. Three key assumptions include future costs, capacity value (which represents the percentage of system capacity available to meet peak demand) and grid integration costs. The overestimation of future solar and grid integration costs, as well as underestimation of capacity value, can reduce deployment of solar. Ensuring that these assumptions are more accurate can be achieved by aligning assumptions with expert opinions, utilizing market data, applying broad and more sophisticated modeling approaches and considering assumptions against holistic grid opportunities.
Second, modeling practices that can limit solar energy relative to other resources: To build out IRPs, utilities use various modeling approaches and tools, which naturally have some limitations. Modeling barriers include incomplete data while the utility is forecasting demand and restricted or unfair consideration of renewables throughout the different phases of modeling such as the resource screen phase and in the consideration of the portfolio of resources. One modeling barrier to note is that utilities can sometimes omit customer demand for renewables in IRPs, failing to capture the customers full influence on resource planning. For instance, some large-scale customers’ investments in additional solar resources beyond what the utility may provide could be missed. Another barrier includes how utilities value distributed solar, which can impact how this resource is compared to other large-scale resources.
How Customers and Utilities can Improve the Planning Process to Fully Enable Clean Energy
To overcome these barriers, customers and utilities can take a number of key actions.
Electric utilities can:
1. Provide transparency: Publish the basis for IRP assumptions on technologies and cost, modeling approaches, steps to achieving clean or greenhouse gas targets, the barriers and opportunities inherent in the assumptions and modeling. And make this available early in the process.
2. Use up-to-date market-based data: Comprehensively review and incorporate investment drivers —including customer clean energy demand — to make adjustments in future need assumptions. In addition, use market-based data through information gathering processes to improve modeling. One example could be conducting a preliminary Request for Proposals based on initial modeling assumptions and then incorporating the results into the resource planning scenario.
3. Use an all-source procurement approach: All-source procurement approaches allow a broader range of resources to compete on equal footing. This is a technology-neutral approach that can help eliminate unnecessary biases toward conventional generation and has been embraced by numerous utilities across the U.S., including in the Northern Indiana Public Service Company’s 2018 IRP process.
1. Become educated, empowered IRP stakeholders: Stay aware of relevant resource planning processes. Planning processes tend to be cyclical, for example occurring every year or every two years, but vary by state. Request transparency throughout these processes, seek out resources and guidance and collaborate with fellow customers with similar goals to scale the engagement or share knowledge and costs.
2. Provide data on your clean energy demand: Engage with your electric utility early and often, and regulators as needed. Share your desired clean energy or low-carbon targets and planned clean energy purchases that could influence the IRP. When utilities understand customers’ clean energy demand, they are more likely to incorporate more clean energy into their IRP.
3. Identify best practices: Encourage utilities and regulators to embrace emerging best practices. For example, encourage a holistic analysis of distribution and resource needs, or request that the utility use a modeling approach that increases the granularity and accuracy of considerations. Provide examples of best practices, especially from similar utilities in similar regions, that the utility and regulator can consider.
Both utilities and customers have a role to play in the transition to a low-carbon power sector. By collaborating and working closely together, especially on long-term resource planning processes, customers and electric utilities can collectively achieve clean energy and carbon reduction targets more efficiently, faster and potentially at a lower cost.