Leading the Charge
Businesses, state and local governments undeterred in aiming for climate targets—will it be enough?
The Trump administration continues efforts to repeal laws that mandate lower CO2 emissions, after having withdrawn US support for the Paris climate accord in June. Regardless, American businesses are formulating their own plans to advance clean energy and environmental sustainability, with support from state and local governments.
Consider Google, which consumes as much electricity as the city of San Francisco — 5.7 terawatt hours — over the course of a year. The global tech firm announced that in 2017, it will reach its goal of using 100 percent renewable energy — or, more precisely, purchasing as many green terawatt hours as it consumes annually.
Google, the world’s largest corporate buyer of renewable energy, has been joined by many other high-tech companies including Intel, Microsoft, Apple, Facebook, and Amazon in setting out to become global examples of corporate citizenship, by way of purposeful environmental stewardship.
Google says its renewable energy use serves two simultaneous goals; it meets growing consumer demand for products that don’t harm the environment, while achieving corporate financial targets. The levelized cost of wind energy — the unit cost of electricity over a lifetime — is the best energy value there is, the company says.
“Wind-power economics are driving coal generation up the dispatch curve and into earlier retirement,” Moody’s analyst Jairo Chung writes in a March 2017 report. “Around 56 gigawatts of regulated coal-fired capacity in the Midwest has operating costs that are higher than the all-in costs of new wind power.” Combined with falling costs for domestic natural gas, coal’s share of the domestic electricity market has decreased from 39 percent in 2014 to approximately 30 percent in 2016 — the first year in which natural gas-fired generation has exceeded that of coal.
Although renewables are quickly becoming a low- or least-cost option, local policymaking remains a critical enabler. “The role of state policies has been tremendously important,” says Marsden Hanna (C ’07), Google’s lead for global energy policy and markets. “Renewable portfolio standards create demand (for clean power), and for companies like ours, the policies are all state and local. We do believe it is important, however, that actors at all levels continue to maintain the momentum, including the federal government.”
The president’s announcement that his administration would pursue formal US withdrawal from the Paris climate accord was immediately answered by the formation of the We Are Still In movement, a coalition of American business, education, and local government leaders committed to maintaining low-carbon goals that are consistent with those previously set in Paris.
“The US stepped away from the Paris accord,” says Kevin Self (KSM ’91), senior vice president of strategy, business development, and government relations at Schneider Electric, a France-based Fortune 500 energy management firm. “But business is not going to just stop. States are stepping up. And the economics will prove these decisions out, because the cost of renewables will continue to come down.”
Market-based Demand Spurs Creative City Strategies
Fifty-two mayors of C40, a network of cities committed to addressing climate change and 100 percent renewable energy targets, are also taking a united stance. Collectively representing 275 million citizens around the world, C40 says burning fossil fuels is inconsistent with long-term prosperity, and its members aim to achieve the goals of the Paris climate accord. The United States Conference of Mayors supports the same position, with Republican and Democratic city leaders vowing to do their part.
Reaching those targets will take time. Cities face some of the same supply challenges as do businesses — utilities procure electricity based on the local supply unless their state utility commissions require that they obtain a certain portion of their portfolio from renewable supplies. “Local governments are increasingly striving to become carbon-free, exploring cleaner energy options to build low-carbon communities,” says Lauren Riga, an Indianapolis-based energy analyst in an interview. “However, over 65 percent of electricity produced in the US comes from fossil fuels.”
Nonetheless, cities are already making progress by employing long-term power purchase agreements to bring wind and solar into municipal generation portfolios.
“We’re going green not only because it supports clean air and water, but because it supports our 21st century economy,” San Diego Mayor Kevin Faulconer says in an April 2017 Sierra Club press release. The nation’s eighth-largest city, San Diego has passed a legally binding ordinance requiring it to complete its transition to 100 percent green energy and cut its greenhouse gas emissions in half by 2035, which will entail converting half the city’s fleet to electric vehicles.
According to a 2016 Sierra Club analysis, if American cities achieve 100 percent renewable energy targets by 2025, resulting electric-sector carbon reductions would greatly help the United States meet the prior Paris accord target of reducing its greenhouse gas emissions by 26 to 28 percent from 2005 levels. To date, 26 US cities have committed to using 100 percent renewable energy, although many are also taking more modest steps to cut their emissions. Cities already running entirely on green energy include Aspen, Colorado; Burlington, Vermont; Greensburg, Kansas; Rockport, Missouri; and Kodiak Island, Alaska. San Diego, Salt Lake City, Las Vegas, and Madison all say they plan to hit the same target, and the city of Chicago has announced that it will transition its municipal buildings and operations to 100 percent clean, renewable energy by 2025.
Barriers to reducing emissions are not only technical, but also socioeconomic and political. They are based on key factors like complacency and entrenched financial interests, according to a paper published in Energy & Environmental Science in 2015. The analysis reports that the benefits of conversion to renewable energy, including lesser global warming and air pollution impacts, along with stable energy prices and new jobs, far exceed the costs.
States Take Lead Roles
States are also playing a critical role in shaping energy and environmental standards.
California is making progress towards cutting its greenhouse gas emissions by 80 percent by 2050, using strategies such as vehicle-emissions limits, energy efficiency standards for buildings, and renewable portfolio standards for utilities. California’s state public utility commission now requires PG&E Corporation, Sempra Energy, and Edison International to collectively buy 1,325 megawatts of energy storage by 2020 in order to cut emission levels.
As the sixth largest economy in the world, California’s energy trajectory can serve as a model not only for other states, but for countries as well. In July, Governor Jerry Brown announced that his state would host a global summit on climate change in 2018, at the same time as all G20 nations except the United States formally reaffirmed commitment to the Paris climate accord.
New York is also finding innovative pathways to sustainable energy. Its Reforming the Energy Vision plan “align[s] markets and the regulatory landscape with the overarching state policy objectives of giving all customers new opportunities for energy savings, local power generation, and enhanced reliability to provide safe, clean, and affordable electric service.” According to a 2014–2015 report by the Colorado-based Rocky Mountain Institute,
a nonpartisan think tank that advocates for the acceleration of market-based solutions for energy and sustainability, New York plans to roll out an increasing number
of rooftop solar panels and other forms of distributed energy in order to “fundamentally transform” how energy is generated and distributed. Some of the state’s energy initiatives were sparked in response to Superstorm Sandy, which knocked out widely distributed, grid-connected electricity for long periods in 2012 (see Empower Fall 2017 articles “Risk and Reward: The insurance sector on the climate frontlines” and “Alumni Profiles: Casey Kuklick”).
In the Midwest, Illinois is implementing ambitious energy policies. The Future Energy Jobs Act, a law which recently passed the Illinois General Assembly, doubles the state’s energy efficiency requirements and kick-starts renewable energy development. In addition, utility companies have partnered with clean energy advocates and regulators to develop a first-of-its-kind metric to quantify greenhouse gas reductions related to the state’s deployment of five million smart meters to nearly all residential customers. In 2017, Illinois policy makers announced the NextGrid: Illinois Utility of the Future Study, an ambitious 18-month initiative that engages stakeholders from across Illinois to help develop a cleaner, more reliable, dynamic power grid throughout the state.
Paradigm Shift for the 21st Century
“Ultimately, we see this as a national change in how electricity is generated and consumed,” says James Mandel, who has analyzed energy issues for Rocky Mountain Institute. “It will be cleaner and distributed. The timeframe changes, however, based on location. In some places with access to cheap and reliable electricity, the transition will be slower. But coal costs are increasing, while green energy costs are continuing to decline. We feel good about this evolution.”
The energy marketplace is rapidly changing, and it is driven by customers who are demanding cleaner energy. Businesses are responding, bolstered by developing technologies that are getting better and cheaper. Many more policymakers around the globe are beginning to align around the vision for a more sustainable future.
In the US, “federal, state, and local policies have an important role in nudging the ball forward,” Google’s Hanna says. “But market forces have made it all possible.”
The test is to meet ever-increasing energy demands across the globe in the cleanest possible way. While economic and political challenges will continue, many essential pieces are in place to achieve success. The clock is ticking however, and climate change impacts will begin to test our limits, well beyond our current pace of progress. Crisis can create further alignment between business and policy, but is that the best that we can do?