PANDEMIC

Electricity, COVID-19 and carbon: 3 issues to watch

The coronavirus outbreak has slashed more than a half-million U.S. clean energy jobs this year, putting progress to cut carbon emissions from the grid in jeopardy.

But what does that mean for the push toward a cleaner electricity mix?

The short answer: It depends.

There's little doubt that the pandemic and economic crash could take a toll on carbon reduction in the power sector, as public utility commissions and advocates grapple with how to retain energy efficiency programs. Some companies in rooftop solar have reported record sales even as the broader outlook is filled with dark clouds. And major power companies are sticking with carbon reduction goals that mature over the next three decades, though upcoming years may be more uncertain.

"For utilities regulated by [public utility commissions], the commissioners are going to be focused in the coming months and year or two on things that are related to COVID and helping customers who can't pay their electricity bills, which means it's going to be harder for the commissions to have time to focus on [carbon-cutting] proposals," said Julia Hamm, CEO of the Smart Electric Power Alliance.

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A study from the Yale University School of Forestry & Environmental Studies found that because of declining low-carbon energy investments from the pandemic, emissions could rise more than previously thought for 15 years (Energywire, June 24). And questions about the ability to meet state emissions goals in places such as Colorado are rising (Climatewire, June 24).

But don't assume that means all is lost for now, clean energy supporters argue.

"If we look at the next 10 to 20 years as a critical time, we need to be walking and chewing gum," said Rachel Gold, director of the utilities program at the American Council for an Energy-Efficient Economy (ACEEE). "And that means getting energy efficiency reductions and deploying a lot of renewables."

Erica Bowman, director of resource and environmental planning and strategy at Southern California Edison, added: "How do we get everyone across the economy back to work? There might be real opportunities in the clean energy space to get those jobs up and going and do so in a more concerted way."

Here's how three efforts to slash carbon in the electricity sector — rooftop solar, energy efficiency and company emissions pledges — are faring in the pandemic:

Efficiency

Jobs in the efficiency sector have been ravaged this year, as thousands of workers have been unable to insulate homes, install windows and perform other tasks because of social distancing guidelines or requirements (Energywire, April 7).

While groups like ACEEE have said that efficiency measures could cut U.S. energy use and greenhouse gas emissions by about 50% by 2050, such efforts come with a price tag. Surcharges on utility bills, for instance, fund things like improved insulation, lighting and smart thermostats for people's homes.

That means efficiency is now a point of debate in states across the country as regulators and others look for cash to provide relief to customers while also preparing for utility requests to cover unpaid bills.

The New York Public Service Commission included energy efficiency in a list of areas affected by the pandemic when it recently moved to establish a proceeding to identify and address effects on services and programs it regulates.

Georgia Power, which is part of Atlanta-based Southern Co., has suspended a refrigerator recycling program and part of a home energy improvement program. Decisions on those options were related to safety concerns around COVID-19, according to the company.

Those programs "involve someone actually going face-to-face into a customer's home, for instance," said John Kraft, a Georgia Power spokesman. He said other efficiency efforts at the utility continue, including LED lighting rebates and an online energy checkup.

In Arizona, state regulators decided earlier this year to refund over $44 million of unspent energy efficiency-related funds to customers of two utilities to help deal with economic hardship in the wake of COVID-19.

For customers of Arizona Public Service Co., that translated to an average estimated June bill credit of $9.77 for a small residential customer and more than $62,500 for an extra-large commercial and industrial customer, according to a news release from the Arizona Corporation Commission. APS does retain certain energy efficiency programs despite the refund plan.

Energy efficiency programs funded by ratepayers are easier to justify when demand is high and wholesale prices are high, said Tony Clark, a former member of the Federal Energy Regulatory Commission who is now a senior adviser at Wilkinson Barker Knauer LLP. Cratering demand and low power prices make it tougher to make the programs pencil out, he said.

"I think that it does make them somewhat vulnerable to a state commission going in that may be looking for ways to deal with how to pay for bad debt expense without raising customer rates or ... in some way or another alleviating customer cost pressures," said Clark, a Republican.

Gold with ACEEE said energy efficiency programs can help with economic recovery, as they aid households and businesses, lower energy bills, and support local jobs. While programs may be seen as vulnerable, she said the United States will "miss the boat" on a lot of climate opportunities if it gives up on energy efficiency.

"Anytime you have a separate charge that people see on their bills, that's something that — especially in times of economic hardship — that gets additional attention," she said, adding that transparency to customers is important. "But it's also important to take the long view and look at the system benefits and the bill savings."

The Southeast is a focal point during the pandemic, as it has a high energy burden because so many people live in older, inefficient homes in a region that faces high heat and humidity. Consumer advocates criticize electric companies and their regulators for not making energy efficiency more of a priority.

One standout is Duke Energy Corp., according to the Southern Alliance for Clean Energy's annual report on energy efficiency released earlier this year. Duke's programs have helped make North Carolina the only state in the Southeast to exceed the national average, delivering energy savings that are on par with the rest of the country.

But the Environmental Working Group argues that Duke has barriers to energy efficiency programs and clean energy technologies, both of which contribute to cheaper utility bills (Energywire, June 5).

In some regions, officials said it's unclear how some of the efficiency discussions may turn out.

Gil Quiniones, CEO of the New York Power Authority, said there needs to be thought about measures that aren't capital-intensive but still cut carbon.

"There is so much uncertainty about the situation. How will businesses, large and small, and residential customers respond?" Quiniones said. "To me, it's a question mark."

Solar

Like most sectors, the U.S. renewable energy industry took a hit from COVID-19. The California-based BW Research Partnership Inc. found that clean energy sectors lost about 447,000 jobs in April and over 27,000 jobs in May (Energywire, June 16). Renewables were part of that tally.

A report this month from the Solar Energy Industries Association and Wood Mackenzie said the U.S. residential solar market could see a 25% drop in year-over-year installation volumes in 2020 given issues around permitting, work stoppages and lower demand. The numbers are expected to be strong this year for U.S. utility-scale installations, which will aid clean energy efforts.

Yet some rooftop solar companies have sounded hopeful notes, as well.

"Our orders reached a single-day all-time high at the end of April as consumers are choosing to power through," Sunrun Inc. CEO Lynn Jurich said in a May 6 earnings release. California-based Sunrun is a provider of residential solar, storage and energy services.

"Early indications are that even if the country enters a prolonged economic downturn with poor consumer confidence, people will still want solar and may want it even more, since it allows them to save money and receive reliable power without constraining their debt capacity," Jurich said on an earnings call last month.

In a May statement, Jurich highlighted Sunrun's effort to make "the process of going solar nearly contact-free for our customers."

Industry observers say there could be another factor in rooftop solar's potential resilience.

Hamm of the Smart Electric Power Alliance said there's a question of how much economic constraints will be counterbalanced by an increasing sense among people to be self-reliant.

"Everybody recognized they needed to stock up on toilet paper," Hamm said. "Next time, it could be a crisis that results in the power grid going down. People want to be prepared so if that happens, they won't be caught off guard."

John Berger, CEO of Houston-based Sunnova Energy International Inc., a residential solar and storage service company, echoed this sentiment. He said that despite the disruption caused by COVID-19, his company's first quarter this year showed nearly 7,000 new customers, the company's best quarter in its history.

"The uncertainty brought upon by COVID-19 has shown us the world may be more fragile than we originally thought, magnifying the importance of being self-reliant and further proving the economic and societal value of solar plus storage," he said during a May 15 earnings call.

Clark, the former FERC commissioner, said one challenge will be that rooftop solar is more expensive than grid-scale solar.

"There are efforts under way to address high permitting and inspection costs for residential [photovoltaic] systems," Molly Cox, a Wood Mackenzie research analyst, said in a recent news release.

The firm indicated that residential system prices could be affected more this year by the coronavirus than other market segments may see.

Compensation to solar users also remains a point of contention, including net metering that credits excess solar power sent to the grid at the same retail rate a customer pays for power. While solar supporters see benefits in net metering and consider full retail compensation to be fair, Clark said he doesn't know "how you do that in the long term," given a lower value in the marketplace for excess rooftop power.

That's something utilities, solar advocates and others continue to fight out at state commissions and, among certain parties, through a FERC docket (Energywire, June 16).

Company goals

A growing number of electricity companies are pledging to go carbon-free or be net zero by 2050, or at least drastically reduce emissions in the years ahead. While critics may question whether companies are moving fast enough, many of the plans essentially remain in place despite the current state of the economy.

The Edison Electric Institute, which represents investor-owned electric utility companies, said in a statement this week that its "member companies still are expected to collectively reduce their CO2 emissions at least 80 percent by 2050." EEI said members are committed to making "the energy they provide as clean as they can, as fast as they can, without compromising customer reliability or affordability."

Hamm of the Smart Electric Power Alliance said that at this point, it's clear that the utility industry is aiming to have a leadership role on climate change. But that doesn't mean there are no concerns.

For example, Michael Backstrom, managing director of energy and environmental policy at Southern California Edison, said the regulatory pace of clean energy dockets may not be quite what it was before.

"Our commitment to carbon reduction remains there, and at the same time as we are thinking about economic recovery," he said. "What we've seen is there has been an added focus on addressing near-term financial pressures our customers are facing."

Still, those dockets haven't come to a halt.

Backstrom said the state's goals for achieving clean energy, clean transportation and climate objectives remain important. And respiratory challenges associated with pollution that make people more susceptible to things like COVID-19, he said, reinforce the importance of clean energy projects because they can improve local air quality.

Quiniones of the New York Power Authority said much of the major capital customer work has paused during the pandemic. But it has been in the process of restarting.

"For now, for NYPA, we're forging ahead," Quiniones said. "In fact, during COVID, during the pause period, we issued $1.2 billion in long-term bonds, $800 million of which are green bonds. We want to make sure when we unpause we have enough resources, flexibility and liquidity to restart and hit the ground running."

In the Midwest, Xcel Energy Inc. has proposed accelerating nearly $3 billion of clean energy investments in response to a call from Minnesota regulators for ideas as the state looks to recover economically from the pandemic (Energywire, June 18). That includes the potential to expand energy efficiency programs.

In the Southeast, Duke, Southern, Dominion Energy Inc. and the Tennessee Valley Authority continue to move forward on efforts to reduce emissions from their generating fleets, officials say. Dominion, Duke and Southern have net-zero carbon goals by 2050, and TVA is aiming to slash emissions 70% from 2005 levels by 2030.

Charlotte, N.C.-based Duke has agreed to postpone its rate hike request this summer to alleviate pressure that some customers may have from the COVID-19 pandemic. The company will be able to defer those costs on its balance sheet until later.

NRG Energy Inc., which has competitive U.S. generation and retail businesses, said the pandemic reinforces the need to make changes. The company updated and accelerated carbon goals last year — to a 50% greenhouse gas emissions reduction by 2025 from a 2014 baseline and net zero by 2050.

NRG's most recent public data showed it already was 83% of the way to the 2025 goal, including adjustments for asset sales.

"Once we get there, then we will kind of reassess and look and see if we need to set another midterm goal before the net-zero 2050," said Laurel Peacock, director of sustainability at NRG.

Hamm said that even though there may be a "near-term slowdown" on utilities' carbon reduction targets, "leaders will find ways to restimulate the economy in ways that benefit carbon reduction goals, using clean energy as a growth engine for the economy."

Twitter: @edward_klumpEmail: eklump@eenews.net

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