Benchmarking Utility Clean Energy Deployment: 2016 Ranking 30 of the Largest U.S. Investor-Owned Electric Utilities on Renewable Energy & Energy Efficiency
June 2016 (Ceres and CleanEdge)
Benchmarking Utility Clean Energy Deployment: 2016 reflects clean energy progress by the largest electric utilities in the United States at a time when worldwide momentum toward clean energy has never been greater. The historic Paris Climate Agreement, forged by 195 countries in December 2015, punctuated a year in which global clean energy investments and renewable energy installations in the U.S. reached all-time highs.
The year was also marked by record high global temperatures and several of the strongest hurricanes and typhoons on record, providing yet more evidence of the economic and human cost of climate change and the urgency of accelerating clean energy use globally.
This report provides a window into how the global transition toward clean energy is playing out in the U.S. electric power sector. Specifically, it reveals the extent to which 30 of the largest U.S. investor-owned electric utility holding companies are increasingly deploying clean energy resources to meet customer needs.
The 30 holding companies evaluated in the report represent 87 electric utility subsidiaries located throughout the U.S.1 Collectively, these companies accounted for nearly 60 percent of total U.S. electric industry sales in 2014, the most recent year for which data is available and the reporting year in which these companies are benchmarked.2
While these utilities differ widely in size, geography, resource profiles and ownership of generation assets, they all share an obligation to provide the public with safe and reliable service at reasonable rates, and a responsibility for maintaining and modernizing the electric distribution grid. As such, their role in enabling widespread U.S. clean energy deployment is vital.
The report assembles recent data from more than 10 sources, including state Renewable Portfolio Standard (RPS) annual reports, U.S. Securities and Exchange Commission 10-K filings, and Public Utility Commission reports, to show how some of the largest U.S. electric utilities stack up on renewable energy and energy efficiency performance. To our knowledge, it is the only single source of information on how U.S. electric utilities rank in terms of their actual deployment of clean energy solutions.
Benchmarking these companies provides an opportunity for transparent reporting and analysis of important industry trends. It fills a knowledge gap by offering utilities, regulators, investors, policymakers and other stakeholders consistent and comparable information on which to base their decisions. And it provides perspective on which utilities are best positioned in a shifting policy landscape, including likely implementation of the U.S. EPA’s Clean Power Plan aimed at reducing carbon pollution from power plants.3
Here are just a few of the major developments affecting utility deployment of clean energy since Ceres published the first edition of this Benchmarking report in 2014:
! World leaders have committed to act on global warming. The targets and timetables established in the Paris Agreement represent an unprecedented level of international cooperation and commitment to avert the worst impacts of climate change. Achieving these ambitious goals will require worldwide clean energy investment to increase by an additional $1 trillion per year through 2050—what Ceres calls the “Clean Trillion.” A significant component of this investment is needed to build new renewable power generation.
! Policy support for clean energy in the U.S. is stronger than ever. Recent five-year extensions of the federal investment tax credit (ITC) and production tax credit (PTC) will drive tremendous additional deployment— and further cost reductions—of wind and solar power regardless of how EPA’s Clean Power Plan is implemented.4 Further, several states including California, Hawaii, New York, Oregon and Vermont have strengthened already-robust renewable energy commitments, with new RPS targets ranging between 50 and 100 percent.
! U.S. clean energy deployment has reached all-time highs. The U.S. added a record 7.3 gigawatts (GW) of solar photovoltaic (PV) capacity and 8.6 GW of wind in 2015, bringing total installed capacity to 25.6 GW for solar PV and 74.4 GW for wind.5 In other words, U.S. solar PV and wind capacity grew by more than 28 percent and 11 percent, respectively, in a single year. Looking specifically at utility-scale resources, solar and wind represented more than 60 percent of U.S. total net capacity additions in 2015.6 Further cost declines in renewable technologies, particularly solar PV, are expected to reinforce and accelerate this trend. Similarly, investment and savings from U.S. electric sector energy efficiency programs have reached unprecedented levels.7
! Energy storage—a potentially grid-transforming technology—has grown by leaps and bounds. California’s first-in-the-nation energy storage mandate helped to catalyze nearly 250 percent growth in U.S. energy storage deployments from 2014 to 2015, with eight-fold growth predicted over the next five years.8 Energy storage could play a critical role in enabling utilities to add much greater levels of variable renewable energy resources to the grid.
! State policy approaches to address the recent rapid expansion of distributed solar PV have become a toptier concern. All but four U.S. states took some type of solar policy action in 2015. Twenty-seven states considered or enacted changes to net metering policies, which compensate customers for the rooftop solar energy they provide to the grid, while 61 utilities in 30 states requested increases in monthly fixed charges for residential customers.9
! Some state utility regulators have begun actively exploring new regulatory models to enable new utility business models. The best known of these, New York’s Reforming the Energy Vision (REV) initiative, has taken a ground-up approach to reinventing the state’s electricity marketplace, with utilities serving as “distribution system platform providers” that increasingly rely on demand-side management, efficiency improvements, and distributed energy resources to meet consumer needs.
! While this report benchmarks clean energy performance at the holding company level, it’s important to note that some utility subsidiaries are achieving even higher levels of renewables penetration. Berkshire Hathaway’s MidAmerican Energy, for example, currently gets 41 percent of its generation capacity from wind power (at year-end 2015) and has announced a vision of getting to 100 percent renewables.10
! Corporate and consumer demand for clean energy and continually improving economics are driving utility clean energy procurement above and beyond policy requirements. With power purchase agreement (PPA) prices for utility-scale solar PV falling to all-time lows, utilities are beginning to procure larger amounts of solar based simply on its economic merits.11 (Utilities have procured cheap wind power for years.) Surging corporate demand for renewable energy—marked by a nearly three-fold increase in corporate renewable deals between 2014 and 2015—has also urged utilities in this direction
This report compares utility holding companies on three key indicators of clean energy deployment:
1) Renewable energy sales: The total amount of renewable electricity sold to retail customers during the reporting year, including from owned power plants, power purchase agreements (PPAs), and retired Renewable Energy Certificates (RECs).13
2) Incremental energy efficiency savings: All reportingyear energy savings from i) new participants in existing programs, and ii) all participants in new programs.
3) Life Cycle energy efficiency savings: Estimated savings from all energy efficiency programs put in place during the reporting year, including reporting year savings and all future anticipated savings.14
All three indicators are provided as a percentage of annual retail sales to allow for comparison across utilities of different sizes. This report focuses on the amount of renewable energy delivered from electric utilities to their customers, and does not cover independent power producers. Since states have different approaches to defining and tracking renewable energy, the renewable energy sales findings in this report aren’t intended to reflect utility compliance with state RPS targets. Nevertheless, the renewable energy sales data provided in this report are a useful indicator of the utilities’ clean energy deployment.
Our analysis finds wide disparities in the extent to which the power providers are utilizing renewable energy and energy efficiency. For example, just four of the 30 companies included in the report accounted for more than half of total renewable energy sales.
Sempra Energy, PG&E, Edison International and Xcel Energy ranked the highest for renewable energy sales,with renewable resources accounting for more than 20 percent— and, in Sempra’s case, nearly 36 percent—of their retail electricity sales in 2014. SCANA, PPL, American Electric Power and FPL ranked at the bottom, with renewable energy sales accounting for less than two percent of their total retail electricity sales.15
Eversource Energy, PG&E, Portland General Electric, National Grid and Pinnacle West performed the best on incremental energy efficiency savings. Each achieved annual savings of at least 1.5 percent of their total retail electric sales. In doing so, they are helping their customers save on their energy bills while also helping avoid the need to build costly new power generation capacity. The weakest performers, with minimal or no energy efficiency savings, were Southern Company, Entergy, Dominion Resources and FPL. Similarly, leaders in life-cycle energy savings include most of the same companies, but with Exelon bumping Portland General Electric out of the top five.
Top-performing utilities on renewable energy and energy efficiency are located almost entirely in states with more ambitious clean energy policy goals such as California, Illinois, Massachusetts, Minnesota, New York, and Oregon, while utilities with poor results are typically in states with weak policies, many of them being in the Southeast.
Overall, these 30 companies provided more than 136,000 GWH of renewable energy to their retail customers in 2014, and achieved incremental annual energy efficiency savings of more than 19,000 GWh. This represents year-on-year growth of 13 percent for renewable energy sales and 9 percent for energy efficiency savings as compared with 2013.
Other Key Findings
! State policies remain a key driver in utility clean energy deployment. The top-performing utilities on renewable energy sales are typically based in states and regions with more ambitious policy goals, while utilities delivering the lowest amounts of renewable energy to their customers are mostly located in the Southeast, which historically has had weak state-level support for clean energy.16
▪ Similarly, all of the top-performing utilities on energy efficiency are located in states with policy support for utility energy efficiency programs, including Arizona, California, Connecticut, Illinois, Massachusetts, Oregon and Rhode Island.
▪ Implementation of EPA’s Clean Power Plan would provide further impetus for states to increase utility clean energy deployment.
! Two of the Clean Power Plan’s key approaches to compliance—energy efficiency and renewable energy— are increasingly economically feasible options for electric utilities. Energy efficiency is often the lowestcost energy resource, while the cost of renewable energy continues to decline dramatically and is often costcompetitive with fossil fuels.
! Renewable energy will represent most new U.S. utility-scale electric capacity additions in both 2015 and 2016,according to EIA—yet another indication that utility clean energy deployment will continue to grow.
! Even among utilities in similar market and regulatory environments, however, there is a range of performance, suggesting that strong state-level policies are not the only factor in utility deployment of clean energy.
▪ State RPS policies, which have accounted for about 60 percent of the growth in U.S. non-hydro renewables, will likely be less of a driver going forward as costs for renewables continue to fall.18
▪ Retrenchment can occur in states despite demonstrated beneficial impacts of clean energy policy. While many states continue to encourage investment in energy efficiency, two states, Indiana and Ohio, froze their respective energy efficiency goals, likely leading to reduced energy savings by affected utilities and reduced bill savings for customers.
! Performance in this Benchmarking report is not the only measure of clean energy leadership, which also includes such factors as a utility’s level of support for clean energy policies. For example, National Grid and PG&E have been vocal supporters of energy efficiency, while FirstEnergy has actively criticized and opposed Ohio’s clean energy policies.
! Better, more up-to-date data is paramount. Data on utility clean energy deployment remains far too scattered among too many disparate sources. Forming a complete and uniform picture of how utilities compare on energy efficiency and renewable energy is critical, given the importance of carbon-free resources to the industry’s future and to U.S. and global climate change mitigation efforts…
Energy efficiency and renewable energy, which have grown dramatically in the U.S., will become increasingly important resources for U.S. electric utilities going forward. Forming a complete and uniform picture of how utilities deploy these resources is critical. Following are specific recommendations on how federal and state agencies, utilities, regulators and other stakeholders can improve the quality and availability of utility clean energy data.
# Better, more up-to-date data is paramount. Data from important sources such as EIA and state RPS reports are not only incomplete but are often dated.
# EIA, in its annual information request from electric utilities, should create a new Form 861 file focused entirely on renewable energy that is populated, at a minimum, by renewable energy sales and capacity data broken out by holding company and all subsidiaries; by renewable energy type (including distributed assets); and by ownership type (utility-owned, contracted, or customer-owned).
# As part of this new form, EIA should clarify the definition of renewable energy to include only sources such as wind, solar PV, solar thermal, geothermal, biomass, and small hydro (up to 10 MW), and explicitly exclude problematic energy sources that are considered renewable in some states, such as waste coal, “black liquor,” large hydro (greater than 10 MW) and fuel cells (unless powered by renewable fuels). These two improvements alone would greatly aid data collection and transparency.
# Additionally, EIA, FERC, or another federal agency should begin tracking distributed and centralized grid intelligence infrastructure such as energy storage and demand response, in addition to tracking smart meter deployment.
# Federal guidance on state RPS and EERS reporting requirements could ensure comparable, verifiable and timely data about utility clean energy deployment throughout the U.S.
# The financial community, including investors in the electric utility industry, should use this data to better evaluate the financial, environmental and social performance of electric utility companies. The data in this report should help investors identify how IOUs are adapting to disruptive challenges facing the sector and the extent to which utilities earn revenues from deploying clean energy.
# Electric utility companies should use this report to compare themselves to their peers, especially companies in similar market and regulatory environments, and to evaluate their positioning and strategies.
# Policymakers would benefit from determining which clean energy policies have been most effective in driving investment and creating value for customers, utilities, and the wider economy.
# Consumers can assess how much clean energy their utility has deployed, how the utility is progressing toward state renewable energy and energy efficiency requirements (if applicable), and how well positioned the utility is for a lower-carbon future.