Can you imagine living without power for a day? For a week?
The electricity sector needs to become more resilient in the face of climate change in order to sustain our modern society.
Our modern society is built upon an intricate web of electricity grid so that we have a constant supply of electricity whenever we need it. However, electricity production is one of the largest sources of greenhouse gas emissions, generating approximately 36 percent of energy-related U.S. carbon emissions [1]. Ironically, the industry is experiencing the consequences of its own actions as climate change threatens the resiliency of the electricity system in three major ways.
Threat 1: Extreme weather events cause large disruptions to the (old and outdated) electric system.
Extreme weather is the leading cause of power outages in the U.S. Between 2003 and 2012, an estimated 679 widespread power outages occurred due to severe weather [2]. The cost associated with lost output and wages, spoiled inventory, and restarting industrial operations can be significant [3]. Aging infrastructure only adds to the vulnerability. In addition, certain electric facilities are located near the ocean, exposing them to the risk of flooding and rising sea levels.
Threat 2: Availability of water will hamper the ability to run certain electric power generation facilities.
The U.S. electricity sector is highly dependent on water. Nearly all thermal power plants – coal, natural gas, nuclear, biomass, geothermal, and solar thermal plants – require water for condensing the steam that drives the turbines [4].
Threat 3: Extreme heat wave will increase peak demand, putting great strain on the entire system and demand planning.
Every year, we experience another record for the hottest year. On hot days, everyone turns on air conditioner at maximum capacity, which can put great stress on the grid system [5]. In order to accommodate this demand, utilities will have to make expensive investments into peaking power plants that only get utilized about 10% of the time.
PG&E – Frontier in the old boys’ utility club
PG&E is one of the largest combined natural gas and electric utilities in the U.S., delivering some of the nation’s cleanest energy to 15 million people in Northern and Central California. California is at the forefront of the power system transformation toward a cleaner, more diverse future with reduced carbon emissions. In its Climate Change Policy Framework, PG&E recognizes that the electric industry is a significant contributor to greenhouse gas emissions and commits to finding solutions and taking actions [6].
PG&E’s Plan of Action 1: Developing and investing in robust customer energy efficiency programs will reduce the overall demand for electricity.
Energy efficiency measures can be a win-win-win solution for adapting to and mitigating climate change while saving consumers money on their energy bills. Energy efficient homes and businesses require less electricity, deferring or eliminating the need to build new power plants and power lines. Less energy infrastructure means less equipment is vulnerable to damage from extreme weather events [7].
PG&E’s Plan of Action 2: PG&E commits to identifying and pursuing alternative ways to generate, procure and deliver vital energy resources, including renewable energy and clean, distributed technologies.
Recent development in clean energy technologies enables electricity generation to be smaller scaled and closer to the demand centers, which again reduces the need for large energy infrastructure investment. It also increases flexibility and resiliency since a failure in one rooftop solar panel will not have ripple effect on the entire grid. In addition, clean energy technologies such as wind turbines and solar panels do not require fuel and water to produce electricity. This greatly increases energy independence from geopolitical matters [8].
PG&E should continue to withhold its commitment to provide safe, reliable, affordable and clean energy to its customers. As a leader in the industry, it has the ability to foster more involvement from customers and advance low-carbon policies for California and the country.
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[1] Energy Information Administration, Energy-related CO2 emissions by source and sector for the United States, 2015, https://www.eia.gov/tools/faqs/faq.cfm?id=75&t=11, accessed November 2016.
[2] Executive Office of the President, Economic benefits of increasing electric grid resilience to weather outages, August 2013.
[3] Michelle Davis, Steve Clemmer, Power Failure, April 2014, Union of Concerned Scientists, http://www.ucsusa.org/sites/default/files/legacy/assets/documents/Power-Failure-How-Climate-Change-Puts-Our-Electricity-at-Risk-and-What-We-Can-Do.pdf, accessed November 2016.
[4] Ibid.
[5] Ibid.
[6] PG&E, Climate Change Policy Framework, May 2006.
[7] Davis et al., Power Failure.
[8] Ibid.
Reading this, I wondered if PG&E or similarly-scaled utility companies have considered pushing the responsibility of electricity management onto the end consumers. Specifically, the utility companies could offer to help design and build more sustainable energy solutions on-site – like solar paneling, geothermal energy systems, or even generator/battery solutions for larger clients (think Bloom products: http://www.bloomenergy.com). This would help slow climate change on a broader scale while allowing PG&E to enter into a space that could generate revenue from a new stream. Aside from that approach, direct financial incentives that would encourage users to not consume as much energy in peak times would certainly help the situation. Some companies have started doing this and I think the trend is likely to continue.
Thank you for this interesting article on how a leading utility thinks about climate change. Frankly, I am rather surprised by about how limited PG&E’s response has been to climate change – especially given that PG&E is in arguably the most climate conscious market in the USA – California. It seems their action plan as laid out in this article is big in broad vision while lacking the necessary detail or ambitious goals that could help PG&E stay on top of this issue. Specifically, action plan 1 and 2 talk in broad generalities about energy efficiency programs and developing alternate energy sources. I think if they are serious about these action plans they should set specific numerical targets around this – for eg. to have 50% of their energy generation coming from renewable sources by 2020 etc – following the mold of economies like Germany. This would also be a prudent thing to do from a customer and regulatory perspective – as I see California to be one of the first states likely to implement such mandatory requirements.
I like PG&E’s Plan of Action 1. Energy efficiency programs allow customers to use less energy while receiving the same level of end service, for example, by replacing an old refrigerator with a more energy efficient model [1]. Demand side management has been shown to cut energy consumption by up to 18 percent with a benefit-to-cost ratio of up to six [2]. Smart grid technology is one way to improve energy efficiency. Smart grid technology allows customers to make informed decisions about energy consumption by altering the timing and quantity of their electricity use [3].
However, scaling such programs will require significant investment. The United States is estimated to need up to $476 billion investment ($24 billion per year) in smart grid technology and demand side management to generate $2 trillion in benefit over the next 20 years [4].
Sources:
[1] McKinsey, 2010. The smart grid and the promise of demand-side management, New York: McKinsey & Company.
[2] EPRI, 2011. Estimating the Costs and Benefits of the Smart Grid, Palo Alto: Electric Power Research Institute.
[3] McKinsey, 2010. The smart grid and the promise of demand-side management, New York: McKinsey & Company.
[4] EPRI, 2011. Estimating the Costs and Benefits of the Smart Grid, Palo Alto: Electric Power Research Institute.
This article takes me back to my days as an analyst covering a smart meter company. Smart meters are part of the smart grid, which is a set of systems powered by technology that allows two-way communication between the consumer and the utility company. Here, PG&E has a critical role in the roll-out and adoption of smart meters – a key component of the smart grid – as the company aims to accomplish the plans of action that you highlighted in your article. Likewise, if PG&E begins to adapt newer technology for its grid, the company can mitigate the large disruptions caused by weather events and the strains placed on the grid during peak demand hours. The biggest concern of adopting smart meters is the cost of implementation. Although the price of the technology has decreased across time, many utility companies have not moved forward with the initiative. As PG&E continues to iterate its Climate Change Policy Framework, it would be great to see the company begin to highlight smart grids and smart meters as part of its strategy.
Thank you for this insightful post on PG&E. As a former energy investment analyst, I previously looked at things from the perspective of the energy infrastructure firms and natural gas producers more so than the utilities. Since supply of natural gas today comes primarily from the Northeast while demand is seasonal and much of demand lies along the Gulf Coast and the South, I would disagree with PG&E’s plan of action 1 to reduce demand for energy infrastructure. If anything, because of threat 1 of power outages due to weather, gas pipeline firms are now seeing increased demand for pipeline projects to transport natural gas supply to the necessary demand centers even during times of extreme weather like the polar vortex. For instance, Williams Companies is building the $3bn Atlantic Sunrise pipeline to connect the Northeast with the South, and many other infrastructure firms are seeing the same demand from customers for new infrastructure projects (https://stateimpact.npr.org/pennsylvania/2016/05/05/atlantic-sunrise-pipeline-gets-a-green-light-from-ferc-and-a-lawsuit-from-enviros/).
Regarding PG&E’s plan of action 1, I am a bit skeptical that they are actually taking steps to increase customer energy efficiency – regardless of PG&E’s actions, the demand for electricity in the US has stayed flat since 2007 (http://spectrum.ieee.org/energywise/energy/environment/us-electricity-demand-flat-since-2007). Much of this has been due to consumer education and price sensitivity: people want lower electricity bills and are now turning off their lights, regulating their homes’ energy usage using technology like Nest, buying energy efficient appliances, etc. I’d like to see some examples of how PG&E might be investing in this area.