With the US government pledging over $ 360 billion in clean energy incentives under the Inflation Reduction Act, energy companies are already aligning investments. It’s a huge opportunity, and analysts predict it could help reduce U.S. greenhouse gas emissions by about 40% within the decade.
But in conversations with energy leaders over the past few months, we have heard that financial incentives alone are not enough to reach the national goal of achieving net zero emissions by 2050.
According to some energy industry leaders, achieving net zero emissions will require increased pressure from regulators and investors and the acceptance of technologies that are not usually considered the best solutions to the climate crisis.
‘Net-zero’, with natural gas
In the spring of 2022, we facilitated a series of conversations at Penn State University on energy and climate with leaders from several major energy companies, including Shell USA and American Electric Power and Xcel Energy electric utilities, as well as with leaders of the Department of Energy and other public bodies.
We asked them about the technologies they see the United States leaning on to develop a net zero greenhouse gas energy system by 2050.
Their answers provide some insight into how energy companies are thinking about a zero-carbon future that will require dramatic changes in the way the world produces and manages energy.
We have heard many agreements between energy leaders that achieving net zero emissions is not a matter of finding a future magic wand. They point out that there are many effective technologies available to reduce emissions and capture those emissions that cannot be avoided. What is not an option, in their view, is to leave existing technologies in the rearview mirror.
They expect natural gas, in particular, to play an important, and possibly growing, role in the US energy sector for many years to come.
Behind this view, energy leaders say, is their deep degree of skepticism that renewable energy technologies alone can meet the nation’s future energy demand at a reasonable cost.
Costs for wind and solar energy and for energy storage have fallen rapidly in recent years. But the reliance on these technologies has worried some grid operators that they cannot count on the wind blowing or the sun shining at the right time, especially as more electric vehicles and other new users connect to the electricity grid.
Energy companies are justifiably nervous about power grid failures: no one wants the Texas outages to repeat in the winter of 2021. But some energy companies, even those with high climate targets, also profit from traditional energy technologies and have large investments in fossil fuels. Some have resisted clean energy mandates.
According to many of these energy companies, a net zero energy transition is not necessarily a renewable energy transition.
Instead, they see a net zero energy transition that requires a massive deployment of other technologies, including advanced nuclear power and carbon capture and sequestration technologies that capture carbon dioxide, before it is released or from the air. and then they store it in nature or pump it underground. So far, however, attempts to implement some of these technologies on a large scale have been plagued by high costs, public opposition and serious questions about their environmental impact.
Think globally, act regionally
Another key aspect of our roundtable with energy leaders is that how clean energy is distributed and the appearance of net zero will vary by region.
What it sells in Appalachia, with its natural resource-based economy and manufacturing base, may not sell or even be effective in other regions. Heavy industries like steel require tremendous heat and chemical reactions that electricity cannot replace. The economic shift due to the abandonment of coal and natural gas production in these regions raises questions about who bears the burden and who benefits from the change in energy sources.
Opportunities also vary by region. Waste from Appalachian mines could increase household supplies of critical materials for a cleaner energy grid. Some coastal regions, on the other hand, could lead decarbonization efforts with offshore wind energy.
At the regional level, industry leaders say, it can be easier to identify shared goals. A good example is the Midcontinent Independent System Operator, known as MISO, which operates the power grid in the upper Midwest and parts of the south.
When its coverage area was predominantly in the upper Midwest, MISO could bring regional parties together with a shared vision of greater opportunities for wind power development and greater electrical reliability. It was able to produce an effective multi-state power grid plan to integrate renewable energy.
However, when utilities in more distant (and less windy) states joined MISO, they challenged these initiatives as they did not benefit their local networks. The challenges were unsuccessful, but they raised questions about how widely the costs and benefits can be shared.
Waiting for the right kind of pressure
Energy leaders also said that companies are not thrilled to take the risk that low-carbon energy projects will increase costs or degrade grid reliability without any kind of financial or regulatory pressure.
For example, tax credits for electric vehicles are great, but powering these vehicles could require much more zero-carbon electricity, not to mention a major national transmission grid upgrade to move that electricity. clean.
This could be solved with “smart charging,” technologies that can charge vehicles during times of excess electricity or even use electric cars to meet some of the grid’s needs on hot days. However, utility regulators often dissuade companies from investing in power grid upgrades to meet these needs out of fear that customers will end up paying high bills or technologies won’t perform as promised.
Energy companies also don’t seem to feel strong pressure from investors to move away from fossil fuels.
Despite all the talk of environmental, social and governance concerns that industry leaders need to prioritize, known as ESG, we heard at the panel discussion that investors aren’t shifting much money from energy companies whose responses to ESG concerns they are not satisfactory. With little pressure from investors, energy companies themselves have little good reason to take risks on clean energy or push for regulatory changes.
These conversations reinforced the need for more leadership on climate issues from lawmakers, regulators, energy companies and shareholders.
If the energy industry is stalled due to outdated regulations, then we believe it is up to the public, forward-thinking leaders in business and government, and investors to push for change.
Seth Blumsack, Professor of Energy and Environmental Economics and International Affairs, Penn State and Lara B. Fowler, Interim Director, Penn State Sustainability Institute, Penn State
This article was republished by The Conversation under a Creative Commons license. Read the original article.