The decarbonization index of US utilities

The decarbonization index of US utilities

With the Biden administration aiming for a zero-emission energy sector for the United States by 2035, how are the nation’s largest electricity suppliers doing in terms of decarbonisation?

Together, Visual Capitalist and our sponsor National Public Utilities Council developed the Annual Utility Decarbonization Index. The index quantifies and compares the state of decarbonization among the 30 largest investor-owned utilities in the United States.

Decarbonisation is quantified by evaluating companies based on six emission parameters based on publicly available data from 2020 (the latest available).

Why are the 30 IOUs bigger?

Why does the Decarbonization Index specifically look at the 30 largest IOUs per electricity generation?

Well, these 30 collectively generated utilities around 2.3 billion megawatt-hours (MWh) of electricity (including purchased energy), which account for more than half of the net U.S. electricity generation in 2020. In addition, they also served over 90 million customers, which represent approximately 56% of all electricity customers in the country.

Therefore, it is safe to say that the 30 largest IOUs play an important role in the decarbonisation of both the energy sector and the US economy. As the residential, commercial, industrial and agricultural sectors all use electricity, the decarbonisation of utilities, electricity suppliers, can enable emissions to be reduced across the economy.

Methodology of the decarbonization index

For each of the six metrics used in the decarbonization index, the utilities are rated on a scale of 1 (lowest) to 5 (highest), indicating whether they are in the tail or in the lead, respectively. The scores for each metric are based on the range of digits for each metric split into five equal buckets into which the utilities fall.

For simplicity, assume that the lowest total emissions figure reported is zero tonnes of carbon dioxide (CO2) and the highest is 100 tons. In that case, companies that emit less than 20 tons of CO2 will receive the highest score of 5. Those emitting between 20 and 40 tons of CO2 will get a 4 and so on.

A utility’s overall decarbonization score is an average of their scores across the six metrics, summarized below:

  1. Fuel mixture:
    The share of low-carbon sources (renewables, nuclear and fuel cells) in the net utility-owned electricity generation. We have assumed that the share of low-carbon sources can range from 0% to 100% and scores are assigned based on that range.
  2. CO2 Emission intensity:
    The amount of CO2 issued per megawatt-hour of electricity production owned and purchased.
  3. Total CO2 Emissions:
    The sum of the absolute CO2 emissions deriving from the production of electricity owned and purchased. While this overlooks different utility sizes, the rationale is that smaller unconsolidated utilities may find it easier to decarbonise than larger ones.
  4. CO2 Per capita emissions:
    The amount of CO2 issued by electricity generation owned and purchased per retail customer served in 2020.
  5. Decarbonization Goals:
    An assessment of the provisional targets for the reduction of greenhouse gas (GHG) emissions and the targets for net utility zeroing. The baseline is a 50% reduction in greenhouse gas emissions by 2030 and net zero emissions by 2050 (utility companies with baseline targets score 2.5 / 5).
  6. Low carbon investment:
    The share of planned capital expenditure (CAPEX) for electricity generation allocated to low-carbon sources. We have assumed that the share of CAPEX for low-carbon sources can range from 0% to 100% and scores are assigned based on that range.

The data for these metrics comes from various sources, including the company’s sustainability reports, the Edison Electric Institute’s quantitative reporting models, and the Climate Disclosure Project’s climate change questionnaire.

Explore all six metrics of the US Utilities Decarbonisation Index

Annual report on the decarbonisation of NPUC utilities

Download NPUC’s annual utility decarbonization report for free.

The Annual Utility Decarbonization Index 2022

Before looking at the numbers, it is important to note that the decarbonization index is relative and compares the 30 largest IOUs with each other. Therefore, a score of 5 does not indicate full decarbonisation or net zero emissions. On the contrary, it suggests that the utility is doing particularly well compared to its peers.

With that in mind, here’s a look at the 2022 Annual Utility Decarbonization Index:

Rank Agency Decarbonization Score
# 1 Group of public service companies 4.7
#2 NextEra energy resources 4.7
# 3 Pacific gas and electric 4.5
# 4 Avangrid 4.2
# 5 Exelone 4.1
# 6 Portland General Electric 3.7
# 7 Dominion Energy 3.6
# 8 Florida power and light 3.6
# 9 PNM resources 3.5
# 10 Allied Energy 3.4
# 11 Consolidated Edison 3.4
# 12 Fortis Inc. 3.4
# 13 American electricity 3.3
# 14 Consumer energy 3.3
# 15 Evergy 3.0
# 16 NRG Energy 3.0
# 17 AES Corporation 2.9
# 18 Xcel Energy 2.9
# 19 WEC Energy 2.9
# 20 DTE energy 2.8
# 21 Duke Energy 2.8
# 22 Entergia 2.8
# 23 TransAlta 2.8
# 24 Emera 2.7
# 25 Ameren 2.6
# 26 Berkshire Hathaway Energy 2.5
# 27 Oklahoma Gas and Electricity Company 2.4
# 28 Southern Company 2.3
# 29 PPL Corporation 2.2
# 30 Vistra Corp. 2.0

A small number of companies did not report data on certain metrics and were excluded from the score for those metrics (referred to as N / A). In these cases, the decarbonization score is an average of five parameters instead of six.

The New Jersey-based Public Service Enterprise Group (PSEG) tops this year’s rankings thanks to its low-carbon profile and ambitious climate goals. The company aims to achieve zero net emissions from operations by 2030, five years ahead of the Biden administration’s target and faster than any other utility on the list.

Linked to PSEG is NextEra Energy Resources, the NextEra Energy subsidiary focused on clean energy. The company is the world’s largest producer of solar and wind and generated energy 97% of its net electricity from low-carbon sources in 2020.

In third place is California’s largest utility, Pacific Gas and Electric Company (PG&E). PG&E had the lowest per capita emissions of the 30 largest IOUs at 0.5 tons of CO2 per retail customer in 2020. This figure is significantly below the average of 11.5 tons through the 30 IOUs.

Rounding out the top five are Avangrid, an American subsidiary of the Spanish group Iberdrola focused on renewable energy, and Exelon, the nation’s largest utility by number of retail customers. Avangrid had one of the cleanest fuel mixes 87% of its own net electricity from low-carbon sources. Exelon is the nation’s largest provider of zero-emission electricity generating around 157 million MWh or 86% of its own net nuclear electricity.

Download the complete report on the decarbonisation of utilities

While the Decarbonization Index provides a look at the current state of decarbonization of utilities, there is much more to discover in the full report, including:

  • The obstacles that utilities face on the road to decarbonisation
  • The detailed data behind the six individual metrics
  • The ESG report card of US utilities
  • The solutions and strategies that can help accelerate decarbonization

>> Click here to download the full report and find out everything you need to know about utility decarbonisation.

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