What’s different about the utilities at the forefront of the energy transition?

A new SEPA survey identifies key traits of utilities that are taking the lead in the transition to clean energy.

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Julia Hamm is president and CEO of the Smart Electric Power Alliance. This contributed content represents the views of the author, not those of Canary Media.

Corporate commitments to carbon reduction are a hot topic — and for good reason. The wave of carbon-reduction pledges, from organizations of all types, continues to build, due to pressure from customers, employees, boards, investors and other stakeholders. Some of these commitments are aggressive and are supported by interim targets, plans and investments to attain future goals. Some are not.

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Electric utilities are among the highest-profile and highest-impact organizations setting carbon-reduction targets, with the earliest commitments dating back over 15 years. Over 70 U.S. utilities have carbon-reduction or emissions goals, with more commitments being announced each month. The Smart Electric Power Alliance’s Utility Carbon Reduction Tracker maintains a list and analysis of these commitments. Tracking these commitments is important, to be sure. But it’s even more important to monitor how these organizations are progressing and determine what actions they should take to accelerate their progress.

The electric grid is called the greatest engineering achievement of the 20th century. I believe that when we look back in the future, the transition to a carbon-free energy system will be regarded as the greatest transformation of the 21st century.

SEPA recently completed a comprehensive, honest assessment of electric utilities’ progress on the path to a modern, carbon-free energy system. We call this project the Utility Transformation Challenge. SEPA conducted detailed surveys of over 130 U.S. electric utilities and published a summary of the results called the Utility Transformation Profile. This report includes recognition of the utilities that have made the most progress in the 2021 Utility Transformation Leaderboard.

Image credit: SEPA

Our analysis identified key differentiators between the leaderboard utilities and all other participating utilities, as well as areas where significant improvement is needed.

90% of leaderboard utilities have adopted a 100% carbon-reduction target, compared to 43% of all respondents.

50% of leaderboard utilities provide a retail supply with over 50% clean energy, compared to 15% of all respondents.

90% of leaderboard utilities are engaged in integrated distribution planning, compared to 46% of all respondents.

60% and 80% of leaderboard utilities are engaging residential customers in early-stage and intermediate-stage EV programs, respectively, vs. 29% and 40% of all respondents.

70% of leaderboard utilities are engaging stakeholders in carbon-reduction planning vs. 39% of all respondents.

Based on this work, SEPA offers a set of recommendations for utilities seeking to accelerate their transition to a modern, clean energy system:

● Strengthen carbon-reduction commitments by setting ambitious, science-based targets, with interim goals and detailed plans to achieve them.

● Address the transformation comprehensively across the organization through changes to processes, programs and structures that will accelerate clean energy adoption.

● Embrace the clean energy transformation as a core element of the utility mission and culture.

● Engage customers, technology partners, peer utilities and regulators early and often to build a common understanding and shared vision.

● Integrate equity considerations and goals into efforts to ensure all community members can participate in and benefit from the clean energy transformation.

Utilities must make clean energy a visible, core element of their mission. Historically, utilities have focused on providing affordable, reliable, safe electricity for their customers and communities. Adding clean” to this list of attributes is essential to integrating clean-energy efforts into the mission, as well as the culture of the organization, and orienting employees, customers and other stakeholders around clean energy goals.

What does this entail? Examples include:

● Align executive incentive compensation with achievement of carbon-reduction goals to help focus management efforts. Only 10% of respondents have linked long-term executive compensation to reduced carbon emissions.

● Incorporate clean energy into individual and organizational goals, as appropriate, at every level and in each part of the team.

● For utilities, clean energy needs to become what we do” rather than something else we need to do.”

Making this level of commitment requires changes throughout the organization, including ensuring that:

● Carbon-reduction commitments are aggressive and are supported with detailed plans and investments necessary to reach them.

● Integrated planning incorporates clean energy resources (distributed and large scale), demands from electrification of transportation and buildings, and programs to leverage demand flexibility.

● Projects and programs include equity considerations to ensure that underrepresented and disadvantaged communities are a priority.

● Grid operations integrate and leverage the inherent flexibility of new technologies and diverse energy resources.

Instilling a focus on clean energy throughout the utility culture aligns employees and increases the likelihood of reaching carbon-reduction goals. If done successfully, carbon-reduction efforts and organizational focus are much more likely to survive changes in corporate leadership and board governance, or crisis situations such as a global pandemic. The mission and culture of a utility are persistent and resilient.

Carbon-reduction initiatives and the achievement of a modern, carbon-free energy system are necessary to combat climate change. For utilities, it starts with embracing change, and key to that change is anchoring their mission and culture in clean energy.

(Lead photo: Markus Spiske)

Julia is a visionary non-profit leader at the center of the transformation underway in the electric power sector to a clean and modern energy future.