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Utilities’ Place in a Net-Zero Future Depends on Just Transition, Regional Grid Policies

The practical pathways to align power utility planning with future climate goals—from market transformation in regions that still depend heavily on fossil fuels, to a just transition for workers and communities—were the focus of a late January webinar hosted by Energy Central and the Utility 2030 Collaborative.

Taking the results of last year’s COP 26 climate summit, with its halting progress toward net-zero emissions, as their cue, panelists looked at how the mix of opportunities and challenges on the road to climate stabilization will shape the future of utilities.

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Panelist Aliénor Rougeot, program manager at Toronto-based Environmental Defence Canada, pointed to a just transition for fossil fuel workers, and for countries that are disproportionately burdened by the climate crisis, as an essential element of the shift off carbon. “The just transition as a response to the climate emergency allows us to rapidly decarbonize our economy, while ensuring that workers and communities that would be affected by this rapid decarbonization are given good lives and good jobs in a new economy,” she said.

There are two components of a just transition, Rougeot explained One involves helping people that have existing jobs or lives that depend on polluting industries to transition to other sectors, “and that’s where we talk about economic diversification, creating new jobs, bridging to retirement or retraining people.” The second component is about making sure that “those who were historically hurt by those polluting industries or who are historically excluded from good opportunities to even work in these industries” are brought along in the transition.

Raleigh, North Carolina-based clean energy consultant Diane Cherry said her clients are “all thinking about how to move from where we are to clean energy in the future.” She said the high per capita energy consumption, rising population, and absence of a functioning energy market in the southeastern United States distinguish the region from areas like the northeast and California in a way that makes it particularly ripe for just transition policy.

However, the southeast also faces unique challenges in the transition to a clean energy economy, like inconsistent carbon policies across jurisdictional boundaries and potential impacts of stranded assets for a population already struggling with high poverty rates.

With natural gas still on the grid, “there’s just a whole set of questions about whether natural gas is going to end up as a stranded asset the way that coal has, and what does that mean for the backs of consumers who are ratepayers,” she told participants.

Those economic hardships will land in a region where the rate of persistent poverty is 13% in North Carolina and even higher in Mississippi, she added. And utilities are concerned that if coal and gas plants are taken off the grid on a relatively short timeline and become stranded assets, it will be that much more difficult to maintain a strong economic base while achieving climate targets that align with a 1.5°C pathway. While the southeast has made progress addressing issues like transmission and queue reform, Cherry said, there are concerns about assembling sufficient investment to successfully shift the grid to renewable energy.

Those risks make it hard to build public support for a new economy based on renewable energy, Rougeot said. “How do folks who have so much to lose come to admit that we need to have a transition?” she asked. “How do you get them to want this transition?” The answer to that challenge begins with creating new job opportunities that are more attractive than current jobs.

She cited the erosion of public trust as an important barrier to address, adding that decision-makers will need to “get more passionate” about a just transition to build public support.

“We’re facing a climate crisis, and no matter how much we do to mitigate it, there are going to be some extreme events,” she said. “There are going to be some extreme situations, and having a population that is divided or not trustful of some of the biggest agencies or biggest institutions is a super dangerous place to be in as a country, and as a world.”

A just transition is also needed on a global scale to help countries that are simultaneously seeing the worst impacts of the climate emergency and being cast as laggards on global climate action, even though they account for a tiny fraction of historical and present-day emissions.

“There’s a relatively small proportion of countries that have produced the lion’s share of the emissions over time. And a whole other group…of countries that are experiencing by far the worst impacts of climate change, not in the future but right now, today—it’s happening as we speak,” said The Energy Mix publisher Mitchell Beer.

Though countries like the U.S., Canada, and the UK are responsible for the largest shares of historical emissions—while also being among the highest per-capita fossil fuel consumers—they tend to deflect attention towards other countries and downplay their progress toward decarbonization. Panelists pointed to India as a country whose per capita emissions are one-tenth the size of richer countries’.

Panel moderator Parameswaran Kumar, president of Kumar Resources Inc., said clean energy investments in countries like India are often undervalued by countries in the west. Indian Prime Minister Narendra Modi was met with incredulity by western countries when he declared that India would need $1 trillion over the next 10 years for climate adaptation. However, as Kumar pointed out, that amount is but a fraction of the US$5.9 trillion the world paid out in fossil fuel subsidies in 2020, a mind-bending US$11.2 million per minute, according to the International Monetary Fund.

Contrary to international perceptions, India is making impressive strides to shift away from fossil fuels, said Rahul Walawalkar, executive director of the India Energy Storage Alliance (IESA) and chair of the Global Energy Storage Alliance.

“India is looking at getting up to almost four times where it is right now in terms of the renewable deployment by the end of the decade,” he told participants. That degree of scale up is “unprecedented, especially when you’re already at the 100-plus gigawatt scale.”

India has also scaled up its installed solar capacity and committed to investments in green hydrogen and energy storage, and Walawalkar said.

Recent developments in the country include scaling up solar power generation and committing to investing in green hydrogen energy storage. Walawalkar said the IESA was behind a microgrid initiative aimed reducing system costs by 30 to 50% in three years.”

“There are not too many investments in the energy sector where you can get double-digit returns in most of the developed countries,” he said. “In India, you can easily get that because the economy is growing, and energy needs are going to be increasing.”

Whether on a national or global scale, improving communication strategies will be important to build public support for the energy transition, Beer said. Both utilities and customers will need to see the transition as a matter of “opportunity and gain, not loss and pain,” he stated, with communications tailored to better address the specific needs of different groups.

Noting that the shift off carbon will only become more challenging and expensive if it’s postponed, he encouraged utilities to focus conversations and messaging on benefits of renewable energy and increased energy efficiency.

“There are so many of those benefit arguments that are absolutely real and, frankly, a lot more real to your investors, your stakeholders, and customers than the necessarily abstract conversations that we often have around climate and energy transition,” he said.