The race to net zero
How feasible is net-zero carbon? The technology is there, but what will it cost?
From the pages of In Business magazine.
The race to save the planet is firing up even as the United States served notice that it will be pulling out of the 2015 Paris climate agreement to curb emissions that scientists say lead to climate change. The move wasn’t unexpected, as the U.S. signaled long ago its intentions. Secretary of State Mike Pompeo called the deal “an unfair economic burden” on the U.S. economy and promised the U.S. would continue to offer a “realistic and pragmatic model” solution to reduce emissions.
In 2017, the U.S. was the second largest producer of territorial fossil fuel carbon dioxide based on its share of global CO2 emissions, according to statista.com. Of the top three emitters, China is the worst offender at 27.2 percent, followed by the U.S. at 14.58 percent, and India, 6.82 percent.
In 2018, the Intergovernmental Panel on Climate Change (IPCC) suggested that saving the planet and limiting global temperature increases to 1.5 degrees Celsius, or 2.7 degrees Fahrenheit, would require all nations to commit to immediately cutting emissions to zero by 2050. But emissions continue to rise, and chances are the earth’s temperature will follow suit. In fact, the latest reports conclude that left unchecked, the earth’s temperature could rise 3 to 5 degrees Celsius by 2021.
The race is on. U.S. Rep. Alexandria Ocasio-Cortez and supporters of the Green New Deal would like to accelerate that plan to 2030. 2050 is tough enough, but 2030 is “functionally impossible,” insists Alex Trembath, deputy director of the Breakthrough Institute, an environmental research group, in a Bloomberg Businessweek report, and it’s likely very expensive.
The Deep Decarbonization Pathways Project, a global collaboration of energy research teams, suggests that cleaning up U.S. industries by 2050 could require investments of more than $1 trillion annually.
Ignoring the problem isn’t the answer, either, according to a U.N. Environment Finance Initiative project that suggests companies could end up paying $1.2 trillion over the next 15 years if they fail to address rising carbon dioxide levels.
South-central Wisconsin companies are taking net-zero carbon targets very seriously. We spoke with representatives from Madison Gas and Electric, Alliant Energy, We Energies, and RENEW Wisconsin who remain actively engaged in the cause to become carbon-neutral or better by 2050. Will it be enough? How much will it cost?
Without a crystal ball, nobody really knows the answer to that question.
Local commitments
MGE was among the first utilities in the nation to announce a goal of a fully decarbonizing electricity by 2050. The company continues to follow its Energy 2030 business framework announced in November 2015 to reach sustainability goals. Since then, it has developed renewable energy projects that will increase its owned renewable capacity by about 600 percent, including its 66-megawatt Saratoga Wind Farm that came online in 2019.
MGE is also working with public and private partners to increase its use of solar energy, with 14 megawatts (MW) already announced in Middleton and Madison, and another 25 MW in the works.
The Madison utility is strategizing with the community and businesses to decarbonize electricity generation; to electrify transportation, whether electric vehicles, fleets, delivery vehicles, or public transportation; and to promote energy efficiency. For example, businesses can enroll in MGE’s Shared Solar and Green Power Tomorrow programs, and large commercial customers can participate in the company’s Renewable Energy Rider to customize their own energy-use solutions.
“When we announced our net-zero goal, we said it will require technologies not yet commercially available or cost-effective — and likely will involve technologies not even conceptualized yet — but we know we need crucial reductions in carbon emissions to limit global warming to 1.5 degrees Celsius by 2050,” acknowledges Jeff Keebler, MGE’s chairman, president, and CEO.
“Sustainability itself is a long-term business strategy,” he adds, “and we know it’s important to many of our local businesses. All of our customers, including businesses, will see their carbon footprint decrease as MGE continues to reduce carbon emissions.”
Meanwhile, Alliant Energy announced a Powering What’s Next initiative to build 1,000 megawatts of solar generation in Wisconsin by the end of 2023, enough to power about 260,000 homes as it accelerates the transition to cleaner energy.
Says Annemarie Newman, Alliant Energy Corp. spokesperson: “We can significantly reduce emissions with technology we have today, and we’re moving forward with that. We believe that technological advancements and other innovations would be needed to fully achieve net-zero carbon as an industry.”
The company also announced a plan to break ground on its first Wisconsin Community Solar project in Fond du Lac County next year.
A RENEW Wisconsin analysis of Alliant Energy’s plans says 1,000 megawatts of power would provide about 2.7 percent of the state’s entire electricity consumption.
But it won’t come without costs, and Newman pointed to the Edison Electric Institute’s call for policies that increase funding and support investments in the energy grid.
What isn’t yet known is whether ratepayers will be able to afford the transition.
Energy watchdog
Todd Stuart, executive director of Wisconsin Industrial Energy Group, lobbies for affordable and reliable energy on a daily basis. WIEG represents 30 of the state’s largest businesses, mostly manufacturers, and many of whom pay electric bills of over $1 million each month.
As utilities transition to renewable energy (e.g., utility-scale wind and solar), costs are a significant concern. “Our goal at WIEG is to try to navigate this transition in a small and cost-effective manner to avoid rate shock,” Stuart notes.
Costs for both wind and solar have dropped considerably over the past decade, making them very competitive due in large part to technological improvements and economies of scale.
“The energy industry is changing faster now than it ever has since Edison,” Stuart comments. “Wind has gone down about 70 percent and solar has gone down about 90 percent in costs, including federal tax credits,” he says. That makes both options very competitive, if not even more competitive, with fossil fuels currently.”
Globally, fossil fuel consumption continues to rise, and energy needs are skyrocketing. So as coal plants are retired in favor of less expensive renewables, which technology will pick up the slack?
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In addition to wind and solar, exotic technologies are being discussed, such as small, modular nuclear reactors, carbon-capture technology, or even geo engineering, which remains highly controversial.
Stuart believes utilities will likely lean toward natural gas, which also has become more affordable and abundant due to fracking technology, which is not without controversy, to help offset the closure of coal plants.
Meanwhile, solar costs are projected to continue falling over the next 20 to 25 years, and there is another potential breakthrough. “The game changer may be batteries,” Stuart opines, which allows for the storage of solar or wind energy. “Battery storage is beginning to crop up in some significant quantities in the MISO queue.”
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Costs for solar and wind have tumbled over the past decade, making them more competitive with fossil fuels. Above: Municipal Operations Center (MOC) in Middleton, part of MGE’s Shared Solar pilot project. |
MISO (Midcontinent Independent System Operator) is an independent, not-for-profit organization that delivers cost-effective electric power across 15 U.S. states and the Canadian province of Manitoba. The MISO queue makes public any plans for energy projects throughout the region.
Stuart says the fact that battery storage is even being mentioned is “remarkable.”
“The Midwest, in general, has a staggering amount of solar that will get built, some known, some not yet announced. So it would be great to be able to charge up these batteries when the sun is shining and the wind is blowing and be able to use the energy when the wind isn’t blowing and the sun isn’t shining.
“In theory, you could be turning over a big chunk of the state’s infrastructure.”
There’s just one problem, Stuart explains. Who foots the bill for the coal plants that are retired before their expiration date?
“Power plants are generally expected to last 20 or 30 years,” he says. “When they close earlier than that, they become what the industry calls stranded assets. Utilities still owe money on them, whether they’re operating or not.”
He compares it to refinancing a home mortgage for a lower interest rate. If the home is sold earlier than the mortgage maturity date, the homeowner still owes the bank.
In 2003, Stuart was one of the main authors of Wisconsin’s Environmental Trust Financing Law, designed to potentially mitigate the stranded asset issue in Wisconsin. “It is not a panacea,” he admits, “but it should reduce the costs of retiring power plants early and then replacing them with new generation.”
On Nov. 1, in fact, the Public Service Commission agreed to let We Energies refinance part of its debt on a Pleasant Prairie power plant it retired in 2018. The decision saves We Energies ratepayers more than $100 million, but commissioners warned that it wasn’t to be used as a template for future “stranded asset” cases, as more such assets are expected.
Alliant Energy Corp., meanwhile, has already retired about 30 percent of its fossil-fueled generation capacity since 2005, including over 1,000 megawatts of retired coal-fired generation. The company hasn’t scheduled the closure of its remaining coal-fired generation yet, but it has committed do so and reduce carbon by 80 percent by 2050.
The company’s recent announcement to add up to 1,000 MW of solar in Wisconsin by 2023 is a significant step toward that goal as it transitions toward more renewable energy.
New assets like additional wind or solar may be just as competitive or even more competitive than traditional fossil fuels, but there’s still a cost.
“You already have infrastructure [shuttered coal plants] that needs to be paid for because there’s basically a mortgage on it,” Stuart explains, “so you really have to be careful that you don’t have a rate shock for the customer.”
This is important because from an economic development standpoint, large manufacturers paying $1 million or more every month for electricity could relocate to parts of the country where rates aren’t as high.
Stuart says Wisconsin’s utility rates are, on average, some of the highest in the Midwest. “As one of the most manufacturing-dependent states in the country on a per-capita or per-unit output basis, if you already have high rates, it becomes a tax on manufacturers and an economic drag.
“You have to be careful that our rates stay competitive with other areas in the country. If other manufacturing states have much lower rates, it becomes a problem for both production and jobs. You need to keep your competitive position.”
A different kind of farming
As renewables become more common across the state, some farmers may be able to benefit somewhat from leasing portions of their land to utility companies.
Tyler Huebner, executive director of RENEW Wisconsin, explains that such lease arrangements are voluntary but they can provide a stable income stream to help farmers deal with fluctuations in crop production and commodity pricing.
A typical wind farm uses only one to two acres per wind turbine, Huebner explains, while solar farms on average require between five to seven acres of land for every megawatt of solar power capacity. Solar developers often contract for additional land, as well, to provide flexibility in how farms are laid out and to meet state and other requirements.
In terms of total acreage, the amount of land required for wind and solar farms is surprisingly low. According to RENEW Wisconsin data, less than half a percent of the state’s total land would be required to supply half of Wisconsin’s electricity from solar power.
MGE has partnered with the UW–Madison Nelson Institute for Environmental Studies to help ensure that its goals keep in stride with the most up-to-date climate science as the company looks toward reaching net-zero carbon by 2050.
“We know we have a challenge, but our net-zero carbon goal by 2050 is where we need to be,” notes MGE’s Keebler. “It is based on the latest climate science and the best information we have available. Our strategies are the same as those identified by the IPCC.
Keebler also points out that MGE’s 2050 goal sets the company’s direction, but not its pace. That, he hints, will require everyone’s commitment.“We believe we can go further faster by working together with our customers.”
At Alliant Energy Corp, Newman agrees the timeline will be difficult to meet. “We acknowledge that achieving our 80 percent carbon reduction goal by 2050 will take work, but with careful planning we can do it in a way that keeps our electricity affordable and reliable, and our communities strong.
“We have been on the journey of accelerating renewable energy production for more than a decade. We have a track record of success. We expect to be the third largest owner-operator of wind energy in the U.S. by the end of 2020.”
Stuart (Wisconsin Industrial Energy Group) remains pragmatic. “As we electrify more things, the devil will be in the details,” he says.
The issue of stranded assets is a regulatory problem, he notes, so how much should customers end up paying for decommissioned power plants that were supposed to keep operating for decades into the future?
“I don’t know how you get to net-zero carbon,” he says, “but I know we can reduce it quite a bit. Our goal is to navigate this energy transition in the most cost-effective manner. There will be costs in the interim as more fossil fuel plants are retired early and replaced with new generation infrastructure, but no one knows how much it will cost.”
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