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Most Electric Utility Execs Back Embattled CPP But Express Gas-Fired Power Reliance Concerns

More than two-thirds (70%) of U.S. electric utility executives want to see the Obama administration's proposed Clean Power Plan (CPP) move forward, according to an annual survey by Utility Dive that was conducted before the proposal was temporarily blocked by the U.S. Supreme Court.

Meanwhile, as half of the survey's respondents said their utilities are most invested in new natural gas-fired generation, few said they want to see that trend continue, because of fears of price volatility and concern that relying too heavily on natural gas could hamper their efforts to meet future CPP carbon emission targets.

Utility Dive said it conducted an online survey at the end of 2015 and early this year of 515 executives from every region of the United States, before the Supreme Court issued a stay of the CPP (see Daily GPI,Feb. 10). The Washington, DC-based publisher said there were at least 300 respondents to each question in the survey, which was released Tuesday.

"It's not yet clear what effect the stay, or even a decision to overturn the CPP, will have on the sector," Utility Dive acknowledged in an editor's note that accompanied the survey. "Even if the rule is ultimately upheld, the stay would likely push back compliance timelines. As it stands, the EPA [U.S. Environmental Protection Agency] will be unable to enforce its September deadline for states to submit compliance plans."

Clean Power Plan

According to the survey, 41% of respondents think the EPA should hold to its current emissions standards and timetable, while 29% think the EPA should make the emissions reduction targets more aggressive leading up to 2030. Only 17% said the EPA should reduce the targets and timetables, and 13% said the EPA should scrap the plan altogether.

The final version of the CPP was unveiled last August (see Daily GPI, Aug. 3, 2015). The plan requires states to cut their emissions by 32% below 2005 levels by 2030. They must also develop and implement plans that ensure power plants in their state -- either as single plants or as a collective group -- achieve goals for reducing carbon dioxide (CO2) emissions between 2022 and 2029, and final CO2 emission performance rates by 2030.

Utility Dive said opposition to the CPP was strongest among electric cooperatives, with 32% stating they want the plan scuttled entirely and 29% want the targets and timetables relaxed.

"Co-op sentiment against the CPP could be due to their size and institutional structure, as 68% of co-op respondents hailed from organizations with fewer than 250,000 customers," Utility Dive said. "Small organizations such as these may find it more difficult to raise the capital necessary for upgrades to meet emissions mandates, and co-ops may not have all of the financial options for infrastructure financing that are available to [municipalities], public power agencies and investor-owned utilities."

The electric utility executives were evenly divided over how the states where their utilities are located should comply with the CPP. While 35% said states should put a price on carbon -- either through legislative action or in electricity markets -- 34% said states should use a mass-based compliance approach by calculating pollution in terms of the number of tons emitted. One-third said states should adopt a rate-based approach by calculating pollution by emission per kilowatt hour (kWh) of generation.

Utility Dive said of the respondents who favored a mass-based strategy, 31% also chose to attach a price to carbon, and 32% were in favor of joining to form an organized carbon market.

But when the executives were asked to identify the three most pressing challenges for their utilities, the top three answers were an aging workforce (43%), existing regulatory models(41%) and aging infrastructure. Compliance with the CPP was in seventh place at 20%.

Investment Opportunities

The survey showed that U.S. electric utilities are currently invested in four technologies: utility-scale (i.e. solar and wind power) renewables (66%), demand-side management (64%), distributed generation (50%) and new natural gas-fired generation (50%).

According to Utility Dive, new natural gas-fired generation was most popular among respondents from the Midwest and the South, where utilities are looking to replace retiring coal plants. But natural gas was the least popular in the New England and Pacific West regions -- the former because it already relies heavily on natural gas and is attempting to relieve supply constraints, and the latter due to strong renewables mandates in California, Oregon and Washington.

But despite historic low natural gas prices and bountiful U.S. production, only 17% of respondents said their utilities should invest more in natural gas plants. The top three answers were energy storage (65%), distribution generation (52%) and utility scale renewables (47%). Natural gas was seventh.

Utility Dive said the tepid enthusiasm for future natural gas plants could derive from a fear that the facilities could hinder their efforts to meet tougher emission targets down the road.

"While many utilities can meet their CPP goals by replacing coal generation with gas and efficiency programs, an overreliance on natural gas could expose utilities to gas price and supply volatility and inhibit their ability to cut carbon emissions beyond the targets set by the CPP," Utility Dive said. And, “while replacing retiring coal plants with modern combined cycle gas plants is likely sufficient to meet most emission reduction targets by 2030...they could prove a liability if stronger regulations are enacted in an effort to cut U.S. emissions even further."

According to Utility Dive, 44% of respondents said they think their utilities should moderately increase natural gas in their power mix, compared to wind (52%), utility-scale solar (49%) and distributed energy resources (49%). At the other end of the spectrum, 54% of respondents said their utilities should significantly decrease their use of coal, and 36% want to abandon oil.

Despite uncertainty created by the high court’s stay, some of the nation's largest electric utilities predicted their industry would not be dissuaded from retiring coal for power generation and would continue to embrace natural gas and renewables (see Daily GPIFeb. 11). Further complicating matters, industry experts predicted that the sudden death of conservative Justice Antonin Scalia could push a decision over the CPP well into 2017 (see Daily GPIFeb. 16).

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