Pulling the Southeast Along with the Rest of the Country

In the last article, we covered the states and how they can be grouped into “leaders”, “followers”, and “laggards” depending on their climate change actions. Now, I want to think about the Southeast as a region; and in particular, why it seems to lag the rest of the country when it comes to clean energy and climate change efforts. While it is never advised to make sweeping generalizations about something, providing examples and facts allow for conclusions.

Here are the facts –

(1) The Southeast is the last geographic area of organized wholesale markets and while they have adjusted the regulatory compact cost of service model for electric utilities, there are savings, benefits, flexibility, and business opportunities for independent power producers that are not being realized.

(2) Utilities in the Southeast have captured only a portion of efficiency savings from what

others have done in the rest of the country. Policies and program offerings are less developed.

(3) Climate change impacts the Southeast significantly, especially from extreme weather

events and rising sea levels but there is a lack of policies to address this exposure. Cities

are trying to search for the path to address climate change but it depends on the cooperation from the utilities to make that happen. Combined with the geography’s coal

plants and corresponding emissions, this is an area of concern.

(4) The Southeast on the whole does not have clean energy goals at the state level that are binding, with the exception of the Commonwealth of Virginia and therefore it is

dependent on executive actions from the governor or actions from city councils.

Let’s unpack this a little more.

Wholesale Market Reform

The vertically integrated utility environment is part of the Southeast in which monopolistic utilities own generation, transmission and distribution assets. A general criticism of vertically integrated utilities is that they have not been open to competition from renewable resources. RTO market rules were not designed with widespread renewable penetration in mind, but the utility Southeast Energy Exchange Market (SEEM), which utilities have proposed as a competition “light” option does not come close to the benefits realized from an RTO. SEEM allows utilities to satisfy their own customers first, then transact any excess energy through the energy imbalance market or meet demands at a lower cost. The N.C. Utilities Commission did not believe it had jurisdiction to comment on SEEM but we are now waiting on action from FERC with details such as trading and price information to understand more.

But at the end of the day, an RTO and the cost savings and open market transactions which allow independent power producers to compete on a level playing field are not available in the Southeast. Two decades ago, when the country's other ISOs and RTOs were formed, Southeast utilities failed to reach an agreement that would have created a similar structure. With the South Carolina energy market reform study that passed and anticipation that North Carolina will do the same, is now the time competition opens up in the broader Southeast?

Energy Efficiency in the Southeast

Let’s look at energy efficiency efforts and energy bills and see where the Southeast ranks. Data from SACE’s “Energy Efficiency in the Southeast” shows that the Southeast has “among the highest energy bills in the country and the lowest energy efficiency performance”. Duke Energy is the only utility that allocates annual efficiency savings that exceeds the utility average for the entire country (.79 percent vs. .71 percent) with success because of their relationship working with consumer advocates to add program offerings.

The ACEEE 2020 energy efficiency report makes similar conclusions about the Southeast. The metrics in their reporting reflect the utility energy efficiency landscape and cover customer-funded programs and initiatives as well as other areas of utility focus that relate more broadly to energy efficiency, such as electric vehicles and customer rates. The Southeast’s electric grid has the second highest average emissions rate nationally along with need for energy efficiency efforts. Seven of the bottom 10 utilities in energy efficiency performance are in the Southeastern United States based on company commitment level and regional pressure and policy context.

Climate Change Legislative Efforts

The Southeast as a group does not have greenhouse reduction legislative actions (with the exception of the Commonwealth of Virginia) or renewable energy portfolio standards (with the exception of North Carolina). This is despite the fact that the Southeast has more coastal and low-lying areas vulnerable to sea level rise and intense rainfall as well as more hurricanes, floods, droughts, and warming ocean temperatures.

As just one data point, natural disasters such as hurricanes are more frequent and intense. Several factors are driving the trend toward more frequent and intensive hurricanes. First, there has not nor will there be an El Nino present to suppress hurricane activity. (El Nino creates stronger and more stable air over the Atlantic Ocean, making it harder for hurricane formation.) Also, a warmer temperature holds more moisture and the warming climate leads to more hurricanes that produce higher rainfall amounts. Taking that one step further, lower vertical wind height, weaker tropical Atlantic Coast winds, and a stronger west African monsoon all increased the likelihood

for an above-normal Atlantic hurricane season in 2020. In fact, in May 2020, the National

Oceanic and Atmospheric Administration (NOAA) declared 2020 an “extremely active season” with 25 named storms, the most NOAA has ever predicted in one seasonal forecast. It is likely that 2021 and future years have more of what 2020 brought us.

The Sierra Club’s most recent report on utility climate pledges, analyzed the top 20 utilities that generate the most power from coal and note collectively these 20 companies have only pledged to retire 17 percent of the coal generation by 2030. Most of these 20 utilities are located in the Southeast, meaning that communities surrounding these plants suffer from premature deaths, asthma, heart disease, and other health problems.

So, where are we? Communities have little control over their monopolistic utility that provides them power unless the Southeast marches down the road of competition. The region lags behind other areas in the country in renewable electricity while facing some of the biggest global warming threats in the nation. High-intensity hurricanes are expected to become more common, and storm surges more devastating in growing coastal communities. With Biden as president and his desire for climate change action at the federal level, we may see this region of the country stepping up.

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© 2020 by Diane Cherry Consulting.