Climate change and its associated costs are the biggest issues facing the power sector, the head of a prominent utility advocacy group said Jan. 20.

But Edison Electric Institute President and CEO Tom Kuhn and officials from other industry trade groups also stressed the need to consider the costs and reliability impacts of efforts to slash carbon emissions.

"The biggest challenge for all of us is the climate challenge," Kuhn said during the U.S. Energy Association's annual State of the Energy Industry Forum. "The amount of money that's caused by these [climate] events is astronomical."

The costs associated with U.S. weather and climate-related disasters totaled $145 billion in 2021, according to a recent report from the U.S. National Oceanic and Atmospheric Administration's National Centers for Environmental Information. Extreme weather that can be fueled by climate change has taken its toll on utility infrastructure; for example, Entergy Corp. subsidiary Entergy Louisiana LLC sustained more than $4 billion in storm- and hurricane-related damages across 2020 and 2021.

"We really have to take on the climate issue in a major way to make sure that we do continue the large reductions in carbon emissions in the future," Kuhn said. "That will be our No. 1 priority for sure."

The Edison Electric Institute, or EEI, leader cited the U.S. power sector's progress in reducing carbon output, with industry emissions down 40% from 2005 levels and 40% of the country's electricity generation now coming from carbon-free sources. The push for the power sector to achieve net-zero emissions is the "defining issue of our time," according to Kuhn.

But industry group executives said at the Jan. 20 event that the clean energy transition must be done cautiously. Despite calls from some policymakers and climate activists to quickly move away from fossil fuel-based power, Kuhn said natural gas will continue to play a role in reducing emissions, both by displacing coal-fired generation and providing a backup for intermittent renewable energy facilities.

Jim Matheson, CEO of the National Rural Electric Cooperative Association, stressed the need for around-the-clock sources of power, particularly as momentum grows to electrify transportation and the Biden administration and Democrats in Congress seek to decarbonize the bulk power system.

"Reliability needs to be a primary concern in terms of the design of that policy, and I'm not so sure that's always the case," Matheson said. "If you're going to shift to significant electrification of the economy ... that creates a number of operational challenges."

The power industry is "up to the task" of the energy transition but needs to maintain reliability and affordability at the same time, American Public Power Association President and CEO Joy Ditto said.

The industry leaders pointed to the broader challenges of operating energy infrastructure amid increasingly intense weather, hurdles that all types of energy resources must overcome. Matheson highlighted how extremely cold weather, including the February 2021 cold snap in Texas, can affect the reliability of natural gas supplies.

When it comes to extreme and shifting weather patterns, "we've got to figure out how we manage that," Ditto said. "We've got to think about that going forward."

Legislative outlook

The heads of all three trade groups praised the recently enacted infrastructure legislation that President Joe Biden signed in November 2021.

Kuhn said the law is an important part of achieving net-zero emissions for the power sector, citing its support for clean energy development and vehicle electrification. Matheson noted that the legislation includes 27 funding opportunities that could benefit electric cooperatives, including grid investments, cybersecurity and clean energy.

But the power industry hopes to see more action from Congress. Democrats have been working to advance the Build Back Better Act, a massive social spending and climate package that contains about $550 billion in climate investments. With GOP lawmakers and key swing voter U.S. Sen. Joe Manchin, D-W.Va., opposing the broader bill, Democratic lawmakers could scale back the legislation or try to move key sections of the bill separately.

On Jan. 19, Biden said the Build Back Better bill's climate and clean energy provisions may have enough support from lawmakers that they could be signed into law.

With EEI in favor of the bill's clean energy tax incentives, "we will be again working with the administration and Congress" to advance those provisions, Kuhn said.

Along with other tax provisions, the National Rural Electric Cooperative Association and American Public Power Association have backed the bill's call to allow nontaxable entities, including electric cooperatives, to obtain the value of clean energy incentives through a direct pay option. Currently, about a third of the U.S. power sector is not eligible to obtain tax credits to deploy renewable energy and other emissions-free resources.

If the broader Build Back Better Act does not move ahead, Matheson said the National Rural Electric Cooperative Association would fight to include the direct pay provision in other legislation.

Direct pay "would be transformative for our sector," Matheson said. "We're just looking for a vehicle where it could pass Congress."