Wind turbines and energy storage facilities near Palm Springs, Calif. Renewables make up most of the new power capacity waiting to come online in the US as utilities spend billions to decarbonize their fleets. Source: Mario Tama/Getty Images News via Getty Images.

Most large US power companies are gaining ground on decarbonization, with several utilities approaching the net-zero finish line. However, progress was uneven in 2023 and new challenges lie ahead, a survey by S&P Global Commodity Insights showed.

Extreme weather, rapidly rising energy demand, grid interconnection delays and opposing state policies can hamper progress for the most ambitious of power companies, the survey results indicated.

Nuclear-heavy Constellation Energy Corp., one of the largest US utilities by market cap, in 2023 produced 89% carbon-free electricity and supplied 10% of the country's clean power. Yet, soaring demand for power in Texas drove the company's operations-driven Scope 1 emissions 6.3% higher than the year before, the survey found.

The increase in emissions was "the result of our natural gas generation assets in Texas being called on more frequently and for longer durations than in prior years to ensure the reliable delivery of power to meet the demand of the state's electricity grid," Constellation said in its sustainability report released in June. The company declined to comment further.

"The journey was always going to get exponentially more difficult as you go down the pathway," Eric Holdsworth, Edison Electric Institute's climate programs director, said in an interview.

"Even if you look at our sector's emissions over the last 15 or so years, while the general emissions trajectory is downwards, there are certainly years where it bumps up — because of economic growth, sometimes it's fuel prices, sometimes it's weather. All of those can have an impact on a year-to-year basis," Holdsworth added.

Avangrid Inc., another clean energy industry leader with 86% emissions-free power generation in 2023, had to boost production at a natural gas-fired power plant in Oregon after drought caused a 20% drop in hydropower generation, according to Laney Brown, Avangrid's vice president of sustainability.

Fortunately, "our emissions reductions in other areas helped offset the emissions from increased production," Brown added in an email. "We increased the percentage of our alternative vehicle fleet from 6% in 2022 to 11% in 2023 and renewable electricity in our corporate facilities went up to 44% from 5%."

In the end, Avangrid saw a 1% cut in emissions in 2023 from a new baseline year of 2020.

"There's a little bit of stock-taking, and what that reveals to me is that you can only get so far in this energy transition through voluntary commitments and corporate goodwill," Sasha Mackler, executive director of the Bipartisan Policy Center's energy program, said in an interview. "Utilities need certainty, they need clarity, they need to understand the rules of the road. And in the absence of an overarching policy framework, what we get are fits and starts."

The companies leading the net-zero race

Challenges aside, Constellation, Avangrid and several other companies appear steadfast in their march toward net-zero.

By 2022, Public Service Enterprise Group Inc. (PSEG) had cut its Scope 1 and 2 greenhouse gas emissions by 89% from 2005 levels. With the mid-2023 sale of its stake in a Hawaii natural gas plant, PSEG had completed a multiyear divestment of fossil-fueled power plant assets, and the company in November 2023 declared its generation 100% carbon-free.

"When you look at the utilities that do long-term plans, they're still committed to a very large build-out of new clean energy," Brendan Pierpont, director of electricity modeling at the think tank Energy Innovation, said in an interview. "Even in spite of the load growth ... when you look at what's waiting in the interconnection queues, the vast majority of that is clean energy. I think many utilities are committed to meeting those goals and figuring out how we can build the resources we need fast enough."

New England utilities Avangrid and Eversource Energy, as well as PSEG, are the only companies among the top 30 utilities by market cap to maintain a 2030 net-zero goal. Sixteen of the companies plan to zero out some or all of their greenhouse gas emissions by 2050, and the rest fall somewhere in between.

Several other utilities also made significant progress toward their climate goals in 2023, considering where they were just a few years ago. DTE Energy Co., for example, cut operational Scope 1 emissions by nearly 46% in 2023 after recording a 34.5% reduction a year earlier.

The 2022 closure of two coal-fired power plants and a production boost at the 1,179-MW Blue Water Energy Center (Belle River Combined Cycle Plant) in 2023 "were the leading factors in the significant drop in emissions," DTE Energy spokesperson Ryan Lowry said in an email.

As recently as 2018, coal plants accounted for 66% of DTE's electricity production. Today, the company has 20 utility-scale wind parks and 33 solar parks in Michigan with more to come, having already invested $4 billion in renewable energy generation in recent years.

The site of one of the coal-fired plants closed in 2022 will soon host a 220-MW battery storage center that will be the largest such project in the Great Lakes region when it begins operations in 2026, Lowry said.

DTE Energy's 150-MW Sauk Solar Park will come online in fall 2024. Source: DTE Energy.

Even fossil fuel-heavy NRG Energy Inc. said it cut Scope 1, 2 and some indirect Scope 3 emissions by 58% in 2023 from 2014 levels after shuttering several coal-fired plants and shifting toward natural gas in recent years. That compared with a 42% emissions reduction a year earlier. Only 5% of NRG's operating revenue came from coal-fired power plants in 2023, the company told S&P Global Commodity Insights.

Some companies backtracked, showed little progress

At the same time, some companies in 2023 treaded water or fell behind, hampered by long-ago investment choices or changing market conditions.

FirstEnergy Corp. acknowledged in early 2023 that it could no longer deliver on its interim emission reduction target. Company spokesperson Tricia Ingraham said achieving a 30% reduction in emissions by 2030 "is not entirely within our control."

The company has extended the life of its two coal-fired plants in the state that account for 99% of FirstEnergy's Scope 1 emissions, citing West Virginia energy priorities and resource concerns in the PJM Interconnection LLC wholesale market.

"West Virginia is heavily reliant on coal generation, from both an energy and economic perspective, and has established the energy policy and regulatory authority to sustain coal generation in the state," Ingraham said in an email. "An intentional reduction in generating output for environmental reasons would not be prudent as it is inconsistent with the state's energy policy."

West Virginia regulators in 2021 ordered utilities in the state to operate their coal-fired plants at a 69% capacity factor, significantly higher than they typically did. The following year, FirstEnergy reached an agreement with regulators to invest $142 million in the 1,098-MW Fort Martin and 1,984-MW Harrison coal plants to comply with federal emissions standards and keep them operating until 2035 and 2040, respectively.

Also noteworthy is NextEra Energy Inc., the largest US utility by market cap. The Florida-based company pledged in 2022 to zero out its own Scope 1 and Scope 2 greenhouse gas emissions by 2045 without using offsets and to use its vast renewables footprint to help the rest of the economy do the same. The company calls its campaign the "Real Zero."

By the end of 2022, NextEra had cut Scope 1 emissions from its own generation by 16% from 2005 levels, less than any other utility in Commodity Insights' survey, its emissions reporting shows. The company did not return calls and emails seeking comment and additional information.

In 2023, 40% of US electricity came from carbon-free resources, but natural gas generation is growing faster. Utility acquisitions in recent years also indicate where companies see fit to place their money.

But such data does not concern EEI's Holdsworth, who asserted that the industry "is moving as fast as [it] can," having already reduced emissions by 41% since 2005.

"You might have to detour the path a little bit and I think that's all fine as long as everyone's still focused on that North Star of net-zero," Holdsworth said. "I really feel like that's what our members are trying to do, recognizing that situations are changing, right?"

Datacenter question looms

The US energy sector is key to the overall decarbonization of the US economy, including the electrification of transportation and buildings. Early in his term, President Joe Biden set a goal to decarbonize the US power sector by 2035 to help the rest of the economy along.

"Of course, all rarely goes to plan," the think tank Rhodium Group wrote in a July report showing how electrification and the datacenter industry could hamper efforts to decarbonize the US power sector.

Without electricity demand from datacenters, power sector emissions could drop 16% by 2035, according to one scenario in the report. If datacenter demand grows as forecast and transmission interconnection delays continue to slow the build-out of renewables, emissions could instead rise 56% by 2035, the Rhodium Group wrote.

The influx of power-guzzling datacenters has prompted many utilities to rethink resource plans and revise their forecasts. It has also raised concern that energy companies may seek to profit from the new demand at the expense of climate goals.

"We are seeking to build a grid that is capable of delivering 100% clean energy by 2040," a spokesperson for Consolidated Edison Inc. wrote in an email. "Any increases in the need for power, whether it be from datacenters, electrified buildings, electric vehicles or other users, add urgency to the move away from fossil fuels."