29 March 2017
Climate Leadership is about being both transparent on emissions performance, and reducing emissions in line with policy guidance to stay within 2 degrees C global warming. As part of our Climate Leaders series, we sat down with Jack Ihle, Director of Environmental Policy at Xcel Energy, to learn how and why a top 100 emitter of greenhouse gas is managing its carbon footprint in line with science-based policy guidance.
Sustainability: Tell us a bit about Xcel Energy and why reducing your GHG footprint is important to your business strategy.
Xcel Energy is a major U.S. energy provider headquartered in Minneapolis that serves millions of electricity and natural gas customers in eight Western and Midwestern states. For more than a decade, we’ve been transforming how we produce, deliver and encourage the efficient use of energy—at a low cost to customers.
Our strategy focuses in three key areas: increasing the use of wind and solar power, transitioning the traditional plant fleet, and providing customers with renewable and energy-saving solutions. Reducing carbon dioxide emissions is a primary driver. We’re on track now to reduce emissions by 45 percent from 2005 levels by 2021, assuming regulators approve our latest renewable energy proposals.
Reducing carbon emissions is important to many of the customers and communities that we serve. We continue to meet the growing desire for reliable, affordable energy that is increasingly clean and from renewable sources. At the same time, we are transitioning our operations for the future, deploying more advanced technologies and reducing potential regulatory costs and risk to customers. Over the next five years we have proposed adding $3.5 billion in wind investments – the largest multistate wind investment in U.S. history, at 3.4 gigawatts across seven states – that will produce value for both shareholders and customers, while further reducing emissions.
These are highly competitive renewable projects that will produce clean energy without significantly impacting customer bills, because the capital investment will be offset by avoided fuel costs. In fact, we estimate our seven-state wind portfolio will save customers nearly $8 billion over the 30-year projected life of the projects, at the same time it helps us achieve a 45 percent carbon reduction by 2021.
Sustainability: Do you report your GHG emissions scope 1, 2, and 3? Aside from meeting regulatory requirements, why is this important?
Transparent greenhouse gas reporting is the first step, and an ongoing commitment, in our clean energy strategy. We joined The Climate Registry as a founding member and have third-party verified and reported our emissions going back to 2005. We also report our emissions to EPA’s mandatory GHG reporting program, to CDP, in our Corporate Responsibility Report, and in our 10K and 10Q filings to the SEC.
Our reporting follows The Climate Registry’s Electric Power Sector Protocol for greenhouse gas emissions reporting, including all three emissions scopes. Scopes 1 and 2 cover direct and indirect emissions, respectively. For many electric utilities, scope 3 is a key category. It covers emissions and generation from significant amounts of power purchased for resale to retail and wholesale customers, as well as power wheeled across our transmission lines. We have a big purchased wind portfolio, so tracking scope 3 helps us to understand the value of that in emissions reductions.
Sustainability: Can you provide an update on your aggregate GHG emissions?
We tend to use 2005 as a baseline, consistent with U.S. climate policy targets and the targets of some of our states. Based on 2016 data, we have reduced carbon emissions by 30 percent since 2005, and by 23 percent since 2010. Full results will be published in our upcoming Corporate Responsibility Report in May. With nuclear, wind, hydro and solar energy, our generation portfolio is now nearly 40 percent carbon-free. That share will exceed 50 percent by 2021, if our recent renewable proposals are approved.
Sustainability: Does this performance since 2010 meet or exceed a science-based target?
We believe that one of the strongest ways to show climate leadership is to reduce carbon dioxide emissions. And we have done so, significantly. We have reduced our emissions by 30% since 2005, and by 23% since 2010. We gauge our efforts primarily around the likely long-term trajectory of state and federal climate policy, plus the goals of our customers and communities. These policies and goals tend to be driven by science. Our strong performance of reducing emissions is in line with emissions goals stemming from international agreements that look to the science. The great news for customers and the environment is that our strong emissions reduction performance is accomplished with minimal cost impact, and some of the projects save money.
Sustainability: Do you set targets for future reductions based on a science-based target guidance (e.g. Reducing 1.4% per year from a 2010 baseline?)
Again, our emissions reduction efforts are aligned with customer and community-driven goals for a low-carbon future and with potential policy outcomes. Some of the states, cities, companies, and communities we serve have similar targets to a science-based target, and their targets are often based on international and national discussions. We believe that our planned reductions of 45 percent by 2021 compare favorably to likely policy outcomes, science, and customer and community interest. Our achieved and planned reductions from 2005 to 2021 average more than 3 percent per year. Our performance exceeds U.S. goals in international negotiations, and is ahead of what EPA’s Clean Power Plan would have required us to do.
As we consider the longer-term future, our emissions reduction trajectory can continue if there is a supportive policy and regulatory environment, favorable economics, and ongoing support among the customers, communities, and states we serve. We expect to consider and apply those factors to future plans, as we have for many years. While there are many contingencies to our long-term emissions trend, the technology trends of the last few years give us optimism that we can continue to use more of the renewable resources available in our service territory, which are some of the best in the country. Further, many of our communities and customers make it clear, through targets such as Minnesota’s 80 percent reduction by 2050 goal, that long-term climate objectives will remain a central element of our planning for the foreseeable future.
Sustainability: What benefits have you seen because of your carbon management strategy?
Through our clean energy strategy, we’ve lowered emissions while being more responsive to our customers and more reliant on advanced technologies. This is all happening even as we keep our prices competitive. We’ve also developed options, such as our brand new Renewable*Connect product, that allow customers to obtain carbon-free solar and wind energy in a flexible, easy-to-join way. These products provide a new way to satisfy our customers. We’re incorporating advanced technology and transitioning our generating fleet and power grid for the future. Our diverse energy supply insulates customers from rising fuel prices, and reduces our regulatory costs and risk. We’ve also managed to provide investment opportunities for shareholders. So we are proud that we have been able to profitably adapt our utility business model to the significant climate challenge.
Our efforts are also achieving positive recognition for the company, such as the 2016 Climate Leadership Award we received from the U.S. Environmental Protection Agency and The Climate Registry, and the #1 utility wind provider ranking we have received from the American Wind Energy Association for the last twelve years.
Sustainability: To be a leader in climate performance, what advice would you give to other carbon intensive firms about GHG management and planning?
Greenhouse gas management and planning varies across companies and economic sectors, so we do not expect our experience to be relevant for all. However, we can suggest a few things. First, renewables can be a valuable part of an energy portfolio. Our renewable experience has been a good one for customers, providing cost-effective energy while reducing regulatory risk. Second, companies can do well by offering cleaner, lower-emissions choices. We offer energy efficiency programs to help customers better manage their energy use, and “green tariff” products that give customers the opportunity to purchase renewable electricity for up to 100 percent of their consumption. Finally, greenhouse gas reporting transparency is in itself an accomplishment. If a company isn’t already reporting, it could consider reporting emissions in a publicly accessible, third-party verified format. Better understanding scope 1 and 2, and if possible, scope 3 emissions, can help identify the most near-term and cost-effective emission reduction opportunities.