Electricity

The third event of the 2021 series, REthink Energy: Countdown to COP26, co-organised by the IIEA and ESB, took place on Friday, 9 July. Thomas R. Kuhn, President of the Edison Electric Institute (EEI), and Pat O’Doherty, CEO of ESB and former President of Eurelectric engaged in a wide-ranging conversation about the future of the European and U.S. electricity industry.

The EEI represents all U.S. investor-owned electric companies, and its members provide electricity for 220 million Americans across all 50 states. Eurelectric, meanwhile, is the sector association which represents the common interests of the electricity industry across 32 European countries. Both the U.S.and EU have set ambitious targets to decarbonise their economies over the coming decades and to reach net-zero emissions by 2050. The generation of clean, reliable, and affordable electricity will play a key role in meeting these ambitions.

Opening Remarks

Thomas R.Kuhn

In his opening remarks, Mr Kuhn acknowledged that climate change is one of the greatest challenges of modern times and argued that electric utility companies around the world are leading a profound energy transformation. He remarked that the American political landscape has changed considerably in the last year and that President Biden’s decision to re-join the Paris Agreement on his first day in office, signals the U.S. intent to be a solution to the global challenge of climate change.

Mr Kuhn concluded his opening remarks by acknowledging that increased market interest in the field of electric transportation presents many opportunities for clean-electricity growth and accelerates the need to develop new zero-carbon technologies such as: micro grids, carbon capture and storage (CCS), and hydrogen.

Pat O’Doherty

Mr O’Doherty began by acknowledging that while COVID-19 is the biggest disruption to global society in living memory and said that one cannot ignore that climate change is here, and that extreme weather events and rising temperatures threaten the habitability of regions across the world. Mr O’Doherty stressed the need to grasp the opportunity to change course while it is still possible. He argued that the global coordinated response to the COVID-19 pandemic shows what can be done when facing a common challenge and that this approach could serve as a blueprint for more coordinated and integrated action against climate change. Mr O’Doherty outlined Ireland’s remarkable level of wind penetration in the energy mix, which can reach as high as 60 or 70% of the mix at certain times. This, he remarked, was considered an impossibility just one decade ago. While penetration can be high at certain times, wind is a variable source of energy and Mr O’Doherty accepted that there is no ‘silver bullet’ to the question of intermittency, and that gas would need to act as backup source for the power system until new technologies, such as hydrogen, are developed.

Mr O’Doherty stressed than wind and solar energy have tremendous potential for Ireland, but that more work needs to be done to address generation requirements when the weather is not windy or sunny.

Citizen Engagement

On the role of citizen engagement with the electricity industry, Thomas Kuhn said that EEI’s customers are a major driver of the move to decarbonisation. He noted that in July 2021, 80 major U.S. companies wrote to the White House outlining their intention to achieve major emissions reductions. This, he remarked, reflects the growing desire among businesses to enhance their green credentials and reflect the demands of consumers.

Mr Kuhn highlighted the increasing number of storms, hurricanes, wildfires, and other extreme weather events that impact the U.S. This illustrates, he argued, the varied and immediate ways that climate change affects daily life for millions of American energy consumers and accentuates the consumer-led drive for industry change. Mr Kuhn remarked that consumer demands are changing and that EEI customers expect a cleaner electricity system with a modernised and reliable grid.

A prime objective of the EEI, Mr Kuhn stated, was to deliver on a clean energy future that works for all American energy consumers. To maintain citizen engagement, Mr Kuhn stressed the need to consider affordability and environmental justice concerns.

Too many communities, he acknowledged, had been left behind in the traditional energy economy. He emphasised that the issue of affordability should not be ignored when considering the transition to a net-zero future as many American electricity consumers live on low incomes and would find it difficult to meet increased energy costs. It is essential, Mr Kuhn said, that these Americans are not left behind in the transition to a cleaner electricity future. He remarked that the U.S. is making positive developments in the share of renewables in the energy mix and that 40% of U.S. energy is now carbon-free, while electricity rates are below the level of inflation.

In Europe, Mr O’Doherty recognised that citizens are beginning to show a greater interest in the role that electricity plays in their lives. In relation to Ireland, he cited the Dingle Project, operated by ESB Networks in Co. Kerry, which looks at the interaction between citizens and the power system through the deployment of new technologies to assist in the development of a smart, resilient, low-carbon electricity network. The results of the project, he said, clearly demonstrate that once people can see the direct consequences of changing their energy impact, engagement with the electricity network is increased and sustained. Concluding his opening remarks, Mr O’Doherty acknowledged that the European power sector is in good shape and as clean electricity is extended across a much broader range of economic activities, there is an opportunity to both reduce carbon emissions and unlock the economic, social and health benefits for society.

Security of Supply

Both speakers emphasised that the maintenance of a reliable grid is of vital importance in the transformation of the electricity sector. They acknowledged the critical role of enhanced digital integration and cyber-defence strategies to protect critical energy infrastructure from attacks.

The recent ransomware attacks and disruptions in the American energy sector, Mr Kuhn said, emphasised the need for greater partnerships with the U.S. government to ensure that the operational technologies in place can prevent further cyber-crime.

Pat O’Doherty highlighted that cyber design is embedded in the reliability of the European electricity network. Interconnected digital solutions, he remarked, are essential to expand the length and breadth of the electricity value chain and to optimise resources through automation, smart metering, and the internet of things.

Mr Kuhn highlighted the recent grid failures in the states of California and Texas as glaring examples of situations which can never happen again but reminders of the need to have a mix of resources available for grid continuity. Mr Kuhn said that natural gas remained imperative to maintain a secure supply of electricity throughout the U.S. He also remarked that the electricity sector is the most capital-intensive industry in the United States, making investments of over $30 billion, with a focus on resilience and security of supply.

The Policy Environment

The EEI is working closely with the current U.S. Administration and on a bipartisan basis with the Congress, state legislators and regulators who wish to be part of a clean electricity solution, Mr Kuhn reported. He emphasised that market orientation towards structures that enhance energy efficiency and demand management are necessary to accelerate technology development.

Mr Kuhn also highlighted the role of tax incentives to drive technology innovation. An opportune fiscal environment, he argued, which drives down the cost of new technologies, and in-turn, allows for the maintenance of electricity rates below the level of inflation, must be maintained in the transition. Mr Kuhn accepted that while debates about decarbonisation targets are similar in many parts of the world, policy conclusions vary. He recognised a difference in attitudes to market-led solutions on either side of the Atlantic and the less important role that carbon pricing serves in the panoply of American policy solutions than it does in Europe.

Mr O’Doherty stated that, in Europe, the price of carbon is fundamental to meeting the emissions reduction targets that have been set. He argued that the free market cannot be given the reign to drive the type of changes that are necessary to deliver a clean energy future, but that governments and regulators will have a significant role to play in updating market design.

Mr O’Doherty recognised the comprehensive nature of the European policy response to the climate crisis, in the form of the European Green Deal. He highlighted the EU’s net zero target by 2050 and the Commission’s new Fit for 55 Package, which sets out a framework to substantially increase the EU’s 2030 emissions reduction targets but stressed that the scale and pace of the change needed over the next 30 years is staggering. Despite the drastic changes and difficult choices imbued in the transition to net-zero, Mr O’Doherty remained upbeat and said he believes that 2050 will offer a much better version of what we have today.

Cooperation between Europe and the U.S.

Both speakers recognised that international collaboration is incredibly important to address the challenge and the opportunity presented by the transformation of the electricity system. Mr O’Doherty said that it would be a valuable signal of international collaboration if Europe and the U.S. could walk lockstep at the COP26 summit in Glasgow in November 2021. Mr Kuhn acknowledged the importance to the EEI of continued engagement with Eurelectric, ESB and other European partners to exchange information on new technologies, discuss public policies and expand trade opportunities.

In conclusion, Mr O’Doherty, participating in his final IIEA contribution as CEO of ESB, reflected on his tenure at the company and offered a hopeful message for the future of the electricity sector. Electricity has had a transformative role in society’s development over the last 100 years. Mr O’Doherty remarked that electricity is the most versatile unit of energy and considering that it will form at least 60% of final energy consumption, clean electricity and indeed ESB, will have a central role in the transformation to a clean energy future.