Traditional power generators have long been a contributor of GHG emissions. In 2015 1,925 million metric tons, or 37%, of U.S. CO2 emissions were from this industry. A shocking 66% of power generation in the U.S. is still fueled with coal and natural gas (each accounting for 33%, respectively), followed by nuclear, hydropower, and renewables (comprised of biomass, geothermal, solar and wind) at 20%, 6% and 7%, respectively. The 13% combined hydropower and renewable energy is disappointing when compared to other developed countries such as Italy, where hydropower and renewables comprised 34% of power generation in 2015. Why is the U.S. lagging in the implementation of sustainable energy?
The power industry is not entirely to blame, as the consumer ultimately drives electricity demand. The per capita electricity usage in the U.S. is approximately 12,700 kilowatt-hours (“kWh”), compared to approximately 6,300 kWh across the European Union. Meeting this large demand is challenging without large-scale, fossil-fuel driven power plants. From a legal perspective, U.S. power generation is heavily regulated at the federal, state and local level. Regulated utilities have to abide by Public Utility Commission (“PUC”) rules, which mandate what and how much capital a utility is allowed to invest in new projects, the maximum price they are allowed to charge consumers for electricity and the profit margin, among many other things. These limiting factors prohibit innovation and have dampened the domestic implementation of clean and renewable energy, given its relatively high cost compared to traditional fossil fuel generation.
We saw a rise in the number of renewable energy companies in the early-mid 2000s, but they quickly lost their cost-competitiveness with fossil fuels as shale gas revolution in the U.S. has sustainably kept the price of natural gas low. The Obama administration Green Energy Stimulus was key in funding many of these renewable companies, however these stimulus programs ended, and it is becoming increasingly difficult for renewables to be cost competitive.
Exelon and the industry are also facing various stricter pending legislation. From an international perspective, the U.S. is a signatory of the United Nations Framework Convention on Climate Change, signed on October 5, 2016. The U.S. government has yet to implement specific new regulation, but has indicated they intend to cut carbon pollution from both existing and new power plants. Domestically, both the Clean Air Act and the Clean Power Plan have passed, but are currently held in the U.S. Court of Appeals. Additional state and local regulations must be abided to as well. The severity of these laws are unknown, but will certainly impact allowed GHG emissions of Exelon.
Despite these difficulties, Exelon has been an exemplary leader. Their vision states “…we believe that reliable, clean, and affordable energy is essential to a brighter, more sustainable future,” showing they are dedicated to and understand the importance of GHG reductions. 64% of their generation is from nuclear energy, which has zero CO2 emissions, and 10% of their generation is from renewables. Exelon has invested in digital, developing consumer-friendly technology to allow consumers to monitor and reduce their usage, thus shifting the demand curve.
However, this is not enough. While Exelon has successfully divested or retired all of their coal power plants, 20% of the generation comes from natural gas, which still emits CO2 (albeit the emissions from the latest natural-gas generation technology are roughly half of that of coal). Despite a lack of government subsidies, they need to push forward with creative ways to deploy clean and renewable energy. For example, they could create a program by partnering with local banks to implement a residential solar (rooftop solar) program. They could also build out and more widely distribute their consumer digital program for monitoring power usage, to reduce total demand. Electric vehicles are a big focus in the automotive industry, however, charging a Tesla battery with coal- or gas- fired power generation negates the concept by simply transferring gasoline usage to another fossil fuel. Exelon could combat this by setting up its own vehicle charging stations – where the majority of the power would come from clean sources such as nuclear and renewable. Finally, they should push forward with constructing new nuclear plants. While renewable energy availability is inherently limited (i.e. wind blows the most at night when power demand is lowest and you can not control the number of cloudy days a year that will affect solar panels), nuclear power is a consistent, zero-carbon emitting alternative.
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