The Financials of Utilities Going Green

Utility CEOs and CFOs huddle with the financial community to discuss the business impact of sustainability.

SAN FRANCISCO – As utilities build out a decentralized grid, plug in ever more solar and wind, erect microgrids and deploy energy storage – the environment and customers win, according to utility leaders.

But there are financial implications. Big ones.

And those were front and center at the recent Edison Electric Institute annual financial conference here for senior utility executives and the financial analysts and stock experts that closely track utility performance.

Utilities must raise money from investors for their efforts.

They face risks. There are policy risks – adhering to guidelines for clean energy set by state laws. There are regulatory risks – of winning the support of state utility regulators who must greenlight any utility recovery of green investments through the monthly electricity bills they pass on to their customers.

Duke has committed to spend $2.5 billion on renewables over five years through its regulated and commercial businesses. It is part of a multi-pronged planning and outreach effort outlined in a major Climate Report.

Cari Boyce (Photo credit: Martin Rosenberg)

Cari Boyce, Duke Energy senior vice president, stakeholder strategy and sustainability, said, “We look at policy risks, operational risks – and we also look at opportunities.”

Utilities each have unique methods of assessing risks and reporting them to the investment community, regulators and state and federal policymakers, along with consumer interest groups.

“I don’t think there is a standard approach,” Boyce said. “There are different ranges of disclosures that companies select.”

Duke and several utilities are working with EEI and investors on a reporting pilot to set common metrics – a scorecard – on many of these issues, she said.

Duke has reported on climate issues and sustainability for years. Recently, there has been more focus on a two-way dialog, determining what shareholders, non-governmental organizations and other want to know, Boyce said.

“In our report we look out to 2050,” she said. “We have a goal to reduce carbon 40 percent by 2030. Beyond 2030, there are technology and policy questions on how to get to deeper reductions. We don’t know all the technology that will be available by 2050.”

“There are a lot of opportunities out these to grow your business,” Peter Trelenberg, Exxon Mobil.

At the EEI financial conference, the impact of climate change and sustainability was underscored by the comments of diverse energy players.

Alexandra Liftman (Photo credit: Martin Rosenberg)

Alexandra Liftman, Bank of American Merrill Lynch global environment executive, said, “As a bank we have a fairly unique role. We deploy capital to address climate change.”

She said that she has a team of 100 colleagues working on these and related “ESG” issues – environmental, social and governance matters.

Utilities must transition to sustainability, Liftman said, and the challenge is to “create the enabling system to make that possible.”

Peter Trelenberg, Exxon Mobil manager, environmental policy and planning, said his company spends $1 billion on new technology each year and that effort is governed by consideration of “what kind of energy do we have to supply to the world in the long-term.”

Peter Trelenberg (Photo credit: Martin Rosenberg)

“Infinite scenarios”, he said, would help move the world to limiting global warming to two degrees – a key objective that many scientists say is necessary to avert damaging climate change. The scenarios include energy efficiency, electrification of the economy, decarbonization and carbon capture and storage, Trelenberg said.

Along with substantial cost – these efforts could mean growth for energy companies.

“There are a lot of opportunities out these to grow your business,” the Exxon Mobil executive said.

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