By Hina Gupta
Recently, both Arizona and Nevada took major strides to achieve a net-zero carbon emissions future by 2050. Meanwhile, Nevada released a climate strategy looking to zero emissions by 2050.
Background
The Arizona Corporation Commission (ACC), a quasi-executive regulatory agency of the state regulating non-municipal utility companies, including energy companies, initiated the final rulemaking process requiring utilities in the state to be 100 percent free of carbon emissions by 2050. If the proposed energy rules are finalized, Arizona will become the seventh state to pass measures that lead to 100 percent renewable or carbon-free electricity in the future. While in Nevada, the state’s Climate Initiative (NCI) released a State Climate Strategy that provides proposals for bold actions to reduce carbon emissions in the electric, transportation, and building sectors, and to reach zero emissions by 2050 economy-wide. With these ambitious policy efforts, both states have demonstrated remarkable leadership towards a carbon-free future; however, the challenge is how to attain these goals.
Arizona To Achieve 100 Percent Carbon-Free Energy by 2050
Arizona took a major step towards culmination of a long rulemaking process to replace its 2006 Renewable Energy Standard and Tariff [https://azcc.gov/utilities/electric/renewable-energy-standard-and-tariff] and amend the state’s energy rules. In a special meeting on November 13, 2020, the ACC, by a 4-1 vote of the commissioners, approved moving forward with publication of a Notice of Proposed Rulemaking for new energy rules that would require the Arizona’s investor-owned utilities to comply with a 100 percent reduction in its carbon emissions by January 1, 2050. (Ariz. Corp. Commission, Decision No. 77829 [https://docket.images.azcc.gov/0000202570.pdf?i=1608503006120]docketed Nov. 23, 2020.)
This rulemaking proposes to repeal the current energy rules for: 1) resource planning and procurement for regulated load-serving entities, 2) renewable energy requirements for regulated electric utilities, and 3) energy efficiency standards for regulated electric and gas utilities. In terms of carbon emissions reduction, the proposed rules also include interim targets of 50 percent carbon emissions reductions by 2032, and 75 percent by 2040. According to the proposed rules, carbon-free electric resources to meet these mandates may include nuclear power generation and renewable resources such as solar, wind, biogas, biopower, hydroelectric, and geothermal electric generators.
The proposed rules establish mandatory standards for ACC-regulated utilities to follow in generating, procuring, and delivering electric or gas services. In particular, the new rules require that each ACC-regulated electric utility file a Clean Energy Implementation Plan (Plan) by April l every third year, beginning April l, 2023. The Plan shall include measures to be taken by each ACC-regulated electric utility to achieve the following goals: 1) meeting the 2032, 2040 and 2050 carbon emissions reduction goals; 2) providing a demand-side management program, including traditional energy efficiency, demand response and other programs that focus on reducing overall energy usage, peak demand management and load shifting by at least 35 percent of 2020 peak demand by January l, 2030, “with an average of at least 1.3 percent annual energy efficiency savings starting in 2021”; and 3) providing at least 5 percent of the ACC-regulated electric utility’s peak 2020 demand, “of which at least 40 [percent] shall be derived from Customer-owned or Customer-leased Distributed Storage” by December 31, 2035. In addition, the proposed rules establish minimum information requirements for such Clean Energy Implementation Plans.
The proposed rules also require a Clean Energy Implementation Plan for:
. . .each Class A Gas utility to consider and propose energy efficiency measures and programs, and . . . each Load-Serving Entity to follow a resource planning process, including, for all new resource procurements, an all-source request for information (ASRFI) process, and an all-source request for proposals (ASRFP) process.
The new rules would require the ASRFP process to be overseen by an Independent Monitor, and provide exceptions from the ASRFI and ASRFP.
A few steps remain before the rules are officially implemented. The Notice of Proposed Rulemaking for the proposed energy rules was published on December 1, 2020, commencing the formal public comment period and the public can submit written comments on the proposed energy rules to ACC by January 22, 202l. Oral comments may be provided during ACC’s Hearing Division’s telephonic oral proceedings to be held on January 19 and 20, 2021. The energy rules are likely to be finalized in March 2021. More information for the proposed rules and the rule making docket for the proposed rules can be accessed here: Docket No. RU-00000A-l8-0284, available at: https://edocket.azcc.gov/search/docket-search/item-detail/21658
Nevada Releases Plan For A Carbon-Free Economy By 2050
In June 2019, Governor Sisolak signed Senate Bill (SB) 254 that set aggressive, economy-wide greenhouse gas (GHG) emissions-reduction targets for the state: 28 percent by 2025, 45 percent by 2030, and net-zero by 2050 in comparison to the 2005 GHG emissions baseline. (Nev. Rev. Stat. § 445B.380(2)(c) (2019).) As a foundation to implement SB 254, the Governor issued an Executive Order on Climate Change [https://gov.nv.gov/News/Executive_Orders/2019/Executive_Order_2019-22_Directing_Executive_Branch_to_Advance_Nevada_s_Climate_Goals/] in November 2019, directing state agencies and departments to evaluate, identify and recommend the most effective climate policies and regulatory initiatives in a comprehensive State Climate Strategy to be delivered to the Governor by December 1, 2020. In order to come up with the Strategy, the Governor launched the NCI in summer of 2020 to provide a framework for Nevada-wide climate action.
The NCI released the 2020 State Climate Strategy (Strategy) on December 1, 2020. See:https://climateaction.nv.gov/our-strategy/. It provides “new mitigation-focused policies, programs, investments, and regulations” that are required to achieve the ambitious 2050 goal of net-zero GHG emissions for the state’s economyfrom all the major economic sectors, including electricity generation and transportation sectors, the major GHG contributor sectors in the state. In addition, the Strategy also provides a ground work for climate adaptation and resilience. The Strategy was developed using the best available science, and includes robust public input from nine virtual listening sessions on a range of climate topics and 1,500 survey responses. The Strategy is designed to be a living document and will be updated periodically as the impacts of climate change evolve and new climate-friendly technologies become available.
Seventeen Policy Recommendations
The Strategy provides 17 specific policy recommendations to implement SB 254 goals, including the elimination of gas-powered heating and cooking in homes and businesses, buyback programs for high-polluting vehicles, expansion of urban forestry programs, and adoption of energy codes for buildings with net-zero energy consumption and energy-efficient labeling for homes, a program similar to how the appliances are graded. In the transportation sector, the Strategy provides policy recommendations such as adopting lower and zero-emissions vehicle standards, implementing a clean truck program, adopting low-carbon fuel standards, implementing the “cash for clunkers” rebate system, and closing emissions inspection loopholes for classic cars. For the energy sector, the Strategy provides policies to realize SB 358’s goal of producing energy from zero- emissions resources by 2050. The Strategy includes policy recommendations for “moving to alternative sources including policy mechanisms such as a clean energy standards, securitization (allowing customer-backed bonds to pay off stranded asset costs), and alternative rate-making mechanisms” by the Nevada Public Utilities Commission (PUCN).
The Strategy proposes that each regulated electric utility prepare a GHG reduction plan, and prioritize decarbonization in its integrated resource plans (“IRPs”) that must be filed with PUCN on or before June 1, every three years. Currently, natural gas-fired generating units can be used as placeholders in the IRP in the electric utility’s supply-side plan. The Strategy proposes to eliminate the use of natural gas units as placeholders in the IRPs, and require the electric utility to use placeholders that are more consistent with the state’s GHG emissions-reduction goals. The Strategy proposed “requiring utilities to integrate more-comprehensive equity considerations in the IRP in order to address social justice issues . . . .”
Overall, the Strategy analyzes and recommends several policies, but it does not dictate policy to the state legislature, local governments and state regulators. However, the Strategy clarifies that the state’s business-as-usual is not working. Based on the 2019 GHG inventory of the state, Nevada will be 4 percent short of the 2025 emissions-reduction goal and 19 percent short of the 2030 emissions-reduction goal of SB 254, if no further state action was taken. The Strategy finds that the state’s failure to hit these SB 254 targets could be costly:
. . .as the reduction targets would prevent up to $786 million in economic damages by 2030 and up to $4 billion by 2050, according to the report, specifically from damages from extreme weather events such as hurricanes or wildfire.
For more information, see: https://climateaction.nv.gov/our-strategy/.
Conclusion and Implications
Both the recent Arizona and Nevada policy initiatives represent a major step towards the carbon-free future for the two states in 2050. If the proposed energy rules in Arizona are finalized and the policy recommendations of the Strategy are adopted and implemented in Nevada, electric utilities will have the affirmative responsibility to procure carbon-free electricity, and invest in alternative energy and energy storage technologies. While both the states have proposed noble goals through these efforts, it remains to be seen how the economic conditions and technologies keep up in terms of implementing and meeting these aggressive 2050 goals.
