Climate change is a growing priority for many of our stakeholders—from large business customers and community leaders with sustainability goals to investors concerned with risk, as well as motivated citizens who want to reduce their carbon footprints.We understand this concern and the demand for action, as our stakeholders look to climate science and see the potential for adverse climate impacts. That’s why we have worked for more than a decade to address the risk of climate change and reduce carbon emissions associated with generating electricity.
Since 2005, we have reduced our carbon emissions by 30 percent, as we work toward a more ambitious emission-reduction target of 60 percent by 2030. Based on our experience, we believe we can achieve this goal as long as there are continued favorable economics and a supportive regulatory environment.
We are steadily delivering on a cleaner, more sustainable energy future—one that provides our customers with the affordable, reliable energy service they expect but with more energy from renewable sources and with fewer emissions and other environmental impacts. In addition to the concern over climate change, a number of factors are enabling our transition to clean energy and the change happening within our industry, including new advanced technologies and evolving customer demands.
Through our economic clean energy strategy, we are transforming the way we produce, deliver and encourage the efficient use of energy by focusing on three key areas:
By focusing on clean energy, we have achieved a number of milestones. We were recognized by EPA, the Center for Climate and Energy Solutions and The Climate Registry with a 2016 Climate Leadership Award for excellence in greenhouse gas management. The American Wind Energy Association has ranked Xcel Energy the nation’s No. 1 utility wind provider for more than a decade, beginning in 2005.
Perhaps most importantly, we are making this transition at a low cost to customers. By engaging with stakeholders, we know that energy affordability is a top priority, but our stakeholders also expect cleaner energy. At the same time as we have made tremendous investments in clean energy, we have managed to maintain energy rates competitive with the national average, with the average Xcel Energy customer bill actually going down over the past four years.
For us, the most significant way we can demonstrate climate leadership is to reduce carbon dioxide emissions from the energy we produce, which make up more than 99 percent of our greenhouse gas emissions. Our current emissions performance surpasses U.S. goals in international negotiations, and is ahead of what EPA’s Clean Power Plan would have required us to do. For example, the U.S. commitment in the Paris climate agreement is 26 to 28 percent below 2005 levels by 2025—an emission-reduction level we have already surpassed.
In 2016, Xcel Energy reduced carbon emission 30 percent compared to 2005 levels, a reduction level we originally did not expect to achieve until 2020. A number of factors came together during the year to produce these results, including an increase in wind and solar production, generation records set by our Monticello nuclear and Upper Midwest hydro plants, and the retirement of three coal units in 2015.
Over the next five years, we expect to achieve at least a 45 percent reduction in carbon emissions from 2005 levels. Our ability to meet this target depends largely on upcoming coal unit retirements in 2017 and the implementation of our proposed wind energy plans, which if approved, will be completed in 2020.
Considering the future beyond 2021, our goal is to achieve a 60 percent system-wide reduction in carbon emissions by 2030, if we continue to have favorable economics and a supportive regulatory environment. We plan to retire two large coal units in Minnesota during this timeframe and expect additional wind and solar development.
Our 2030 emissions-reduction target of 60 percent aligns with potential policy outcomes and with customer and community-driven goals for a low-carbon future. Some of the states, cities and businesses we serve have targets that are based on or are in-line with international and national discussions.
Beyond 2030, we anticipate that emissions reductions will likely continue, assuming that we can:
Our clean energy strategy is transforming the energy we provide customers. Since 2005, we have systematically shifted our reliance on coal-fueled generation, incorporating more wind power and cleaner natural gas. We anticipate a company-wide energy mix by 2021 that is at least 50 percent carbon free, assuming approval of our proposed renewable energy plans.
Over the next five years, we expect to invest approximately $5.5 billion in clean energy projects. This includes capital spending on renewable energy and related transmission projects, as well as spending on our advanced grid intelligence and security initiative.
We have managed significant federal policy uncertainty on carbon emissions for the past several years. In the most recent development, President Trump signed an Executive Order in March 2017, signaling his administration’s plans to halt or significantly modify the EPA’s Clean Power Plan that was intended to regulate carbon dioxide from the nation’s existing power plants. EPA will now start a long, complicated process to withdraw the rule, which requires the same full rulemaking process, including detailed factual support for the rule repeal and public comment periods, required when promulgating a rule.
While the Clean Air Act’s existing authorities are not optimal to regulate greenhouse gases, we think that in the short term having a federal climate rule in place under the Clean Air Act is in the best interest of our customers. A federal climate rule would displace some types of climate lawsuits that could cause unnecessary costs for customers and investors. A federal climate rule, if well designed, could also facilitate state-led processes to address carbon emissions while still respecting the states’ strong role in their own energy policies.
Over the longer term, Xcel Energy has long held that federal legislation could create a better policy than the existing Clean Air Act authorities to regulate carbon emissions. Federal legislation, with input from each state, would better balance the cost and fairness issues inherent in climate policy and could address many of the issues in the Clean Air Act, such as the differentiated treatment of new and existing sources.
As we have long advocated on behalf of our customers, any legislated federal policy to regulate carbon emissions should:
Regardless of future climate policy outcomes, our plans make economic and environmental sense. As always, we will work with our states, communities and customers to work toward their preferred energy and environmental outcomes. We intend to keep moving forward with this clean energy strategy. Given the importance of these issues to our company and customers, we will continue monitoring policy and regulatory proposals to address climate change in the energy sector.
Compared to 2005, Xcel Energy reduced carbon dioxide emissions from electric generation by 27 million tons per year in 2016, equivalent to removing five million cars from the road annually.
Xcel Energy’s greenhouse gas emissions from 2005 to 2015 have been third-party verified and registered with The Climate Registry. For full reporting information, please see our performance summary, which includes emissions for individual years from 2005 to 2016 for Xcel Energy and its three operating systems, as well as scope reporting.
Our efforts to reduce greenhouse gas emissions also extend to managing methane emissions from our natural gas distribution system. Xcel Energy serves about two million customers with natural gas for heating and other energy uses critical to the colder parts of our territory, Colorado and Minnesota, and does so with very minimal methane emissions.
Methane emissions made up less than one percent of our total greenhouse gas emissions (517.2 million cubic feet or 273,578 short tons CO2e) in 2016. While this is a very small portion of our total company-wide emissions, we work to minimize our methane emissions through cost-effective improvements to our natural gas system.
Some of Xcel Energy’s methane emission reduction efforts include:
To support these efforts, we are voluntary members of several industry groups devoted to improving the natural gas system and reducing methane emissions. We have been a member of the EPA Natural Gas Star program since 2008, with a continued commitment to replace aging pipeline. As a participant in the Natural Gas STAR program, we have reduced our natural gas emissions by a total of 316 million cubic feet or 167,151 short tons CO2e—equivalent to the carbon dioxide emissions of nearly 20,000 homes using electricity.
Xcel Energy also joined the EPA’s Natural Gas STAR Methane Challenge Program in March of 2016 as a founding member to further our commitment to reduce methane emissions from our natural gas distribution system. Under the program, we expect to achieve emissions reductions in excess of 50 percent, as we work to minimize methane emissions from venting pipelines during scheduled construction starting in 2017.
In addition to these programs, we also work with the natural gas industry and environmental organizations to understand methane emissions from the delivery system. Xcel Energy is a member the Natural Gas Downstream Initiative, a collaborative effort with other major gas utilities, facilitated by MJ Bradley & Associates. The initiative is focused on opportunities that can substantially reduce methane emissions and support safe, reliable and cost-effective service. We also participate in research studies to help us fully understand the potential issues associated with providing our customers’ energy service.
All of these programs support our proactive approach to operating and maintaining the natural gas system that benefits customers.
Find more detailed emissions reporting in the Performance Summary, as well as in our additional materials, including the 2016 Energy and Carbon Summary and The Right Mix: Investing for a Clean Energy Future.
Find more information on physical and financial risks associated with Climate Change in Xcel Energy’s 2016 Form 10K.
Learn about our executive long-term incentive program that includes carbon dioxide emission reductions in Xcel Energy’s 2017 Proxy Statement
Read our CDP Climate Change Questionnaire
Learn more about The Climate Registry, U.S. EPA greenhouse gas mandatory greenhouse gas reporting, the WRI protocol and ISO 14000
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