Governments around the world are taking steps to ensure their infrastructure will be powered by utilities that operate on clean energy. This could have positive economic and social outcomes, according to Jim Lydotes, senior infrastructure manager at Mellon.
Utilities, which supply homes and businesses with essentials like gas, electricity and water, traditionally generate power using fossil fuels. While clean energy has been widely adopted in transportation, with the proliferation of electric cars, utilities have been slow to transition. However, while many industries experienced a lull in spending due to Covid-19, this is one area where spending has actually accelerated, according to Lydotes.
“A lot has been put on pause but infrastructure spending on clean energy hasn’t slowed down at all,” he says. “In fact, last year—for the first time ever—the production of energy from renewable sources outpaced that of fossil fuels in the UK.”
In 2020, renewable energy from wind, sunlight, water and wood comprised 42% of the UK’s electricity while gas and coal plants accounted for 41%.1 Although the disparity is slim, it’s still a significant step in the right direction, according to Lydotes. In contrast, renewable energy sources accounted for only 20% of electricity in the US throughout the same period.2 However, similar to the UK, and more broadly Europe, the US may start to accelerate its energy transition with a streamlined government focus.
President Biden’s infrastructure plan, unveiled in March, has a mandate that requires utilities to use a set amount of solar and wind, among other renewable energy sources, to power the country.3 The stipulation, called the Energy and Clean Electricity Standard, may even have the potential to boost job growth. As utilities transition their grids and become more reliant on renewables, clean energy sources will need to be cultivated and maintained. To do this, Biden plans to secure US$10bn in funding for the Civilian Climate Corps, which would hire young people for projects that conserve and restore public lands and waters, as well as increase reforestation, among other pro-climate initiatives.
If Europe is any indication of the transition to take place in the US, the best-case scenario is if the latter goes to such lengths as those of Italy and Spain, according to Lydotes.
“Governments around the world are looking to accelerate this push and southern Europe has been leading the way,” he says. “Italy and Spain were very committed to the buildout of renewable energy before Covid and they’ve actually accelerated their commitments throughout the pandemic.”
One major Milan-based utility committed US$19.5bn to cut its carbon footprint by 2030. Throughout this period, the company plans to triple its renewable energy capacity to 5.7 gigawatts and phase out its coal-fired plants by 2022, three years prior to Italy’s next national target.4 By 2030, Italy aims to achieve 30% in total energy consumption, and 55% in electricity consumption, to come from renewable sources.5 In Spain, which produced 43.6% of its electricity with renewable energy in 2020,6 one major utility announced it would spend US$91bn through 2025 to triple its renewable energy capacity. Even more ambitious than Italy, last October the Spanish government introduced a bill aiming for 70% of its power to come from renewable energy by 2030.7
“We think we’re going to see 10 years’ worth of renewable energy growth over the next five years,” Lydotes says. “And the cleanest way of playing that will be with regulated utilities in Italy and Spain, where growth rates are likely to hit levels we haven’t seen in the last 20 years.”
The right stuff
To enable these transitions, the right technology is needed to facilitate phasing out coal-fired electricity, according to Lydotes. Here, tools like dynamic line rating systems, which measure high-voltage transmission line capacity in real time, and topology optimization technologies, which route electricity across the least congested lines in a network, are helping to free up capacity for wind and solar power.8
According to a report by economic consultant The Brattle Group, by spending US$90m to implement these technologies across Kansas and Oklahoma grids in the US, annual production cost savings could reach approximately US$175m.9 The same report says 11,300 short-term jobs could be created in the region for construction of renewables, as well as 650 long-term jobs for operation and maintenance of renewable sources.
“If you look toward regulated utilities with carbon intensive asset bases, they have the ability to transition to more renewable power bases, which will allow them to grow,” Lydotes says. “I think that’s one of the best undiscovered opportunities: utilities with legacy generation bases that still have the ability to transition,” he concludes.
1 The Guardian: UK electricity from renewables outpaces coal power. January 21, 2021.
2 US Energy information Administration: How much of the US energy consumption and electricity generation comes from renewable energy sources? May 3, 2021.
3 Washington Post: Biden’s infrastructure plan aims to turbocharge US shift from fossil fuels. March 31, 2021.
4 Reuters: Italy’s A2A to spend 16 billion euros in green drive. January 20, 2021.
5 IEA: Italy. March 30, 2021.
6 Renewablesnow: Spain generates 43.6% of power from renewables in 2020. December 21, 2020.
7 Bloomberg: Spain’s green boom hands utilities top spot in stock benchmark. December 2, 2020.
8 Greentechmedia: Grid-enhancing technologies could save $5B per year by boosting US renewable capacity. February 24, 2021.