A Vision for Midwest Zero-Carbon Power Starts to Take Shape

The Midwest’s energy landscape has changed significantly over the last 10 years as market dynamics have pushed coal-fired power offline and more and more low-cost utility-scale wind and solar projects are developed. Similarly, there has been a surge of consumer interest in distributed solar, as well as programs—like the Solar For All and Community Solar programs in Illinois—that are giving low-income, environmental justice, and other communities that have been disproportionately impacted by pollution, access to the broad benefits of renewable energy.

But what may have once been dismissed as a fleeting trend, is now a full-blown sea change for the electric power industry, for state and local policymakers and for the families and businesses that consume energy in a region historically dominated by coal.

And while wind and solar power are more competitive than ever, a new twist on the clean power transformation is emerging: commitments to deeply decarbonize power generation, in some cases reaching 100% carbon-free (we refer to “deep decarbonization” as commitments for 80 to 100% carbon-free or net-zero carbon).***

Commitments to deeply decarbonize electric power production, from Minnesota to Indiana, have been on the uptick in the Midwest in recent months, and make up a significant proportion of the overall national transition. Thankfully, leaders across the region are taking to heart the need for immediate and bold action to address the climate crisis, and are now in the vanguard of a movement embracing deep decarbonization policies and committing to ambitious investments in clean energy.

The Midwest has seen a precipitous decline in power sector carbon and other pollution emissions for more than a decade. The upswing in recent commitments to clean energy and to building a path toward a carbon-free grid demonstrate that it is no longer a matter of if electric power generation will decarbonize; it is now a matter of how and how quickly.

***Note: This blog addresses deep decarbonization commitments solely related to the combustion of natural gas to generate electricity—the emissions from the “smokestack” of power plants. See NRDC’s Sheryl Carter’s recent piece on the significant GHG emissions impact of the extraction and transportation of natural gas as well, and the need for the U.S. to markedly reduce our reliance on gas (and to take the carbon out of any that remains) if we are to reach our climate commitments.

The Changing Face of the Historically Coal-Reliant Midwest

Before we dig into the recent increase in deep decarbonization commitments, here’s a bit of review on the great strides the Midwest states have made towards a cleaner power sector over the last decade. 

Driven by cheap gas and copious wind resources, 40% of the Midwest’s coal capacity (retrieved from S&P Global Screener Tool) that was operational in 2008 had retired as of 2018. These retirements have made up a whopping 44% of total US coal retirements since 2008. In contrast, renewable generation saw a 6-fold increase within the same time frame. This evolving power mix has driven a 28% reduction in carbon emissions in the region over the last decade, a trajectory that will only continue as the Midwest plans to retire over 5,000 MW of coal capacity in 2019. Over half of that coal capacity coming offline hails from one state—Ohio.

Much of this laudable progress away from coal is the result of new market realities. Renewable energy, especially in the wind-rich Midwest, is now the cheapest form of new power, coupled with the fact that natural gas prices remain at record lows. With these favorable market dynamics, Iowa has realized the greatest growth in the Midwest's renewable energy portfolio in 2018 by generating 5x the amount of wind and solar the state produced ten years ago. However, as observed in NRDC’s previous analysis, to achieve our climate goals and deliver the full suite of clean energy benefits (while avoiding a rush to natural gas-fired power), market forces will not be enough.  Keeping up the current momentum will require strong state, utility, and local commitment to the clean energy transition.

And the good news is that Midwest states and utilities are increasingly showing remarkable leadership on that front.

State Initiatives

Should you need further proof that the deep decarbonization movement is more than just a trend, one need look no further than the scores of states and utilities that are now joining the ranks. A recent accounting by Clean Air Task Force reveals that Governors and utilities are making these bold commitments in all corners of the country (including the Midwest), with the total coverage for deep committed carbon reductions (as opposed to renewables-only policies) accounting for 38 percent of US electricity sales and about 31 percent of national utility CO2 emissions.

Illinois, Wisconsin and Minnesota: State Leaders Aiming for 100%

Starting 2019 off on the right foot, there is an emerging bench of Midwest states taking the reins with some of the most progressive decarbonization proposals in the US.

In Illinois, a nation-leading energy policy package was introduced in February—the Clean Energy Jobs Act (CEJA). Not only would it put the state on a path to realizing Governor J.B. Pritzker’s commitment to 100% renewable energy by 2050 but would also codify a vision for a carbon-free power sector in Illinois, putting the state in league with the climate and clean energy leadership beacons of California and New York. Committed to ensuring that all residents would benefit from this energy transition, the legislation aims to diversify the clean energy work force by quadrupling the size of Illinois's low-income Solar for All program and adding even more programs to train and create jobs with a diverse work force.

Further north in Wisconsin and Minnesota, Governor Tony Evers and Governor Tim Walz are spearheading clean energy initiatives by calling for 100% carbon-free energy by 2050 in their respective states. These initiatives are especially ambitious, given that just last year, 55% of Wisconsin’s electricity was still coming from coal-fired power, with 40% for Minnesota.

Governor Walz’s carbon-free vision for Minnesota involves strong collaboration with utilities, like Xcel Energy. The proposal would allow electric utilities to determine their own pace of decarbonization, raise efficiency standards for investor-owned utilities and double down on low-income efficiency programs, and require that utilities prioritize carbon-free energy sources when building new facilities.

Similarly, Governor Evers’ budget proposal (the Wisconsin legislature is still in session as of the date of this piece) also set a goal for 100% carbon-free electricity among other commitments, including funding for energy efficiency projects, a $4 million clean energy research grant, and a commitment to dedicate Volkswagen settlement funds to electric vehicle charging stations. Considering that Governor Evers’ predecessor scrubbed references to climate change from state websites, Wisconsin's new direction is not simply an amazing feat, but also a clear recognition that aggressive and deliberate action will be needed to rise to the urgent climate crisis.

This recognition was also on display among emerging leadership states at an important regional climate dialogue in Chicago this April. In a meeting convened by NRDC, Midwest Environmental Justice Network, League of Conservation Voters, and Sierra Club, Governor Pritzker and his policy team, and senior energy and environmental policy advisers to Michigan Governor Gretchen Whitmer and Governors Walz and Evers, began the critical process of identifying smart climate solutions within their own borders, and ways to amplify those impacts by working together.

Missouri and Kansas: No More Baby Steps—The Push for Accelerated Coal Retirements

While favorable economic trends are fueling the precipitous decline in coal, according to analysis by the Rocky Mountain Institute, relying on these trends alone is still not enough to meet the 2°C warming objectives that the world committed to in Paris.

While elected officials in neither state have made explicit deep decarbonization commitments, Missouri and Kansas have taken steps to accelerate the market momentum of coal decline. In both states, coal continues to account for a dominant chunk of power. In Missouri, the state’s proportion of coal-fired power generation has hardly budged in decades.

These states have introduced securitization legislation with the goal of fast-tracking the closure of coal plants by addressing one of the biggest barriers to retiring coal early—unrecovered capital. Under these proposed laws, securitization would serve as a financial tool to help accelerate coal retirements by allowing plant owners to rapidly recover the capital invested in these plants that would have typically taken years to recoup. The Kansas and Missouri securitization bills would also support a just, clean energy transition through a framework for utilities to reinvest the recovered capital in new renewable energy projects, as well as retraining and workforce development of displaced coal workers.

Indiana: Holding Back the Tide of Natural Gas

By slowing down the development of natural gas-fired power plants and encouraging renewables growth, Indiana is also becoming fertile ground for progressive action on clean energy.

The Indiana Utility Regulatory Commission recently rejected Southern Indiana Gas and Electric’s proposal to build a large, 850 MW gas plant to replace three retiring coal plants. The Commission concluded that the proposal failed to consider renewable energy alternatives and was too reliant on natural gas. In doing so, the Indiana Commission joined a very small group of utility regulators that have explicitly pushed utilities to explore clean energy as an alternative to a costly and unnecessary gas plant expansion.

This decision is a critical exception to a distressing trend that we are seeing all-too frequently in the Midwest and across the country—new investments in natural gas-fired power filling the capacity gap left behind from retiring coal plants. As David Roberts of Vox adeptly put it in his recent article on the perils of relying on gas as a transition resource while we ramp up renewables, “coal-to-gas switching doesn’t reduce emissions to zero. And zero-as-soon-as-possible is the goal.”

Utilities Getting in on the Game

Complementing this impressive showing from Governors, legislators and state regulators across the Midwest is the wave of utilities who are making similar moves to clean up their generation fleets and drive toward deep decarbonization goals.

A few months prior to Governor Walz’s announcement of his carbon-free vision, Minnesota-based Xcel Energy unveiled a plan in December 2018 to deliver 100 % carbon free electricity by 2050 across its service territory (which includes 7 others states in the Midwest, Interior West and Texas), with a near-term goal of 80% reduction by 2030. Xcel is the first major utility to set this ambitious goal on such an accelerated schedule.

Moving southeast to Indiana, NIPSCO has unveiled a plan to retire its entire coal fleet by 2028 and replace that capacity with a cheaper portfolio comprised of renewables and storage—notably, without building new natural gas plants. This plan is particularly impressive given that Indiana remains one of the top five states for coal-fired power generation (to wit, coal accounts for 70% of the state's overall generation). See state profile at Energy Information Administration. It is worth noting that this wholesale shift to a carbon-free portfolio did not come without controversy; earlier this year, the coal industry launched a campaign against it and attempted to persuade the legislature to intervene. But thanks to the clear economic advantage of its clean energy plan (shutting the plants down and moving forward with renewables will save consumers a whopping $4 billion), NIPSCO has not wavered.

In Michigan, Indiana’s neighbor to the north, Consumers Energy and DTE Energy are making commitments to decarbonize their power fleets. In particular, just last week the Public Service Commission approved Consumers Energy’s historic plan to move away from coal entirely, and to replace the gap with massive investments in renewable energy (550 MW of wind and 5,000 MW of solar over the next few decades), as well as a focus on shrinking the overall pie of energy use via ambitious levels of energy efficiency. Also notable in the Consumers Energy plan? The utility plans to meet energy demand in a truly carbon-free manner via renewable energy investments, rather than spending consumer dollars on new natural gas-fired power.

Finally, in Missouri, the state’s largest utility Ameren, has committed to cut carbon emissions from its power fleet 80% by 2050. Projects have also been greenlit to build the state’s largest wind farm. In fact, Ameren—one of the most coal-reliant utilities in the country—recently announced a nine-fold increase of wind in its generation portfolio.

Keeping up the Progress and Going Even Further—What Is it Going to Take?

The Midwest is quickly emerging as a national leader in driving down emissions from the dirty business of generating electricity. This is in no small part due to the rapid cost decline in wind and solar, and a growing recognition that removing carbon from the power sector once and for all and addressing climate is an opportunity—rather than an impediment—that promises to revitalize sluggish economic prospects in many states and put more people to work in the clean energy economy. To be sure, Midwesterners, particularly the 730,000+ employed in clean energy jobs, have reaped the benefits of this transition, according to the annual Clean Jobs Midwest survey released by Environmental Entrepreneurs and Clean Energy Trust. In fact, the clean energy industry in our region now dwarfs economic opportunities in the fossil fuel industry, which employs barely a quarter of the number of clean energy workers.

As the Midwest—and the rest of the country—continues to embrace this sea change, it will be critical that leaders, utilities, and other decision-makers have the tools necessary to reach their ambitious goals. What will this take?

• We will need to double down on state and local policies to ensure a sharp ramp-up of wind and solar generation to replace the capacity gap being left by coal retirements. While overall power sector emissions have been dropping for the last decade, in 2018 the US saw that trend start to change with the biggest increase in CO2 emissions in 8 years. This underscores the need for leadership on policies and programs to keep up the momentum and prevent rebound.
• State regulators will need to view new proposals for natural gas-fired power with a critical eye and resist the urge to green light significant new investments in a carbon-heavy generation source when cheap wind and solar are available, and when viable battery solutions are starting to emerge.
• A fresh look at energy efficiency—a reliable stalwart in keeping energy demand low over the last decade—will be also be essential. As NRDC emphasized in our 2016 report laying out the policy pathways for cutting GHG emissions 80% economy-wide by mid-century, shrinking the overall pie of energy consumption will be needed to keep emissions low while we transition to cleaner power sources. After all, the cheapest, cleanest kWh of energy available is the one you never have to produce.

Carbon emissions from the Midwest’s power sector are also just a part of the story. While the region is making good progress in cleaning up power generation, transportation sector emissions will likely eclipse the power sector in many Midwest states in the next few years (and have already done so nationally). Powering cars, trucks, buses, and public transit from the increasingly-clean electric grid will be essential. We will also need to start electrifying end uses in the building sector; on-site fossil fuel use in residential homes and commercial buildings (largely from space and water heating) is a significant source of emissions in the Midwest (and nationally). Finally, any comprehensive plan to decarbonize and cut pollution from our region’s economy should also address the Midwest's dominant industrial and agriculture sectors.

It is also critical that the Midwest states address a wide range of environmental burdens as we develop an actionable path for our 100% carbon-free vision. Carbon and its climate impacts are part of a larger need to cut a wide range of pollution emissions from across our economy, to address decades of disproportionate air, water, and land impacts on communities across our region.

Problems of this magnitude demand aggressive solutions. We look forward to building solutions with partners and leaders across this region, and doing it “the Midwest way”—by rolling up our sleeves and getting to work.