New Initiative Provides Model for Action by Local Electricity Distribution Companies
Pepco, the company responsible for distributing electricity within Washington, D.C., has launched an important set of climate actions that will help the District of Columbia fulfill its objective of achieving net-zero emissions by 2050. Local energy distribution companies like Pepco are critical to helping their customers reduce pollution and save money by supporting energy efficiency measures for their homes and businesses, helping customers switch to electric vehicles, and promoting electric space and water heating. With its new initiative, Pepco has pulled together an impressive program that sets a smart, leading example for local distribution companies across America.
Climate action on the distribution, not generation, side
It is important to recognize the role of a local electricity distribution company. The electricity system has three main parts: 1) the generators that make electricity, 2) the long-distance transmission system that moves wholesale electricity from generator sites like power plants and wind farms to local distributors, and 3) the local companies that deliver electricity to individual customers. In some parts of the country, one utility serves all three functions. But in D.C. and other “deregulated” markets, the roles are separated. Thus, a local distribution company like Pepco distributes electricity within its territory but does not generate that electricity.
Since Pepco doesn’t produce electricity, its climate goals do not cover how much of that electricity is generated from clean, zero-emission energy. This is where most of the power sector’s emissions come from so a complete power sector solution must start with clean energy. The D.C. City Council has taken action on the source of our electricity by setting a goal of zero-emission power by 2032. But even if it does not generate that zero-emission power, Pepco and other distribution companies still have a key role to play in cleaning up the distribution system and helping customers take the necessary steps to cut carbon pollution.
Cutting carbon from distribution operations
Pepco is committing to cut pollution from its own operations. For example, Pepco will make sure that its buildings are powered by zero-carbon electricity, will move its own fleet of vehicles to electricity, and will reduce the rate of leakage of sulfur hexafluoride (SF6), a very potent greenhouse gas used in electricity distribution equipment.
Supporting customer climate action
Even more important are actions distribution companies can take to help customers reduce their emissions and to do so in a way that saves money and increases reliability. Key areas include energy efficiency and beneficial electrification, the process of switching energy use to electricity where that is good for the climate, for customers and for grid reliability.
Like many utilities, Pepco is seeking to offer energy efficiency programs for its almost 895,000 D.C. customers, including low and moderate income customers, though Pepco requires approval from the Public Utility Commission to take this step. This is critical as energy efficiency measures (like sealing building leaks and encouraging energy-saving appliances) are one of the most cost- effective ways to reduce emissions, lower energy bills) and, with the right incentives, local distribution companies are uniquely well-positioned to serve. We’d like the DC Public Service Commission strengthen its energy efficiency goals to at least match the 2% per year adopted by Maryland.
Pepco has several initiatives to support electric vehicles (EVs). This includes different electricity rate structures for EV owners, including time of use rates. Recent studies show that adding EVs, particularly with time of use rates, helps lower electricity rates for all customers. Pepco is also seeking to make the electricity system improvements needed to support charging of buses, taxis and ride-share fleets. The programs approved in Michigan and California also provide good models.
On the building side, we need local distribution companies to support beneficial electrification of space and water heating. First, utilities can provide incentives that help with the up-front cost of purchasing and installing a heat pump or efficient electric water heater. D.C. offers rebates on efficient heat pumps, although its program lags behind some electric cooperatives.
Second, the electricity rate structure should be designed to support electrification. Pepco is proposing to improve its rate structure by reintroducing an all-electric rate. that is fair to homes that do not rely on gas for space or water heating. Currently, D.C.’s rate structure, like in many other parts of the country, discourages going all-electric because rates increase if household energy use exceeds a certain threshold. The better approach that Pepco is seeking to reintroduce will provide a different rate structure for homes that heat space and water with electricity as those homes will inevitably use more electricity than a home relying on a gas furnace and water heater.
Pepco is also starting an initiative to help make community solar available to low-income customers. Community solar projects allow residents to buy a piece of a large solar array, giving them the benefits of owning solar at much lower cost than rooftop solar. Rural electric cooperatives have long been community solar leaders , with projects across the country, including the largest at the East Kentucky Power Cooperative. Pepco DC plans to provide land and some of its large rooftops – valuable commodities in an urban area – to host community solar projects for limited-income residents.
One missing element is a demand response program that compensates customers for altering their energy use. As we add more variable wind and solar to our energy mix, it will become increasingly important to shift electricity loads to use clean, low-cost electricity when it’s abundant. And there are good opportunities hiding right inside our homes. For example, the Minnesota cooperative Great River Energy has worked with its members to store a gigawatt of energy, most often abundant night-time wind power, by controlling when 65,000 residential water heaters heat, without sacrificing those customers’ ability to take a hot shower whenever they desire. In 2016, NRDC collaborated with the National Rural Electric Cooperative Association and Great River Energy to publish an analysis of how cost-effective these grid-enabled water heaters can be. My colleague Pierre Delforge recently reemphasized the potential of such water heater storage. It would be great to see D.C. and Pepco work together to take advantage of these opportunities.
But again, the important thing that Pepco has done here is to create a plan that combines nearly all the elements of what distribution companies can do to help tackle climate change. We look forward to working with other utilities to put together similar comprehensive programs.