Utility Planning Update, Q3 2024
Our most recent review of utility planning reveals significant load growth (but from electrification more than data centers), increased use of gas plants, and higher projected emissions for the US electricity sector.
This article is one of a series in our review of all integrated resource plans (IRPs) for electric utilities across the United States. We provide analysis of expected load, planned capacity, modeled generation and emissions, and comparison to targets and decarbonization scenarios to evaluate progress toward a zero-carbon energy future.
Every month, RMI’s Engage & Act team quantitatively reviews integrated resource plans (IRPs) to identify which US electric utilities are on track to achieve adequate progress on emissions reductions, and which utilities have plans that do not move quickly enough. IRPs do not provide a fully accurate prediction of the future, but we focus on them because they reflect the direction that utilities are currently striving for and a set of proposed actions to get there.
In our last review, halfway through 2024, we found drastic increases in projected electricity demand. While a majority of planned capacity additions still came from wind and solar, many utilities responded to load growth by increasing proposed gas capacity. Our modeling showed higher use of gas would lead to higher emissions, above levels previously projected before the passage of the Inflation Reduction Act (IRA).
In this most recent third quarter of 2024 (Q3), few major utilities made updates to their IRPs, so we do not observe drastic changes in aggregate projections. However, we do see a continuation of major qualitative trends among the many smaller utilities that updated their IRPs. As a group, these utilities increased their load projections by nearly 5 percent, resulting in higher projected use of gas plants and higher emissions than in their previous IRPs.
While this trend of increasing emissions is a concern for climate impact, we note positive trends that recent utility conversations of load in IRPs centered on energy efficiency, growth of electric vehicles, and building electrification. Utilities are being pushed by state and federal laws and regulations to increase zero-carbon capacity additions, and some exemplary individual utilities are going beyond these requirements to make the most of the investment opportunity that the clean energy transition presents for the US electricity sector. Building on these leading examples, we expect more utilities to increase their ambitions and seize the opportunity to provide clean power to customers while increasing profits to investors. Now is the time for utilities to seize the opportunity presented to them in the clean energy transition.
The current state of IRPs
In our current snapshot of IRPs (Exhibit 1), we continue to see a gap between projected emissions, target emissions, and decarbonization pathways such as the International Energy Agency’s Net Zero Emissions by 2050 Scenario (IEA NZE).
Most decarbonization pathways, including the IEA NZE, find that the electricity sector needs to reach net-zero emissions by 2035. Unfortunately, utility company targets often aim for net-zero emissions by 2050, and often do not comprehensively cover emissions from both owned (Scope 1) and purchased (Scope 3) emissions. If all companies in our coverage meet their targets, they will only reduce their emissions 62 percent by 2035, compared to a 2005 baseline. We also find a gap between these targets and projected emissions based on IRPs, which as of the end of September 2024, we project to be reduced by just 52 percent by 2035, compared to a 2005 baseline.
Exhibit 1: Projected emissions from IRPs, targets, and the IEA NZE scenario
Load
As of the end of Q3 2024, IRPs across the nation anticipate load to grow 24.8 percent by 2035 compared to 2021 levels (Exhibit 2). This is up from prior projections — 16.1 percent in December 2023, 12.0 percent in August 2022, and 9.7 percent in January 2021.
In a positive shift, many companies with IRP updates in Q3 2024 focused on energy efficiency in their load projections, which we applaud as it is often the most economical solution for reducing both emissions and customer costs.
In contrast to the first half of 2024, in Q3 we observed less discussion from utilities about incoming electricity demand from data centers and more about load growth from electrification of vehicles and buildings. This incoming load from beneficial electrification is a feature, not a bug, of the clean energy transition. It demonstrates progress in transitioning from a fossil fuel economy to a future powered by clean electricity. In the near future, we expect to see even more utilities proactively support electrification through grid upgrades, smart grid technologies, rebates, and other incentives to enable adoption of electric vehicles and building technologies while growing their own business.
Exhibit 2: Projected electricity demand (load) from IRPs
Capacity
Current planned capacity from IRPs across the United States (Exhibit 3) includes 270 GW of wind and solar additions, 72 GW of gas additions, and 69 GW of coal retirements between 2023 and 2035. These aggregate numbers did not change significantly between Q2 and Q3 2024.
However, Q3 2024 saw a wide variety of individual utility changes to planned capacity. Some utilities followed a response that was common in the first half of 2024: to meet higher electricity demand without the ability to bring wind and solar resources online quickly, they added gas plants and/or delayed fossil retirements, leading to higher emissions. Other utilities made almost no change in their new IRPs, appearing to be satisfied with their current system and lacking proactive desire to seek improvement. As a bright spot, we also discovered exemplary cases where utilities responded to higher anticipated electricity demand by greatly increasing zero-carbon capacity additions, with expected generation even beyond increases to anticipated load. So while some utilities are waiting for external requirements that they change their resource mix, others are making the most of the present opportunity to invest in clean energy for the benefit of their customers, investors, and the climate.
Exhibit 3: Planned capacity in IRPs
Emissions
Our latest projections (Exhibit 4) are that emissions planned in IRPs at the end of Q3 2024 will be 52 percent lower than 2005 levels by 2035. This is nearly the same as our aggregate projections at the end of Q2.
Projected emissions are lower than they were at the beginning of 2021 because of increased overall plans to build zero-carbon capacity. However, they are higher than they were at the time when the IRA passed, because of near-term delays to zero-carbon capacity additions and because of increased gas use in response to increased projected electricity demand.
Exhibit 4: Projected emissions from IRPs
Cumulative metrics
When considering climate alignment of the US electricity sector, or individual utilities, the key metric that RMI’s Engage & Act platform focuses on is cumulative emissions through 2035. Cumulative emissions, or the total amount of greenhouse gases put into the atmosphere, is what directly influences climate change, so this metric gives us clear insight into whether we are on track to meet climate goals. We also find value in metrics of cumulative projected load, to know whether the task of reducing emissions is becoming easier or more difficult for utilities, and cumulative projected emissions intensity, to know if consumers are increasing or decreasing emissions associated with their electricity consumption.
Exhibit 5 shows that across all IRPs in the United States, cumulative projected emissions are now 4.8 percent higher, cumulative projected load is now 3.9 percent higher, and cumulative projected emissions intensity is now 0.8 percent higher than it was in December 2023.
Exhibit 5: Cumulative projected load, emissions, and emissions intensity
The primary reason for the minimal recent change in aggregate projected load and emissions shown in Exhibit 5 is that few major utilities made updates to their IRPs during Q3 2024.
Exhibit 6 provides an additional view of the direction that IRPs are going, by considering the percent change in cumulative projected load and emissions among the set of companies that did update their IRPs each quarter. With this view, we see that for the first six quarters following the passage of IRA, utilities planned to meet higher load with a resource mix that resulted in lower emissions. However, beginning in Q1 2024 and continuing through this quarter, increasing load is expected to be met by a mix of resources that, on average, lead to higher emissions. For Q3 2024, utilities that updated their IRPs increased their load expectations by 4.6 percent and plan to deploy a resource mix to meet this load that results in a 5.5 percent increase in emissions. Combined, this is a 0.8 percent increase in emissions intensity. The six quarters immediately following IRA’s passage are proof that increasing load can be met by a resource mix that yields lower emissions, but the latest IRPs do not deliver on that potential.
Compared to the broader 3-year view, Q3 2024 unfortunately continues the trend we observed in the first half of 2024: an increase, rather than decrease, in projected emissions and emissions intensity.
Exhibit 6: Change in cumulative projected load, emissions, and emissions intensity
Achieving a climate-aligned future
Our review of IRP updates in Q3 2024 reveals both positive and concerning recent trends in how utilities are navigating this critical moment of the clean energy transition. Increased electricity demand primarily from electric vehicles and buildings shows that utilities are starting to capture the growth opportunity that the electricity sector has in supporting the transition of other sectors. More potential still exists for this trend to accelerate. But US utilities are still not planning to build sufficient zero-carbon capacity to meet new demand, and now plan higher gas use and higher emissions than they did in the year following passage of the IRA. For utilities to align with scenarios such as IEA NZE, they must invest far more into the zero-carbon technologies that will make up our future electricity system.
One insight into mechanisms of progress comes from IRP narratives in Q3 2024. Many utilities repeatedly referenced laws and regulations as guiding overall design and objectives of their IRPs. This included state renewable portfolio standards, Washington's Clean Energy Transformation Act, and greenhouse gas emissions standards from EPA’s Clean Air Act.
Beyond being required to embrace the clean energy transition, we soon expect to see more utilities proactively seeking the opportunity the transition presents. By fully taking advantage of IRA incentives, utilizing novel approaches such as clean repowering, and planning more comprehensively, utilities can reduce emissions, provide reliable and low-cost electricity to customers, and generate increasing earnings for investors.
RMI’s Engage & Act Platform: Data and Insights for Real Climate Impact
RMI’s Engage & Act Platform provides data and insights for real climate impact. To learn how you can access and use this targeted resource to uncover recent trends and clean energy growth opportunities — and accelerate the pace of electric utility carbon emissions reductions — please visit the Engage & Act website.
Methodology
Historical data in this article comes from the RMI Utility Transition Hub. Projected capacity and total generation (load) is based on data collected manually from IRPs by EQ Research, combined with historical data. Generation by technology is calculated with assumed continuation of trends in capacity factor for each company and technology, and converted to emissions by using average US emissions factors by technology.