Creating a Reliable & Affordable Decarbonization Roadmap for California

As utilities around the world face the consequences of the climate crisis, California’s San Diego Gas & Electric (SDG&E) took action to address the public and regulatory policies driving governments, businesses, and utilities alike to evaluate the most viable pathways for economy-wide decarbonization.

To aid this effort, Black & Veatch’s Global Advisory practice provided technical advising, subject matter expertise, and economic and power market modeling services to SDG&E as the utility developed The Path to Net-Zero: A Decarbonization Roadmap for California, a comprehensive decarbonization roadmap to meet the state’s goal of achieving carbon neutrality by 2045.

Finding the Best Decarbonization Path

Though decarbonization has become an economic and social megatrend, reshaping the ways companies, governments and industries map out their long-term strategies, deciding exactly how to achieve net-zero operations can be daunting. Nonetheless, entities of all types are making detailed plans to reach their goals. Recently, Black & Veatch and Clarion’s 2022 Megatrends in Power report found that nearly two-thirds of organizations have goals tied to carbon or greenhouse gas emissions reduction, clean energy or renewables, while 98 percent described having defined plans to meet those goals.

California, widely considered one of the most advanced regions in the world when it comes to sustainability and decarbonization efforts, has set an aggressive 2045 net-zero target, which also specifies that 100 percent of their retail electricity sales by that time should come from decarbonized and zero emissions resources. SDG&E’s study determined that to reach the net zero goal, California will need to accelerate the decarbonization of its energy sources at 4.5 times its current rate.

Knowing California would need a comprehensive roadmap to meet this goal, SDG&E saw an opportunity to add insights that would inform the broader conversation while also identifying potential impacts specific to the San Diego region. To do this, they turned to a team of sustainability experts, including Black & Veatch, to help structure and perform decarbonization-related modeling efforts focused on reliability.

The team included Black & Veatch, Boston Consulting Group, David Victor (professor of innovation and public policy at the School of Global Policy and Strategy at the University of California San Diego), and SDG&E.

The study’s creation can be broken down into two main portions followed by a third: demand-side modeling and supply-side modeling, followed by reliability testing. Modeling determined the cost-optimal mixture of technologies needed to satisfy the state’s increasing energy demand while meeting decarbonization targets, informing the plan for upgrades and development to the state’s infrastructure systems. Then, that plan was tested multiple times against the industry standard for reliability to ensure it could hold up to real-world demands.

To understand which technologies would best meet the state’s long-term needs, a baseline of projected energy demand over the next several decades needed to be established. Black & Veatch conducted demand-side modeling to determine the electricity demand over the next several decades as the economy electrified. This included primarily buildings and transportation-related electrification. It also analyzed potential impacts to gas throughput and how clean fuels could be used in the pipeline for hard-to-electrify end uses.

These demand-side results were then considered in conjunction with the supply-side results. Black & Veatch’s supply-side modeling forecasted how the electric grid and associated resources might need to evolve to decarbonize electric generation.

To deliver technical expertise on the range of decarbonization technologies considered, Black & Veatch’s holistic approach pulled subject matter experts from across the company to assess technologies that included hydrogen, wind generation, solar generation, energy storage, electric vehicle charging infrastructure, and more.

Testing for Reliability

While other decarbonization studies have provided alternative decarbonization pathways for California, the modeling approach leveraged by this team was unique in its inclusion of a rigorous power system modeling exercise to ensure full grid reliability. Though simply creating a decarbonization plan may amount to forecasting the technologies and investments needed to get to net-zero, ensuring that plan can support real-world electricity needs in a reliable manner is another story.

Knowing this decarbonization plan needed to provide power reliably for SDG&E’s customer base, but also should be applicable to the overall state of California, Black & Veatch used advanced modeling methods to test the plan against the North American Electric Reliability Corporation’s stringent industry reliability standard. The standard deems an electric system reliable if it experiences only one power outage every 10 years.

“Ensuring that decarbonization roadmaps are comprehensively evaluated for both reliability and affordability is critical in ensuring the practicality of implementation of decarbonization strategies,” said Aileen Currier, Principal Consultant, Decarbonization Strategy for Black & Veatch’s Global Advisory team. “Given the breadth of expertise at Black & Veatch, we were able to provide real-world, multi-disciplinary expertise and insights to create, implement, and execute a technical approach that allowed us to achieve this result.”

Spreading the News

The report, The Path to Net-Zero: A Decarbonization Roadmap for California, provides a viable pathway for both SDG&E and California to meet the state’s decarbonization goals while also ensuring electric system reliability and affordability. Available as a free download, this roadmap serves as an example to the state of California and beyond what considerations are key to creating a robust decarbonization plan.

Key takeaways from the report include:

• Electric generation capacity in California will need to increase by four times the 2020 levels to support necessary transportation and building electrification.

• Diversity in generation supply is crucial, including the development of 40 GW of new battery storage as well as 20 GW of dispatchable generation from 100 percent clean hydrogen combustion by 2045.

• Implementation of the roadmap will require regulatory and political support to prioritize electric sector reliability, maintain affordability while increasing equity, incentivizing innovation and adaptability, and enabling deployment of decarbonization infrastructure.

Understanding the necessity of keeping decarbonization costs low for both the state and utility customers, the roadmap estimates that California will require a relatively small share of state GDP to reliably achieve its decarbonization goals. Keeping this in mind, the report analyzed illustrative changes in SDG&E residential customers’ total annual energy expenditures in 2045, including electric utility bills, natural gas utility bills and gasoline costs. Customer types who were projected to adopt electric appliances and vehicles at the average rate of the roadmap were expected to pay approximately the same annual energy costs in 2045 compared to 2022, excluding the impact of inflation. They were also projected to be paying roughly 19 percent lower annually than those who do not adopt the strategy set out by the roadmap.

As the world continues to decarbonize, energy utilities hold a significant position in helping to ensure states meet their respective decarbonization goals. Though to many citizens, such strategies are rarely seen or considered, all will feel the invaluable, sweeping changes brought by a more diverse, carbon-neutral energy landscape. As SDG&E and the greater State of California work toward their 2045 net-zero goal, this roadmap stands as a model for utilities and governments around the world as they, too, work to upgrade power systems and lower emissions.