‘It’s time to move on.’ Meet the CEO who says no to coal

Source: Benjamin Storrow, E&E News reporter • Posted: Monday, October 29, 2018

Gerard Anderson is among the most outspoken climate hawks in the utility industry. Last year, the DTE Energy Co. CEO committed his company, the largest utility in Michigan, to reducing carbon emissions by 80 percent of 2005 levels by 2050. DTE has plans to shutter all its coal plants by 2040 and has said it will double its renewable capacity from 1,000 megawatts to 2,000 MW by the early 2020s.

On a recent afternoon, Anderson sat down with E&E News in his Detroit office to talk about utilities’ responsibilities to address a warming plant.

DTE has said it plans to cut emissions 80 percent by 2050. How did you make that decision, especially in the absence of a government mandate?

Well, it’s interesting how it evolves. I have for years chaired or co-chair [the Edison Electric Institute’s] Environment Committee. And in 2015 and ’16, my assignment was to try and build consensus in the industry around the Clean Power Plan. And I can tell you that was, that one was controversial with different companies in different positions, different states with different viewpoints and politics. We spent a lot of time, a lot of evening phone calls and weekend meetings. But we did as an industry come to a position, and the position the EPA came out with was largely consistent with what the companies had agreed that they could support. …

I know at DTE, in order for me to be able to advocate to other CEOs that we should move on this, I had to actually know [what] we could do. So playing that role required me to ask my team to dig in deep and model this. And as we modeled it in depth and in detail, it began to become clear to me that with what had happened in natural gas in the U.S. and what was happening, and continues to happen to the economics of renewables, that we were just in a radically different position than we had been back in 2008 when Waxman-Markey [the American Clean Energy and Security Act] came up.

There isn’t a sucker’s choice between the environment and economics. So we got the Clean Power Plan implemented, and then the election happened and it became pretty clear that the Clean Power Plan was going to be shelved. That was, after all the time and effort put into it, pretty disappointing to be honest. And on the heels of all the talk about the renaissance of coal, the new administration coming in, I just got a constant stream of questions about what this meant, and was the environment going to degrade and were things going to go backward. And yet I stood there convinced that we had the ability to take this on given where the technology is at.

The other thing I would say is that my senior leadership team and I pulled together in the prior couple of years and asked ourselves a simple question: What do you think our responsibility is? What we believe we need to do? I told them that I believe climate change is one of the defining, if not the defining public policy issue of our time, and what’s our responsibility relative to that? We landed on the fact that we need to address it, we need to be part of the solution. We need to grab it.

What’s so interesting about DTE and other big utilities in the heart of the country is you associate coal with the factories and manufacturing that are so important to the economy here. What did you hear from your big customers when you said you were doing this?

Well, you know we had to tell them that we could work our way through this 80 percent reduction and do it economically and reliably. And, you know, we had to do the math and the engineering to be sure that we weren’t making that up, that it was true. We did say that we’re going to walk away over time from 100 percent of our coal and we’re going to replace it with a significant mix of renewables and that natural gas was needed too in order to achieve the reliability. But I said at the time, we get 80 percent without having to do anything really esoteric. I mean a mix of 40 percent natural gas and 40 percent renewables will get you to the 80 percent reduction for us. And we can achieve the reliability with them as well. …

You talk about climate responsibility. How do you balance that with your responsibility to keep the lights on and your responsibility to turn a profit?

People have figured out that reliability and affordability and these sharp reductions in carbon can all work together. It’s doable, and it wasn’t a decade earlier I’ll tell you that. Sometimes people really need to redo the math and redo the engineering to understand that what’s been in my mind, the old model, is not right anymore. So I think, just to talk about today, this train is moving and it is moving fast. Faster than the Clean Power Plan certainly anticipated. The Clean Power Plan called for a 21 percent reduction in carbon nationwide by the early 2020s. I think it was by 2021. And then a 32 percent nationwide by 2030. We’re going to be a 32 percent in the early 2020s. So we’ll probably be at 50 as a country by 2030. We will as a company, I think, we’re already well beyond our Clean Power Plan goals for the early 2020s and then moving north. You know we’ve committed to 45 percent by 2030, and I think we’ll be north of that.

The other thing I’ve observed is that, and I started saying it explicitly to our peers, is you know this used to be a conundrum for us. Actually, the challenge to reduce carbon is the greatest growth opportunity that our sector has. Because the only real tool that we have to do is remove carbon from transportation and industry generally is electrification. So if we show that we can remove the carbon from electricity, then the other sectors come to us to solve the problem. It is a great opportunity for us to do what we do, which is build infrastructure, but build the infrastructure that society is asking us to. And I think that my perception is that once the ball gets rolling and people begin to observe other people making moves, they’ll think about it and look at it themselves and then realize, “Maybe I ought to think about this.”

This conversation is very different than the political conversation the country is having about energy. So how do you talk about that in an environment where the president has promised to revive coal?

Well, my perspective is a couple things. You know, I’ve been asked, “Is the push for coal going to make any difference to you?” and I said, “One thing an administration can’t do is turn a 70-year-old coal plant into a 20-year-old coal plant.” These are really old assets that are getting extremely expensive. We’ve got better alternatives. It’s time to move on. And that’s just reality. It is time to move on. So I think that’s the real energy and economic discussion. There’s a political discussion that parallels it. The political discussion isn’t just about coal, it’s about groups that feel disenfranchised or left behind. Coal miners are a good representation of that, as a broken industry that feels left behind. And I think the president’s appealing to a group of people that’s representative. I think there are a lot of other people who can identify with coal miners, say, “I’m like them too, I’m left behind too. This president is fighting, symbolically in some way, for people like me.” And so I, in many ways, I see that as a political statement. Those of us in energy know where the economics lie.

Is there opportunity in this transition for those communities that are being left behind by this?

The amount of economic energy right now in the natural gas and renewable sectors is pretty large. There’s a transition job that would need to happen so you don’t get from people working in one industry to opportunity in other industries without, you know, workforce development and training. But there is tremendous job opportunity being created in those two sectors. And you know the real discussion probably should be about how do you transition people out of one sector into the other. You take a state like West Virginia. They’re big in both and growing tremendously in gas. There is an opportunity to move people out of skilled positions in mining and manufacturing and into that. So I think that’s probably the conversation we should be having.

On the flip side, environmentalists want to see you go faster. What to do you say to them?

Well, a couple of things. First of all, when somebody sees that number come in a state like Colorado and the wind bid is 2 ½ cents or something like that and people say, “Well see, it’s cheaper than gas.” It’s not an apples-to-apples description because gas is a 24/7 dispatchable commodity and wind isn’t. And people often then say, “Well, we’ll put a few hours battery storage with it.” That really isn’t the same either. In fact, to transition wind or solar to something that truly has the dispatch profile of a combined-cycle gas plant, if you truly want that flexibility, the amount of storage you need is immense. And in a state like this, you’ve got a sunny day today, but we go through long periods where in the winter the solar production is virtually negligible and the wind dies too. We’re not looking for a couple hours of storage, and we’re looking for weeks, maybe even months of energy carry. …

And so the Blue Water plant that you toured is our answer to get it. It gives a sharp reduction in carbon from the coal we’ve got today, a 70 percent reduction in carbon and keeps the dispatchability, and we’re pairing that up with a lot of renewables. And that path gives us the 80 percent. Now then people have asked a lot about long term. I said I think long term we’re going to see an evolution in technologies, continued penetration of renewables and deployment of batteries, although I don’t think batteries at the scale I was just talking about. But as that mix pushes in, I think the dispatch levels and gas will decline over time and it will take on a different role. It is going to be baseload today. It will go to cycling, and over time we’ll be kind of light cycling and peaking and adding flexibility to the grid, and maybe someday our storage technology has become so good that you know they handle it, but they aren’t there yet today.

This interview has been edited for brevity and clarity.