Pathways toward Grid Decarbonization: Impacts and Opportunities for Energy Customers from Several US Decarbonization Approaches

The power sector is the second-largest source of greenhouse gas emissions in the US and accounts for one quarter of total emissions. Decarbonization of the power sector can play a leading role in cost-effective, economy-wide emissions reductions given that deep emissions reductions are projected to cost more in other sectors, and electrification is expected to be the lowest-cost means of decarbonizing many energy-using activities (NASEM, 2021). In this report, we examine the effects of several pathways to reduce GHG emissions in the US power sector, and the impacts and opportunities for energy customers. For a brief summary of implications of the recently passed Inflation Reduction Act on this study, see the Summary for Policymakers.

1.1. Decarbonization Pathways Evaluated in the Analysis

We project the following key pathways:

1. A national clean electricity standard (CES)—both a Fast CES (100% clean generation target by 2035) and a Slow CES (100% clean generation target by 2050).
2. Utility-led Decarbonization—all vertically integrated investor-owned utilities (IOU) fully decarbonized by the end of 2050.
3. A national transmission macrogrid consisting of 7,830 miles of high-capacity direct-current transmission lines, constructed by 2035.
4. Expansion of competition among generators via expansion of organized wholesale electricity markets (OWMs) to the parts of the U.S. that do not currently have them
5. Expansion of supply choice to almost all commercial and industrial (C&I) customers, combined with the OWM expansion just described.

These pathways can be combined for larger total net benefits. In addition to considering the effects of the individual pathways, this report evaluates the effects of certain pathway combinations, specifically:

• Combination of a national CES with a national transmission macrogrid
• Combination of a national CES with expansion of OWMs
• Combination of supply choice and OWM expansion

We project and evaluate the impacts of these pathways and combinations across several electricity sector outcomes in 2035 and 2050, including generation mix, emissions, retail prices, net benefits, and employment. Additionally, we project each pathway’s effects on commercial and industrial (C&I) customers’ access to clean electricity. To help inform consideration of an 80% by 2030 (80x30) national CES, this report also projects the effects of such a policy in 2025 and 2030.

1.2. Decarbonization Pathways: Key Takeaways

Table 1 reports the effects of each pathway on two core metrics: GHG emissions from the power sector and net benefits to society. The following key takeaways from this analysis are informed by those outcomes as well as other results discussed in this report.

• The national CES pathways are the only pathways considered that approach full decarbonization of the U.S. power sector in the timeframe modeled. Both a Fast and Slow CES can reduce U.S. power sector emissions more than 90% by 2050. A Fast CES can reduce emissions faster by a 2030-2035 timeframe, but our analysis suggests that there is a balance to be struck between pace and cost.
• Every pathway produces emissions reductions and several billion dollars of annual net benefits, with a national CES producing the largest emissions reductions and approximately $100B per year in estimated net benefits by 2035. Other pathways varied greatly (see Figure 1).
• Full decarbonization by all vertically integrated IOUs by 2050 would, in that year, produce approximately half of the net benefits of the national CESs we model.
• The transmission macrogrid and OWM expansion would each reduce both costs and emissions. The estimated benefits of the macrogrid are three to four times the estimated costs, and include a net national average retail electricity rate reduction of approximately 1%. OWM expansion is estimated to save $11 billion per year.
• Large increases in clean generation can be achieved with relatively small projected price impacts. For example, increasing 2035 clean generation from 42% in the reference scenario to 87% via the Fast CES increases projected national average retail electricity rates by 7%. Increasing 2035 clean generation to 78% via the Slow CES increases rates by only 3%.
• The pathways would affect customers’ ability to voluntarily choose green power. OWM expansion would increase access to green power, and adding supply choice would further increase it. A national CES or utility-led decarbonization could increase or decrease access, depending on utilities’ and regulators’ choices regarding voluntary green power access but would help accelerate greening the grid for all customers.
• Both CES pathways increase projected energy sector jobs through at least 2035. During the years 2023-2035, the Slow CES results in an average of just over 200,000 more jobs than the reference scenario. The Fast CES results in an average of nearly 300,000 more jobs than the reference scenario. During 2036 through 2050, the CES pathways have smaller effects on jobs, with the Slow CES still resulting in more jobs than the reference scenario and the Fast CES resulting in fewer jobs than the reference scenario. The Utility-led Decarbonization results in approximately 50,000 more jobs during 2023-2035 and fewer jobs during 2036-2050, compared with the reference scenario.