2020 Sustainability Report CEO Letter
At a time of immense, rapid change in our world, we at LS Power are driven each day by a deep responsibility to meet this critical moment—to deliver the energy people increasingly need to live modern lives while also protecting and preserving our planet. This is not new for us. We’ve long been at the forefront of transitioning America’s energy system and we are especially proud of our leadership in lowering carbon in the power sector.
In this, our inaugural sustainability report, we outline not only how our dedicated, passionate people have been putting our responsibility into action, but also how LS Power has been doubling down on our efforts to make the nation’s energy system cleaner, more efficient and more resilient. This report details the actions that we are taking to realize that goal, from building thousands of megawatts of new wind and solar projects, to deploying one of the world’s largest battery storage systems, to advancing a nationwide electric-vehicle charging network.
Our approach to the energy transition is deliberately focused on new investments that will yield long-term reductions in greenhouse gas (GHG) emissions at the system level.
We’re disruptive—and we’re proud of that. But even more, we are transformative in where we want to take the industry. By zeroing in on the key constraints to decarbonization (e.g., the need for battery storage in California or new transmission in New York), we believe our initiatives are leading the way to actually reduce emissions. Simply put, with our time and capital, we are swinging at decarbonization’s fattest pitches. These include:
- Advocating for high-impact policies: competitive power markets, expanded transmission procurements, and technology-neutral carbon pricing
- Developing new clean energy resources: battery storage, renewable generation, electric vehicle fast-charging infrastructure, demand response and energy efficiency platforms, transmission, and renewable fuels
- Optimizing existing power assets: pumped storage hydro (in order to store more renewable energy) and high-efficiency thermal plants (in order to displace less-efficient plants)
- Investing in emerging clean energy technologies: carbon capture, advanced transmission, and new forms of electric mobility
Since our inception in 1990, we’ve lived this approach, continually evaluating our society’s evolving energy needs and the effects of those needs on our environment and the communities where we operate. But we don’t stop there; we use that research to guide the direction of the company.
When we first developed utility-scale solar projects almost 15 years ago, our efforts were considered audacious in scope and scale, and the development and execution were challenging. Since then, we have successfully developed and operated multiple renewable generation facilities, extending beyond solar to include wind development as well as hydro operations through our acquisition activities.
We also tackled battery energy storage, which has proven to be an increasingly important complement to intermittent, weather-dependent renewables. In 2017, years before it took center stage in the renewables conversation, we foresaw the necessity of battery storage and established ourselves as a market leader. Moreover, and despite the challenges of 2020, we successfully expanded our portfolio of battery storage projects to meet critical peak demand. Our Gateway project came online during the California blackouts last summer as the world’s largest capacity battery at the time. Over the years, we recognized that as consumers increasingly focused on climate change, the demand for electric vehicles would rise as well. In 2020, we took steps to enable that demand. We acquired and continue to significantly invest in the growth of EVgo, the nation’s largest public fast charging network for electric vehicles and the first platform 100% powered by renewable energy. We also announced a Renewable Fuels Initiative during the year through which LS Power is jointly developing a portfolio of landfill gas-to-renewable natural gas projects throughout the United States.
We don’t stop at developing our own projects. We’re also calling for systematic changes. We believe transparent and competitive energy markets are a pathway to innovation and efficiency that ultimately will lead to more affordable, cleaner solutions for consumers and our environment. During 2020, our team was more engaged than ever in the person-to-person advocacy that is essential to getting policy right at the regulatory and legislative levels. Some of our initiatives include advocating and litigating in support of competition in transmission and power generation, opposing unwarranted resource-specific subsidies that cause market distortions, and promoting an economy-wide price on carbon.
Properly priced carbon markets can incentivize investment in lower carbon technologies and will avoid market distorting policies that can lead to capital destruction through bad investments that end up not making sense in the long term for all stakeholders involved. Electricity is a critical service and our advocacy work seeks to promote durable solutions that keep reliability at the forefront of the discussion.
Our View on Emission Reduction Pledges
Our approach is different than “net-zero” emissions pledges from some utilities and independent power producers (IPP). I think it’s important to explain why. There is nothing innately wrong with making such pledges. What matters, however, is how a company seeks to deliver on them. There is a disconnect when a company’s near-term plans to fulfill a net-zero pledge (1) consist chiefly of selling existing assets (many of which may already be unprofitable); (2) are a simple response to market dynamics and demonstrate no coherent value-creation strategy tied to decarbonization; and (3) have little to no impact on GHG emissions from the overall system (as opposed to from an individual company’s generation portfolio).
To illustrate the possible pitfalls of the corporate net-zero approach, consider these examples:
- A utility holding company owns a fleet of unregulated coal-fired, gas-fired, and nuclear power plants. They decide to sell their coal-fired plants to another firm. Upon acquisition, the new owner continues to operate the plants as they are being run today. Unloading its coal fleet substantially reduces the utility company’s GHG emissions and enables it to claim credit toward its net-zero goal. With its former plants continuing to run as before, however, the impact on system-level GHG emissions is de minimus. Should the utility company be hailed as a leader on climate change despite the fact that selling the coal plants does nothing to actually accelerate the pace of decarbonization?
- An IPP announces plans to retire 5,000 MW of coal-fired plants. The plants have incurred losses over the past five years due to low natural gas and power prices. Retirement of these plants reduces excess supply in the market and boosts prices/profits for the IPP’s other plants (most of which are likely fossil generation). Should the IPP’s management be credited with a forward-thinking climate strategy even though their exit from coal reflects a basic business decision and does little to signal how the IPP will actually contribute to the energy transition to a greener grid?
The examples above underscore the need to distinguish energy transition initiatives that are short-term, indirect, and incidental from those that are long-term, deliberate, and consequential. Over the last decade much of the reduction in GHG emissions from the U.S. power sector reflects the simple reality of low-cost natural gas displacing coal. Coal-to-gas switching, however, has limited runway to further reduce emissions—particularly as the secular declines in gas prices begins to fade.
Natural gas still provides 40% of America’s electricity generation—and though that share will likely decline over time, natural gas-fired plants provide an essential complement to intermittent wind, solar and other renewable resources.
Recognizing the complexities of decarbonization is one reason why LS Power has so far eschewed grand net-zero pronouncements. If between now and the publication of our next sustainability report, LS Power were to sell or spin off our fleet of gas-fired plants, it is probable that (due to both reliability and economics) the plants would continue to operate as they do now. Hence, even though our company could claim lower GHG emissions, system-level emissions will be unaffected and LS Power will have done little to advance decarbonization.
Rather than reshuffling our portfolio to project the cleanest possible image, we are prioritizing the hard work of making low and no-carbon energy profitable and, therefore, sustainable.
Our People and Our Communities
None of our work would be possible without our people. They are the heart of our company and the keys to our success. We’ve grown our ranks to 268 people over the past year with a net increase of 22 new team members while committing anew to advancing a culture that embraces inclusion and welcomes diverse perspectives.
Moreover, our projects have created thousands of additional jobs, primarily in construction and operations, in the communities we serve across the country. In 2020, we contributed $1.8 million to food banks, crisis centers, emergency response and health organizations, and more. Those jobs and investments supported local economies at a time when they really needed it.
In a year where we faced much societal turmoil and uncertainty together, it was a great privilege to work in an industry so essential to our lives and, especially, to work with a team that tirelessly ensured the safe and sustained operations of our power generation and transmission projects across the United States. I am very proud of them and their work.
In the pages ahead, I look forward to sharing more about who we are and what we do. With deep gratitude for our employees, industry partners and customers, I sincerely thank you for supporting LS Power, in the past, today and for years to come.
Chief Executive Officer