Low-Priced Renewables Driving Change At US Utility Companies

Renewables are finally getting the attention they deserve from US utility companies. That won’t help homeowners and private businesses that want to go solar. The utility giants are still firmly committed to preserving their monopoly status and locking out any upstart competitors if they can. But as the cost of solar and wind energy continues to drop, utilities have no choice but to shift their long-term focus to renewables.

Asbury coal plant in Missouri. Credit: Empire District Electric

AES, one of the major utility companies in the US, operates in 17 countries on 4 continents. At present, half of the electricity it generates in the US comes from burning coal. This week, it announced that it will invest $1.8 billion between now and 2020 on renewable energy sources. According to Motley Fool, that amount appears to be quite modest in comparison to the more than $18 billion the company intends to invest in total during that period, but $13.5 billion will go to improving distribution and transmission systems, while only $3 billion will be allocated to fossil fuel generating assets.

AES is also investing $4.5 billion in the 2000 megawatt Wind Catcher project in Oklahoma, which will be the world’s second largest wind farm when completed in 2020. That all means that, over the next few years, AES will devote more capital resources to renewables than it does to fossil fuels. There is only one reason for that — renewables are projected to generate more electricity for less money than any other source.

The trend toward renewables is gathering speed in the American heartland. Ameren, which supplies customers in the St. Louis area, announced recently that it will invest $1 billion to build wind farms with a total capacity of 700 megawatts by 2020. Last week, Empire District, a utility that services southwestern Missouri, filed plans with the state’s public utilities commission to add 800 megawatts of wind power during the same time period. But the proposal goes further. It says the company will also shutter its 200 megawatt coal-fired Asbury power plant by April 2019, more than a decade ahead of schedule, according to St. Louis Today.

The economics of the transition to renewables are interesting. Federal tax credits available to the utility companies if they switch to renewable energy are a significant factor. Those credits are due to expire in 2020. Although, the current so-called tax reform proposals being considered by the US Congress could terminate the credits sooner. The Trump administration could also rock the solar energy industry if it imposes significant tariffs on solar cells as a result of the recent recommendations of the International Trade Commission.

On the other hand, the Asbury generating station will need about $20 million in air quality improvements in the next few years, after the utility spent nearly that amount just two years ago for other emissions-related upgrades. Empire District says it expects transitioning to renewables will result in more than $325 million in savings over the next 20 years — lowering the monthly utility bills of its customers by an average of $10 a month during that period.

“The Public Service Commission will make a decision that will affect how the other utilities do this,” said James Owen, the executive director of Renew Missouri, which advocates for increased adoption of renewable energy in the state. “This is the direction of how utilities are going to be run. There are tax advantages to do this and now the iron is hot,” he added. “(Utilities are) going to have to look at how this market is moving beneath their feet.”

Rapidly shifting economic and regulatory realities make long-term planning difficult for utility companies, but the continuing decline in the cost of wind and solar power is making renewables attractive from a bottom line point of view. Any reductions in carbon emissions are merely icing on the cake.