Why do utilities prefer renewables?
A recent survey by the trade publication Utility Dive found that electric power industry leaders expect significant growth in solar, wind, natural gas and energy storage. They also project significant decreases in coal- and oil-fired generation.
Why is their outlook so divergent from what’s happening in Washington, D.C.? The answer is a result of multiple market dynamics within the energy industry.
– Markets favor low-cost energy. Currently natural gas, wind and solar are the lowest-cost resources available to produce electricity and are pushing out coal as a source of power.
– Markets emphasize the long view. As utilities look at aging coal plants that are providing decreasing value to their systems, they are making multi-decade and multi-billion-dollar decisions on investments in power plants and infrastructure to replace coal.
– Markets loathe uncertainty. The Trump administration’s policy reversals and tweets are an unstable foundation upon which to build a corporate strategy.
– Wall Street is helping utilities finance billions of dollars of investment. To ensure access to low-cost capital, they want to cite low-risk investments. Coal represents a high-risk investment from both a pollution and a resource standpoint. In 2016, 44 percent of the U.S. coal supply came from companies that had declared bankruptcy. The resource is simply too risky for investment markets.
– Utilities earn returns on investments in capital infrastructure. Investments in renewable resources are nearly all capital investment and represent the best return for investors.
[Read more here]
You can see these factors represented in the chart below. There has been no new coal since 2013. Since then there have just been retirements of coal power stations. Investment in gas-fired generations has been roughly constant for ten years, but since 2013, retirements of gas have risen, so net new gas capacity additions have been falling. The dark blue "other" has seen steady net retirements. This will have been mostly the shuttering of nuclear power stations. Solar has gone from zero to 1/3rd of new capacity in just 4 years. Wind has fallen, but that's because it was cheaper than solar but is no longer. Right now you're looking at roughly 1/3rd wind, 1/3rd solar and 1/3rd gas. Gas is useful because it can be dialled up or down quickly so it is very complementary to renewables. In time, as battery costs decline, gas will be replaced by storage. But just moving to a 1/3rd gas + 1/3rd solar + 1/3rd wind grid would still cut emissions from generation by 84%, as gas produces half the emissions of coal (though "fugitive emissions", i.e., escaped methane makes that trade-off less happy, because methane is a much more powerful gas than coal).
 |
| Source: The Conversation |
No comments:
Post a Comment