Renewable Energy and the President-elect – 11/24/16

The president-elect will not alter U.S. utilities’ shift toward renewable energy because the tipping point for the industry has already passed.

In many parts of the U.S., basic economics and profit-seeking have replaced environmental rules and government subsidies as the drivers of renewable energy investment. In West Texas, new wind farms can be built for just $22/MW-hour while solar projects in the deserts of Nevada and Arizona are built for less than $40/MW-hour. If you compare those figures with the average lifetime cost of natural gas plants ($52/MW-hour) and coal ($65/MW-hour) in the U.S. then you can see why utilities hesitate to embrace fossil fuels based on a handful of vague campaign promises.

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Companies such as Duke Energy Corp. that invest billions in power plants are already moving forward with long-term plans to focus on cleaner alternatives.

“We said before the election that whoever is elected president, we would be continuing our efforts to go to a low-carbon fleet and also pursue renewables,” said Tom Williams, a spokesman for Duke, the second-largest U.S. utility owner.

Wind, solar, and natural gas have dominated new additions to U.S. grids for years as utilities closed a record number of aging coal-fired generators, according to the Energy Information Administration.

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Utilities have announced plans to close 12GW worth of coal plants over the next four years, largely because cheap natural gas has made them uneconomical.

Cost isn’t the only thing that makes clean energy appealing to utilities. A solar farm can go up panel-by-panel in a matter of months to quickly meet new demand. By comparison, it takes years to just permit, finance, and build a coal plant, and then it has to last decades to really turn a profit, making one or two four-year presidential terms seem like hardly any time at all.

Killing the Clean Power Plan, which would require states to reduce emissions from power plants, would only slow the transition. As would a repeal of two federal subsidies — the investment tax credit and the production tax credit — that help to make solar and wind affordable.

Yet, taking away the subsidies, which were extended for five years at the end of 2015 with bipartisan support, could be very difficult and unpopular. And the Clean Power Plan, which was suspended pending a Supreme Court ruling, isn’t scheduled to take effect until 2022 anyway making it more of a general threat that it could occur rather than a concrete one. Utilities, meanwhile, are planning for the far future where follow-through on that threat is still possible.

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“We are moving forward with plans that call for replacing some of our coal generation with natural gas, low-cost wind energy and expanding solar options for customers,” said Frank Prager, vice president of policy and federal affairs for Xcel Energy Inc., which owns utilities in eight states.

Even without the Clean Power Plan, Bloomberg New Energy Finance forecasts that wind and solar energy will grow 33% over the next two years, adding 40GW, mostly driven by state, rather than federal, policies.

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More than half of U.S. states require utilities to incorporate renewable energy into their generation mix, including Republican strongholds like Texas, Arizona and Montana. Large blue states like California and New York have set goals to source half of their power from clean energy by 2030.

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Between economic reality and state-level policies favoring more renewable energy installations, it is hard to see how the president-elect could convince utilities that a move back into fossil fuels is in their best interest.

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