Coal Shortage Causes Short Supply Of Power in China

Clean energy investments are soaring worldwide, and the United States is no exception with $56 billion going toward renewable generation in 2015, an 8-percent increase over the year before.

So why are some utilities going against this trend – and risking a contest against more progressive competitors that are gaining market share at their expense?

To understand why, it helps to have a closer look at Ohio-based FirstEnergy, a large investor-owned energy company with operations in six states that has become the poster child for resistant utilities.

The FirstEnergy case also illustrates why companies that refuse change won’t be able to stop the rising clean energy tide, no matter how hard they try.

A $4-billion fossil bailout paid for by consumers

At the moment, FirstEnergy has an expensive proposal – to the tune of nearly $4 billion – before the Public Utilities Commission of Ohio to protect its inefficient, polluting and unprofitable fleet of power plants.

The utility has been trying to convince regulators to prop up its plants for the next eight years, essentially saddling people in Ohio with the cost of FirstEnergy’s coal and nuclear investments.

The company needs the money because it doubled down  on dirty power plants that became uneconomical when natural gas prices dropped and energy efficiencies took a bite out of the company’s revenues. These decades-old energy assets are now at risk of getting stranded as power costs drop.

If FirstEnergy prevails in the case it would be able to secure revenues – well above what the market would provide – from its uneconomical nuclear and coal plants through 2024, even ifless expensive electricity became available elsewhere.

Competitors: We’ll sell cleaner energy for less

Other power producers say the FirstEnergy deal is nonsensical.

Exelon has challenged FirstEnergy’s proposal and offered to provide carbon-free energy at a lower price for the same time period. And major utility Dynegy recently proposed that it, too, can meet Ohio’s electric demand more competitively than FirstEnergy’s subsidized power plants.

These companies’ alternative deals would not only avoid the multibillions in subsidy costs, but also provide multibillions of dollars in savings. Time is on their side as well, because cleaner energy is on the move regardless of the outcome in the Ohio utility rate case.

Investment in renewable energy sources worldwide reached a record high of $329 billion in 2015, and came in spite of falling oil and gas prices. Today, there’s a business case to be made for power sources such as sun and wind, and against carbon-based fuels that trap heat in the atmosphere.

These utilities get it

Not surprisingly, a number of American utilities are now taking steps to phase out coal, and invest in clean energy sources and energy efficiency programs.

California’s three largest utilities will soon create roadmaps to incorporate more distributed energy resources, such as rooftop solar and electric vehicles, onto the grid. In Illinois, electric and gas companies are partnering with environmental and consumer groups to dramatically increase adoption of smart thermostats in the state. And in oil-rich Texas, the state’s biggest electricity generator with a coal-heavy fleet, Luminant, recently announced plans to power more than 50,000 homes with West Texas solar by late 2016.

By bucking the tide of the global move to clean energy, FirstEnergy’s strategy is ultimately doomed, because economics is now driving these changes. FirstEnergy, by clinging to old and dirty assets, will be on the losing end of the new energy economy.

By Dick Munson 

Originally Published on January 29, 2016

The Energy Exchange Blog is a forum where EDF‘s energy experts discuss how to accelerate the transition to a clean, low-carbon energy economy. Follow them on Twitter here: @EDFEnergyEX