America’s Power Plan released four new reports on transitioning away from uneconomic coal assets, focused on financial transition impacts, managing depreciation, swapping debt for equity, and embracing a “steel for fuel” investment strategy. The article below, an abbreviated version of the Steel for Fuel brief, highlights how early retirement of uneconomic coal assets can improve rather than destroy shareholder earnings if the utility is allowed to reinvest capital in new renewable plants. In cases where renewables are cheaper than operating existing coal, swapping steel for fuel and adds value for investors, customers, and the environment.
America’s Power Plan collects the latest research on smart energy policies from the leaders in America’s power sector transformation. In addition to our blog below, we also produce periodic newsletters (sign up here) on current topics to help policymakers and other stakeholders stay up to date on important questions.
Utilities in the United States have adopted new responsibilities, and their century-old business model is struggling to accommodate growing policymaker and customer demands.
These demands will only increase after new governors and legislatures were elected in dozens of states this month, meaning new policy leadership as governors appoint utility regulators and state legislatures set new energy goals – both have power to reform utilities and meet unmet demands.
The two trends of falling wholesale energy prices and declining load are making traditional utility-led investments in generation harder than ever to justify. As a result, investor-owned utilities are doubling down on distribution and transmission spending as primary investment strategies. But, as GridLab’s Ric O’Connell explains for America’s Power Plan, this rash of investment isn’t just concerning from an affordability standpoint, it is eating into the value of clean resources like flexible demand and storage.
Even though electrifying some buildings and many vehicle types is already cost-effective, electricity policy veterans know that change rarely sweeps unchallenged through these highly regulated sectors. Widespread beneficial electrification requires anticipating and removing technical and institutional barriers to take full advantage of technological trends. Unless policymakers start preparing for the electric wave today, its positive benefits may either be delayed or never materialize.
While the demise of coal power in the U.S. due to economic forces has been well documented, there is no clear plan for the communities left behind. At the federal level, discussions center around Soviet-style financial interventions to save uneconomic coal and nuclear plants by paying their owners what’s needed to remain profitable. This month, we analyzed six soon-retiring power plants owned by Ohio-based FirstEnergy to show the potential to redirect those funds to the communities that stand to lose the most in the energy transition.
In a May 2016 Trending Topics piece, we wrote that regulators can pursue either outcome-oriented or information-intensive approaches to solving the utility information problem, and get the most out of clean, distributed energy resources (DERs). Two years later, experimentation is happening and solutions are emerging, albeit relatively slowly, centering around integrated distribution planning and performance-based ratemaking. in Washington D.C., a new model has emerged as a possibility – vesting the authority for data sharing and distribution system optimization into a public third-party entity.
As the United States renewable energy market continues growing and our energy needs evolve and shift to cleaner sources, the way clean power is transmitted to our communities must follow the same responsible siting as the energy projects themselves. Wilderness-quality lands, important wildlife habitat, and cultural resources areas are not appropriate for transmission lines and energy development. Thankfully, an ongoing process shows how we can build regional transmission projects crucial to a clean, reliable, affordable energy future without sacrificing environmental stewardship.
ERCOT’s planning reserve margin is well below their target for resource adequacy this summer. To a naïve observer, the energy-only market structure’s test will be whether ERCOT can avoid shortfalls, i.e. a loss-of-load event. But no level of investment or reserve margin can entirely eliminate all risk or protect the grid from ever falling short. Instead, the true test of ERCOT’s market design is whether strong investment signals, i.e. higher prices, spur investment to drive the system back from acceptable risk to a more desirable level of risk. Fortunately ERCOT looks capable of meeting this subtler test, and it should stay the course to avoid expensive capacity markets.
Mark Ahlstrom, President of the Energy Systems Integration Group, lays out a creative solution that just might be the power market fix we’ve all been waiting for. He observes that we are having so much trouble making the markets work for the wave of new grid technologies upon us – but maybe that is because we set up the markets with a limited view of future options.
If you’re a utility regulator, you’re undoubtedly hearing about new regulatory models, more specifically, performance-based regulation. But regulatory processes can constrain the ability to get policies designed well in the implementation and incentive design phase. Experience shows it pays to get out in front of this movement and start the conversation now with stakeholders in your state.