Depreciation accounting recognizes asset value reduction over time. For coal plants, depreciation determines the value remaining when plants retire early. Depreciation is an important tool for transitioning away from older assets, such as coal plants, to cheaper resources, such as wind and solar. This brief reviews how depreciation schedules affect utility earnings and ratepayer costs, as well as other stakeholder interests.
Early retirement of uneconomic coal assets can improve shareholder earnings if a utility is allowed to reinvest capital in new renewable energy generation. When building new renewables is cheaper than operating existing coal, swapping steel for fuel adds value for investors, customers, and the environment. This brief addresses equity shareholder perspectives and suggests how potential funding sources can mitigate impacts on communities and workers affected by early plant retirements while improving environmental performance.
By analyzing publicly available financial information, policymakers and utility stakeholders can identify where running existing fossil fuel generation costs more than replacing it with new wind or solar. A suite of financial instruments can facilitate and reduce costs of this financial transition away from fossil fuels toward clean energy. This brief uses Colorado’s experience transitioning from coal to clean energy as a case study analyzing existing generation costs, and introduces financial tools to help electric utilities that own fossil generation manage the clean energy transition.
EI’s Megan Mahajan details how the price to build new renewable energy has fallen below the cost of running existing coal-fired power plants across the U.S.
EI’s Amanda Myers outlines how policymakers and utilities can align profit with public policy objectives to succeed at utility business model reform.
Navigating Utility Business Model Reform seeks to establish foundational elements of different reform options, poses key questions to explore their applicability, identifies illustrative experiences for ideas and concepts, and explores policy implementation options to help spur action. Navigating Utility Business Model…
An excerpt from EI’s new book Designing Climate Solutions outlines how de-risking renewable energy projects can accelerate investment and deployment of clean energy.
An America’s Power Plan contributor outlines how utility distribution grid spending could help add distributed clean energy and improve grid resilience.
Energy Innovation’s new book Designing Climate Solutions is the first policy manual for low-carbon energy and is the first book to identify the 10 policies, applied to the 20 highest-emitting countries, that can reduce emissions fast enough to stay below 2°C of global warming and avoid the worst impacts of climate change.
EI’s Mike O’Boyle outlines how widespread beneficial electrification requires anticipating and removing technical and institutional barriers to take full advantage of technological trends.