Financial Transition

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The rapid cost decline of renewable energy means running existing coal generation now exceeds the all-in cost of replacing it with wind and solar in most of the United States. This “coal cost crossover” begs regulators and utilities to reconsider the prudency of continuing to operate existing coal plants. Though cleaner resources save customers money almost immediately, untangling potentially stranded assets and transitioning this unproductive capital into new clean energy resources requires balancing consumer, environmental, investor, and local interests through complex regulatory proceedings.

Regulators, utilities, stakeholders, and investors must work together to ensure customers benefit from closures while helping affected communities transition away from a coal-based economy. But regulation needs to adapt – without opportunities to reinvest in clean resources, regulated utilities that own uneconomic plants will seek to keep them running as long as possible because they can still earn substantial returns even on uneconomic assets.

Energy Innovation analysis highlights different tools to balance stakeholder interests and facilitate the transition away from uneconomic fossil fuel plants. We provide utility stakeholders with information about tools to manage financial transition to balance stakeholder interests, and can help states facing new economic realities embrace clean energy.


Resources

Series: Managing the Utility Financial Transition from Coal to Clean, by Ron Lehr – Energy Innovation (December 2018, December 2019)

Fossil fuel power plants are quickly becoming uneconomical compared to cheaper clean energy generation. Regulators, utilities, and investors must work together to ensure customers benefit from closures while helping affected communities transition away from a coal-based economy. This series of policy briefs highlights different tools to help utilities balance stakeholder interests, facilitate the financial transition away from uneconomic fossil fuel, and help states embrace clean energy.

Utility Financial Transition Impact: From Fossil to Clean 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 accelerating clean energy transition.

“Steel for Fuel”: Opportunities for Investors and Customers 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.

Depreciation and Early Plant Retirements This brief reviews how depreciation schedules affect utility earnings and ratepayer costs, as well as other stakeholder interests.

Debt for Equity Utility Refinance This brief reviews how utilities can refinance undepreciated balances on plants in service to lessen the consumer rate burden, primarily through replacing some portion of equity with corporate debt.

Utility Monopsony Regulation: What’s Behind Low-Cost Wind and Solar Bids in Colorado? This brief reviews Colorado’s “Clean Energy Plan” to assess which features created a competitive bidding process, resulting in many bidders and low prices for clean generation projects, rather than a monopsony situation.

The Coal Cost Crossover: Economic Viability Of Existing Coal Compared To New Local Wind And Solar Resources, by Eric Gimon, Mike O’Boyle, Chris Clack, and Sarah McKee (March 2019)

America has entered the “coal cost crossover” where existing coal is more expensive than cleaner alternatives. Today, local wind and solar could replace 74 percent of the U.S. coal fleet at an immediate savings to customers. By 2025, this number grows to 86 percent of the coal fleet.


Articles

How Effective Utility Monopsony Regulation Drove Colorado’s Shockingly Cheap Wind and Solar Bids. Mike O’Boyle. Forbes, December 2019.

Utilities Running Uneconomic Coal Plants Costs Consumers $3.5 Billion From 2015-2017. Mike O’Boyle. Forbes, December 2019.

Overcoming Barriers to 100% Clean Energy, Part Two: How We Need to Evolve America’s Power Grid to Enable a Clean Energy Future. Eric Gimon. Forbes, December 2019.

The U.S. Southeast: A Hotspot for Uneconomic Fossil Power, Already Costs Consumers Millions.Mike O’Boyle. Forbes, October 2019.

Cheap Clean Energy Makes New Natural Gas a Risky Bet Utility Regulators Should Avoid. Mike O’Boyle. Forbes, July 2019.

The Billion-Dollar Coal Bailout Nobody is Talking About: Self-Committing in Power Markets. Joe Daniel. Forbes, May 2019.

Renewable Energy Job Boom Creates Economic Opportunity as Coal Industry Slumps. Silvio Marcacci. Forbes, April 2019.

The Coal Cost Crossover: 74% of U.S. Coal Plants Now More Expensive than New Renewables, 86% by 2025. Silvio Marcacci. Forbes, March 2019.

How Utilities can Swap Coal Debt for Clean Energy Equity. Ron Lehr. Forbes, February 2019.

Closing Colorado Coal Would Save $2.5 Billion. A New Proposal Could Unlock the Coal-to-Clean Shift. Silvio Marcacci. Forbes, January 2019.

Steel for Fuel: How Utilities Can Replace Fossil Fuel Expenses with Renewables Earning Potential. Ron Lehr and Mike O’Boyle. Greentech Media, December 2018.

From Coal to Clean: How Utilities Can Manage the Inevitable Financial Transition. Ron Lehr. Forbes, December 2018.

Plunging Prices Mean Building New Renewable Energy is Cheaper Than Running Existing Coal.Megan Mahajan. Forbes, December 2018.

Record-Breaking $405 Million Auction Proves Offshore Wind is the Rare Bipartisan Success Story. Silvio Marcacci. Forbes, December 2018.

Investment-Grade Policy: De-Risking Renewable Energy Projects. Mike O’Boyle. Forbes, November 2018.

Redirecting Trump’s Coal and Nuclear Bailout to Fund Economic Redevelopment. Sonia Aggarwal. Greentech Media, August 2018.

Billions at Stake: Should We Invest in Struggling Power Plants or Communities Facing Closures?Sonia Aggarwal. Forbes, August 2018.

Top Renewable Energy Financiers Reveal Pathway to $1 Trillion in U.S. Investment. Silvio Marcacci and Gil Jenkins. Forbes, July 2018.

Is Offshore Wind About to Hit Cost-Competitiveness in New York and New England? Mike O’Boyle. Forbes, May 2018.

Wind and Solar Costs Continue to Drop Below Fossil Fuels. What Barriers Remain for a Low-Carbon Grid? Mike O’Boyle and Silvio Marcacci. Utility Dive, March 2018.

America’s Offshore Wind Boom is Finally Here: Which State Will Win the Race to the Top? Mike O’Boyle. Forbes, February 2018.

Cheap Renewables Keep Pushing Fossil Fuels Further Away From Profitability—Despite Trump’s Efforts. Silvio Marcacci. Forbes, January 2018.

Rick Perry’s Coal and Nuclear Subsidy Could Cost the U.S. Economy $10.6 Billion per Year. Silvio Marcacci. Forbes, November 2017.

Offshore Wind’s Investment Opportunity: Economic Growth with Emissions Reductions. Silvio Marcacci. Forbes, July 2017.

Global Coal Use, Power Sector Emissions Will Peak Within a Decade as Low-Cost Renewable Energy Grows. Hallie Kennan. Forbes, June 2017.

Embracing the Coal Closure Trend: Economic Solutions for Utilities Facing a Crossroads. Hallie Kennan. Forbes, May 2017.

New Financial Tools Proposed in Colorado Could Solve Coal Retirement Conundrum. Eric Gimon. Forbes, April 2017.

Wind and Solar Are Our Cheapest Electricity Generation Sources. Now What Do We Do? Mike O’Boyle. Greentech Media, January 2017.

Analysis Finds Wind Could Replace 6,000 Gigawatt-Hours of Coal in Colorado. Ron Lehr. Greentech Media, August 2016.

Driving Blind: The Worst Examples of Outdated Data Skewing Renewable Energy Projections. Eric Gimon and Sonia Aggarwal. Greentech Media, June 2015.