A ‘tectonic change’ in the world’s power
Solar’s rise and coal’s decline are among the trends that are causing utilities to rethink their strategies
Solar’s rise and coal’s decline are among the trends that are causing utilities to rethink their strategies.
Rising concerns about fossil fuels, interest in rooftop solar and shifts in how power is distributed are upending the traditional role of utility companies, according to chief executives.
The CEOs, speaking last week at the CERAWeek by IHS Markit energy conference, said the changes are leading many companies to remake their business models for the first time in decades. They are divesting coal-fired power plants, investing more heavily in renewable energy and adjusting to the prospect of competing with their own customers in generating electricity. In California, for example, about 4,000 to 5,000 customers of the utility Edison International install solar systems on their rooftops every month to make their own power, selling the excess to the grid, CEO Pedro Pizarro said. That means utilities may have to become both distributors and brokers who match power producers with customers.
“That is a long-term trend,” he said. “You can’t stop that technology, and you can’t stop customers that want to get into it.”
It’s not unique to California. The trend of customers wanting more control over their power has become an everyday concern for the German manufacturing company Siemens, which makes transmission lines, wind turbines and solar panels, among other products. People want to make their own power and sell it back to the grid, said Judy Marks, CEO of Siemens USA.
Isabelle Kocher, CEO of the French power company Engie, said she, too, sees “tectonic change” in the world’s power mix. Last month, Engie sold all of its U.S. coal and naturalgas fired power plants to Houston-based Dynegy
for $3.3 billion. Engie plans to invest billions of dollars in renewables, Kocher said.
Even in Texas, a center of fossil fuel production, the winds of change are literally blowing. The Electric Reliability Council of Texas, which oversees 90 percent of the state’s electric grid, now gets a third of its power from wind farms. Solar farms are expanding around the state, and there are more options for installing rooftop solar as panel costs continue to drop, according to industry officials.
President Donald Trump has pledged to roll back the Obama administration’s Clean Power Plan, which sought to limit emissions from power plants, but such a move is unlikely to have much effect on the expansion of renewables in Texas, said Toby Baker, a commissioner with the Texas Commission on Environmental Quality, the state’s environmental protection agency.
“With the cost of solar, the amount of wind coming online, the market is doing what the Clean Power Plan was trying to do,” Baker said, speaking on a panel addressing changes in Texas’ power mix. “Regulations are important, but at the end of the day, lowcost natural gas and zerocost wind are driving this more than regulation.”
Despite the changes, power lines in Texas and around the country are not set up to have customers both send and receive electricity from the grid, said Paula Gold-Williams, the CEO of San Antonio’s municipal utility, CPS Energy. Companies will have to invest in upgrading and changing their electricity distribution systems to handle independent power flowing into their distribution systems.
In 2011, CPS announced that it would shut down its coal-fired J.T. Deely power plant by 2018 — which would make it the first coal-fired plant to be closed in Texas.
On Thursday, Barry Smitherman, who formerly served on both Texas’ Public Utility Commission and Railroad Commission, said the economics are in favor of retiring expensive and inefficient coal-fired power plants, and that the company should retire more plants to save money that it can reinvest elsewhere.