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Utilities should avoid the high risk investments of new coal and nuclear power stations

We Must Discourage Electric Utilities from Making High-Risk Investments Green Energy Institute, 24 Nov 14, By Amelia Schlusser, Staff Attorney

Ceres recently issued an update of its 2012 report, Practicing Risk-Aware Electricity Regulation. The updated report concludes that large fossil fuel and nuclear power plants are the riskiest investments for utilities, and that renewable energy, distributed generation, and energy efficiency are lower-risk investments with potentially lower price tags than baseload alternatives.

According to Ceres, these relative investment risks are driven in part by recent developments in the U.S. electricity sector. Notably, the EPA is poised to regulate carbon emissions from new and existing power plants in the near future. In addition, renewable energy costs have decreased significantly in recent years, and some renewable technologies are either approaching or have already become cost-competitive with fossil fuel resources. Impending carbon regulations and increased deployment of distributed generation and energy efficiency are placing added pressure on entrenched utility business models, and, as GEI’s Nate Larsen recently discussed, regulators are beginning to explore strategies to modernize the grid.

Renewable energy resources such as onshore wind and solar PV are insulated from risks associated with fuel price volatility and emissions regulations, and the levelized costs of these resources are on par or below the levelized costs of fossil fuel resources. Nevertheless, many utility integrated resource plans continue to identify renewables as higher cost, higher risk resource options……….

A carbon emissions allowance program that places a premium on renewable energy generation is one potential strategy to deter investments in high-risk fossil fuel resources, but it is by no means the only available strategy. State public utility commissions should consider revising their resource planning and procurement rules to send a clear message to utilities that investments in baseload fossil fuel plants are not prudent and that zero-emitting resources are in the public interest.

Ratepayer advocates should closely monitor levelized cost projections and oppose investments in resources that are vulnerable to long-term cost increases. And finally, policymakers should ensure that applicable legal and policy frameworks incentivize energy infrastructure development that mitigates ratepayer and taxpayer vulnerability to risk over extended timeframes. Infrastructure constructed today will likely operate for multiple decades, and it is imperative that we discourage investments that will lock-in exposure to rising costs and environmental degradation for years to come. http://greenenergyinstitute.blogspot.com.au/

November 26, 2014 - Posted by Christina Macpherson | business and costs, USA