By Jeffrey Tomich, Reporter, E&E News
A study by consultants Vibrant Clean Energy LLC and Energy Innovation said the United States has reached “the coal crossover,” at which renewables could replace almost 75% of the U.S. coal fleet and at an immediate savings to customers. By 2025, the number is set to rise to 86%. But in most cases, what’s left behind as utilities pull the plug on old coal plants is more than industrial shells awaiting demolition. They’re also leaving behind millions of dollars of so-called stranded costs on the companies’ books — costs someone must shoulder . . . Environmental and consumer advocates, utilities, and regulators across other states in the coal-heavy Midwest are trying to find balance between cutting carbon and keeping utility bills affordable. A potential solution to accomplish those goals is securitization — refinancing higher-cost debt with low-interest, ratepayer-backed bonds. Read more here.
Photo Credit: We Energies
What are “stranded assets?”
Stranded assets are now generally accepted to be fossil fuel supply and generation resources which, at some time prior to the end of their economic life (as assumed at the investment decision point), are no longer able to earn an economic return (i.e. meet the company’s internal rate of return), as a result of changes associated with the transition to a low-carbon economy.
Source: Carbon Tracker Initiative
ADDITIONAL RECOMMENDED READING
Securitization fever: Renewables advocates seize Wall Street’s innovative way to end coal, by Herman K. Trabish, Utility Dive
State legislation authorizing the use of securitization:
U.S. Green Bank Act of 2019 Would Provide $10 Billion+ of Capital to State and Local Green Banks, Coalition for Green Capital. The Green Bank Act of 2019 would inject billions of dollars into the U.S. economy to accelerate clean energy deployment, grow clean energy businesses, and deliver affordable clean energy to all Americans. The members of the global Green Bank Network and the American Green Bank Consortium have already shown that public investment in clean energy deployment drives greater total investment, job growth and lower energy costs. The bill creates a new USGB as a wholly owned corporation of the U.S. government, housed within Treasury. It would be capitalized through the issuance of federal Green Bonds.
According to the International Monetary Fund, the United States subsidizes fossil fuels at a cost of $649 billion a year.
Thriving in a low carbon future: M&A and the new energy economy, Utility Dive
Contributed article by Mary Anne Sullivan, Sarah Shaw and Alex Harrison, Partners at Hogan Lovells.