Power company decarbonization is critical to avert run away global warming and they are announcing their transition goals. However, careful inspection of these plans, raises questions about how serious some power companies are and whether as investors, we need to be asking tougher questions and getting more involved in moving things forward. The YvesBlue Engagement Portal is the perfect tool to help you do this.
Power companies common to US portfolios such as AEP, Duke Energy, Dominion, Xcel, etc. have recently made bold commitments but the details raise questions. For example, in 2020 AEP executives announced "aspirational" goals to transition to 100% renewable energy by 2050 but that seems to include quite a lot of natural gas. According to its own sustainability report, AEP projects adding 1,607 MW of natural gas, a fossil fuel, to its generation mix over the next ten years, with nearly half that new gas planned for 2028-2030*.
More broadly in the US, there is a known glut of natural gas plant capacity. At least 200 new gas plants are planned or in development across the U.S., totaling nearly 70,200 MW of additional capacity*. While it is seen as a solution to the intermittency of renewable assets, others are saying that this could be a stranded assets situation with many of them already operating well below capacity. Meanwhile wind and solar assets have never been cheaper to install and operate. Utility scale battery storage that would address the intermittency issue is also getting more economical. Finally, rate payers are saying that they want more renewable energy.
With the rate and amount of new gas plants in the works, it goes beyond being a "bridge" to being a real climate change problem. In Europe, the situation is even more complex as many countries push for net zero. So the details matter. A company's decarbonization plan shouldn't be shifting around so much that you can't detect that what is actually happening is not a decrease in fossil assets at all and hopefully the power companies in your portfolio are not adding more natural gas in the face of much cheaper wind and solar prices.*