Largest N.J. power company to sell all gas, coal plants

Source: By Miranda Willson, E&E News reporter • Posted: Tuesday, August 4, 2020

The owner of the largest utility company in New Jersey announced plans last week to sell its nonnuclear fleet, including all of its fossil fuel generating plants.

The Public Service Enterprise Group Inc. (PSEG) said it would sell more than 6,750 megawatts of fossil fuel power in Connecticut, Maryland, New Jersey and New York and 467 MW of solar energy in multiple states by some point in 2021, the company said. Most of PSEG’s fossil generation comes from natural gas, although it also relies on oil and a coal unit set to retire next year.

The decision comes as PSEG, which owns and operates the New Jersey utility Public Service Electric and Gas Co. (PSE&G), shifts its focus from energy to utility services. PSE&G already constituted about 80% of PSEG’s operating earnings in 2020, according to the company.

“A separation of the non-nuclear assets would reduce overall business risk and earnings volatility, improve our credit profile and enhance an already compelling ESG position driven by pending clean energy investments, methane reduction and zero-carbon generation,” PSEG Chairman, President and CEO Ralph Izzo said in a statement.

PSEG is also evaluating future offshore wind assets and may invest in New Jersey’s first offshore wind project, Ocean Wind, the company said. A proposed 1,100-MW offshore wind farm from Danish company Ørsted A/S, Ocean Wind is expected to go online in 2024.

PSEG will retain its nuclear portfolio, which includes three nuclear units in southern New Jersey as well as shares in two Pennsylvania nuclear power units, because nuclear energy is needed for New Jersey’s carbon reduction goals, according to the company. New Jersey Gov. Phil Murphy (D) released a plan this year to achieve “100 percent carbon-neutral electricity generation” by 2050, and PSEG also intends to be entirely carbon-neutral by midcentury (Energywire, July 26, 2019).

The company’s decision to divest itself from fossil fuels represents an “important step forward” for New Jersey, said Jeff Tittel, director of the Sierra Club’s New Jersey chapter.

“This is sort of a paradigm shift, that there’s more money to be made on the green side than in selling dirty power,” Tittel said.

The decision could also be a reflection of the energy market and regulations in New Jersey. The state has implemented subsidies for nuclear power and offshore wind, said Frank Felder, director of the Center for Energy, Economic and Environmental Policy at Rutgers University.

Whereas nuclear and wind projects are guaranteed fixed payments through the state regulatory process, fossil fuel investments are entirely at the mercy of market forces, Felder said.

“It’s the regulatory compensation that’s driving this, which is driven by greenhouse gas policies, as opposed to the particular fuel,” Felder said.

PSEG has not disclosed possible buyers for its fossil fuel fleet, but the company said it has engaged with Goldman Sachs Group Inc. and Wachtell, Lipton, Rosen & Katz as it evaluates potential sales. The economics of fossil fuels, however, along with the outcome of the federal election this year, could affect sale prospects, Felder said.

“[The] economic outlook is extremely poor, electricity demand is decreasing, and there is a large political and policy push away from fossil fuels,” he said in an email.

While Tittel said he would have preferred to see PSEG retire or shut down its fossil fuel generators, he hopes the company’s decision could encourage more clean energy investments from other utilities.

“I think this should show other companies that moving toward green energy and energy efficiency is a better way of making money, and better for the environment and dealing with climate change,” he said.