U.S. Utilities Boost Investments in Wind, Solar Power

Source: By Cassandra Sweet, Wall street Journal • Posted: Wednesday, May 11, 2016

U.S. wind-power generation has more than doubled over the past five years, accounting for about 200 million megawatt-hours of electricity in 2015, or nearly 5% of the nation’s total power supply.

U.S. wind-power generation has more than doubled over the past five years, accounting for about 200 million megawatt-hours of electricity in 2015, or nearly 5% of the nation’s total power supply. Photo: Agence France-Presse/Getty Images

Large U.S. utilities are taking advantage of government subsidies to buy and produce more renewable energy in anticipation of tougher new regulations on carbon emissions.

Duke Energy Corp. Southern Co. and the energy unit of Warren Buffett’s Berkshire Hathaway Inc. are among the utility companies that are investing more in solar and wind farms and ramping up purchases of clean power, spurred by renewable-energy mandates in more than half the nation’s states and expected federal limits on greenhouse-gas emissions.

The utilities continue to burn coal—and increasingly natural gas—to provide the bulk of their power. But power companies are investing in more wind and solar farms because they can sell renewable electricity to other utilities at higher prices than conventional coal and natural gas-fired plants, under contracts up to 25 years long. And federal renewable-energy tax credits reduce the cost of buying or building a new wind or solar power facility, as well as help offset corporate taxes, utility executives say.


Southern plans to invest about $5 billion in renewable energy over the next three years, more than double what it plans to spend on its new nuclear, natural-gas and clean-coal plants.

The Atlanta-based company generates about 2% of its power from solar, wind and other renewables, up from 1% a year earlier. It owns or co-owns 23 solar farms and two wind farms across several states that produce 3,800 megawatts at full capacity, up 46% from the end of 2014.

One megawatt of solar power can serve about 164 average U.S. homes, while one megawatt of wind power can serve about 273 homes, according to industry organizations.

Southern has reduced the percentage of power it generates from coal to about 27% from 33% a year ago. Its overall first-quarter profit of $485 million was down 4.5% over the previous year. But its commercial power unit contributed $50 million, up 52% from the year before, and the company expects new solar and wind farms to help boost the unit’s annual earnings by 40% this year to $300 million.

Duke plans to nearly double its production and purchases of renewable power to 8,000 megawatts by 2020. It expects to invest $3 billion in new wind and solar projects in the next five years, up from the $4 billion it spent on renewables over the prior 10 years. Solar and wind farms generate 2.5% of the company’s power, nearly double their share in 2012.

“We’re continuing to invest in cleaner forms of energy, particularly in solar and wind,” said Duke Chief Executive  Lynn Good.

The Charlotte, N.C.-based company’s first-quarter profit of $694 million was down 20% from the previous year. But its renewable-energy unit contributed $27 million, nearly triple last year’s figure. Duke expects the unit to earn $135 million this year, nearly twice as much as last year.

Berkshire Hathaway’s energy unit said Friday that it plans to invest $2.1 billion in new wind and solar farms this year and another $2 billion through 2020.

Berkshire Hathaway Energy generates 28% of its power from wind and sun, up from 25% a year ago, and isn’t investing in any new generation that isn’t renewable. It posted first-quarter profit of $490 million, up nearly 5% from a year earlier. Berkshire posted total quarterly earnings of $5.6 billion, up 8% from last year.

U.S. wind-power generation has more than doubled over the past five years thanks to new wind farms, and accounted for about 200 million megawatt-hours of electricity in 2015, nearly 5% of the nation’s total power supply, according to the Energy Department.

Solar-power generation grew even more rapidly over the past five years, accounting for nearly 40 million megawatt-hours last year, a 32-fold increase from five years earlier.

Wind-power prices are down 57% from 2010 to an average of $29 a megawatt-hour, while solar-power prices also are 57% lower at $57 a megawatt-hour, according to Bloomberg New Energy Finance, which tracks renewable energy markets.

Wholesale coal- and natural gas-fired power averaged $35.07 a megawatt-hour in 2015, according to a Wall Street Journal analysis of market data from the Energy Department.

Utilities are often willing to pay higher prices for wind and solar power because they need the electricity to comply with state rules. The Obama administration also introduced rules last year that require power plants to cut carbon dioxide emissions by 32% from 2005 levels by 2030.

Although the Supreme Court in February temporarily suspended the regulations while courts resolve lawsuits by more than two dozen states that seek to block them, many utilities are moving forward with plans to diversify their energy sources anyway.

“We’re seeing more and more solar picked up by these big-name utilities,” said Colin Smith, an analyst at GTM Research.