|A gas-fired power plant in Huntington Beach, Calif. Most utilities have sat out a shift to renewable energy generation over the past two decades, according to a new analysis.
Source: AP Photo
Utilities across the world have been moving very cautiously away from fossil fuels, if at all, over the past two decades, with the vast majority adopting a passive approach to managing their portfolios and only a small share actively shifting to green energy, according to a new analysis.
The study found that, among more than 3,000 utilities, only about 14% prioritized growth in renewable energy over gas or coal-fired power plants, while 10% and 2% had their highest growth in gas and coal, respectively. And even among the companies betting on green energy, more than half continued to grow their fossil fuel capacities at the same time.
"This research highlights a worrying gap between what is needed to stop global warming and what actions are being taken by the utility sector," said Galina Alova, the author of the study and a researcher at the University of Oxford's Smith School of Enterprise and the Environment.
Alova's analysis, published in the journal Nature Energy on Aug. 31, applied a clustering algorithm to identify patterns in the changing asset mix of 3,311 electricity producers between 2001 and 2018, using S&P Global Market Intelligence's own database of worldwide power plants. The study looked only at utilities, excluding independent power producers, and did not take into account hydropower or nuclear capacity.
Alova found that far and away the largest share of companies — over 75% of all analyzed utilities, owning close to 50% of total capacity — could be grouped into a passive category, meaning they showed growth in neither renewables nor fossil fuels and instead simply managed their existing portfolios.
That group is dominated by European utilities, which made up more than two-fifths, and over 70% of the total are state-owned. The passive companies also tend to be smaller, but are typically more fossil-fuel intensive, Alova said.
Her findings go some way to contradicting a narrative for the industry that has been heavily shaped by the transition at major companies such as Denmark's Ørsted A/S, Spain's Iberdrola SA, Italy's Enel SpA or EDP - Energias de Portugal SA. Those utilities have led a prominent push into wind and solar power and, although most of them still own significant fossil fuel assets, have also started pursuing aggressive phaseout strategies in recent years.
"The transition actually depends on a minority of companies," Alova said in an interview. "A large share of utilities are continuing to stick to their conventional business."
Gas, renewables go 'hand in hand'
Alova said one of her most striking findings was the fact that even among the most renewables-oriented companies, 57% continued to invest in more gas or coal capacity — or both. Close to 80% of renewables-prioritizing utilities expanded their gas portfolios over the period, at an average 5%, while 35% grew their coal capacity, at a slower 1% rate.
"Gas and renewables really go hand in hand at a lot of companies," Alova said.
In the U.S., many utilities have continued to build new gas plants in response to a steady stream of coal plant retirements and the allure of historically low natural gas prices, leading to a glut of generation capacity in many regions.
Out of the 10% of companies that prioritized gas growth over renewables or coal in Alova's analysis, one-third are based in the U.S., followed by 8% from Russia and 7% from Germany.
Gas has been hailed as a transition fuel by power generators and network operators around the world, although that sentiment could be slowly starting to shift after environmentalists have long warned of the dangers of locking in additional carbon emissions.
John McAvoy, the chairman, president and CEO of New York-headquartered Consolidated Edison Inc., admitted on an Aug. 26 investor call that the company's recent investments in gas pipelines and storage in the northeastern U.S. may have been its last, as the fuel is no longer "a big part of the longer-term view of the transition to the clean energy economy."
"We made those investments five to seven years ago. And at that time, we, and frankly, many others, viewed natural gas as having a fairly large role in the transition to the clean energy economy," McAvoy said. "That view has largely changed."
However, with even renewables-focused utilities not necessarily reducing their fossil fuel portfolios, Alova warned in her article for Nature Energy that power generators may have still locked in emissions-intensive power plants for quite some time.
"A large share of these assets is far from its retirement age, with a third being added in the last ten years," she said. "Unless retired early and resulting in asset stranding, these power plants are here to stay for decades."