The traditional utility business has been holding out hope that some form of new electricity generation would allow them to maintain their monopoly status without rocking the boat in the way wind and particularly solar could. As long as electricity generation is dominated by massive power plants, rather than small rooftop solar systems or on-site wind turbines, it will be simple to keep utilities as we know them profitable.
Clean coal was a push in the industry for a while, but the $7.5 billion Kemper plant boondoggle by Southern Company (SO 0.45%) showed that it would never be economical. A nuclear renaissance has also been a dream for many utilities and investors, but costs have once again ballooned out of control.
Southern Company's expansion of the Vogtle Electric Generating Plant is billions of dollars over schedule and will be the cause of increased electricity rates in Georgia. In the last week, Duke Energy (DUK 0.43%) seems to have given up on its nuclear dreams entirely. The Lee Nuclear Station was abandoned by the company last week, a few years after the suspension of the Levy nuclear plant in Florida that resulted in about $1 billion in expenses that were charged to customers. What came next wasn't another nuclear plant, but a proposal to build 700 MW of solar energy installations, 50 MW of energy storage, and 500 EV chargers as part of a $6 billion plan to upgrade the grid in Florida. Finally, utilities and regulators are seeing renewable energy and energy storage as an asset and abandoning risky energy sources that have been multibillion-dollar boondoggles for the industry.
Image source: Getty Images.
Utilities aren't about taking risks
The shift away from nuclear and clean coal projects is telling for the future of utilities. They aren't in the business of taking undue technology risks and neither technology has proven to be cost effective or even a viable alternative to natural gas or renewable energy. If regulators -- and ultimately customers -- aren't willing to subsidize these new technologies, they'll be mothballed for technologies like wind, solar, and energy storage that we know are cost effective today.
The losses and cost overruns I've highlighted above will not only deter utilities from making similar investments in the future, it will shift the way regulators will look at nuclear and coal ("clean" or not). Ultimately, a regulator's job is to ensure that there's a stable electricity source for customers at the lowest possible price. With wind and solar now costing less than nuclear and coal energy, there's little justification to keep building nuclear or coal plants.
Image source: Getty Images.
Utilities have turned their focus to renewables
As I mentioned, a part of the official shutdown of the Levy nuclear site, Duke Energy Florida has to build 700 MW of solar in the next four years. This is notable because Florida -- a.k.a. the "Sunshine State" -- is No. 12 for solar installations in the U.S. with just 725.1 MW, according to the Solar Energy Industries Association. After years of fighting solar energy, Duke Energy, Southern Company's Gulf Power Company, and NextEra Energy's (NEE 2.19%) Power & Light -- the main utilities in Florida -- are all embracing renewable energy.
Their change of tune ultimately doesn't come down to the fact that these utilities are concerned about how renewable energy is or reducing CO2 emissions. It's all about dollars and cents. Wind, solar, and energy storage provide predictable costs that are competitive with other sources of energy and nuclear and coal are no longer competitive. It's as simple as that, and if utilities and regulators are publicly making the realization that renewable energy is really the most cost effective form of energy, it shows how far the industry has come from the days wind and solar were questioned as energy sources. Wind and solar are the future of energy, even in a state like Florida.
