The number of utilities betting their futures on renewable energy seems to be growing by the day. Giants like NextEra Energy (NYSE:NEE), Southern Company (NYSE:SO), AES (NYSE:AES), and Duke Energy (NYSE:DUK) are slowly but surely seeing the fossil fuels aren't the profit drivers of their future; renewable energy is. 

American Electric Power (NASDAQ:AEP), who generates nearly half of its electricity from coal, says it will invest $1.8 billion in renewable energy by 2020. That's only about 10% of its total capital spending, but it's a transition other utilities have already begun. 

Solar farm with wind turbines in the background.

Image source: Getty Images.

AEP starts to take renewables seriously

In a press release discussing its future investments, AEP said it will invest $1.8 billion in renewable energy between 2018 and 2020, which seems small compared to its $18.2 billion capital spending plans. But if you pull out $4.4 billion in investment for distribution systems and $9 billion for transmission assets you see that only $3.0 billion will be allocated to fossil fuel generating assets. 

The 2018 to 2020 plan is also on top of a $4.5 billion investment in the 2,000 MW Wind Catcher project in Oklahoma, which will be the world's second-largest wind farm. In total, AEP will spend more on building/buying renewable energy assets than fossil fuels in the next few years. 

A shift is happening at U.S. utilities

The transition to renewable energy is happening because utilities see the economics of wind and solar energy as too good to pass up. And they're putting billions into building their renewable energy businesses

Duke Energy has 2,300 MW of wind power and 600 MW of solar, investing $4 billion in renewables since 2007. It's even investing in battery storage as a new generation of grid asset. 

NextEra Energy's subsidiary NextEra Energy Resources says it is the world's largest generator of electricity from the wind and solar. On top of that, the company has a controlling interest in NextEra Energy Partners (NYSE:NEP), one of the biggest renewable energy yieldcos in the world. 

AES has taken a leadership position in energy storage through a partnership with Siemens called Fluence. This is on top of 25% of its power generation portfolio coming from renewable sources. 

Southern Company is another to make the surprise move to renewable energy. After leading the charge into "clean coal" and nuclear power, Southern Company has made an about-face and added 4,000 MW of renewables in the last five years. 

Renewable energy can't be ignored any longer

Utilities aren't investing billions of dollars into renewable energy to save the climate or appease environmentalists, they're doing so because it's in their best interest financially. Renewable energy is now the lowest cost option when building new power plants and that's what's driving adoption. If these utilities are any indication, there will be tens of billions more poured into the industry over the next decade. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.