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Electric utilities at risk from climate goals despite Paris exit, Moody’s says

Credit ratings giant Moody’s is warning that a big chunk of the nation’s electric utilities are at risk of closing because of the transition toward renewable energy, which is occurring despite President Trump’s decision to pull the U.S. out of the Paris climate change agreement.

The report, issued Tuesday, says not-for-profit public power and cooperative utilities, which generate and transmit electricity, are facing “rising risks” from the transition to less carbon dioxide-emitting power plants, because they own most of the coal plants across rural America.

The company has begun examining the effects of climate policy on the utility sector through the lens of the Paris Agreement. Moody’s found that Trump’s withdrawal from the accord a year ago will be limited because of “customer preferences and technology trends.”

“U.S. withdrawal will have an impact on the sector as some states will choose not to move ahead with carbon reduction policies,” the report said. “But the impact will be limited because many states and cities have committed to achieving their Paris goals.”

In addition, utilities “have consciously transitioned towards cleaner generation, even in states politically opposed to carbon regulations, because of low natural-gas prices and the declining cost of renewables,” the report found.

Many climate scientists blame greenhouse gas emissions from fossil fuels such as coal for driving manmade climate change.

“The utility sector is a major focus of carbon policy since it is the largest contributor to U.S. greenhouse gas emissions,” said Swami Venkataraman, senior vice president at Moody’s. “At the same time, the sector is the main conduit for implementing decarbonization because it’s the primary source of carbon-free energy via renewables, nuclear and hydro power.”

Nevertheless, the biggest risk to publicly owned utilities comes if they shut down their coal plants but still have to pay for them.

The report says the public utilities and co-ops are facing the same challenges that their for-profit counterparts are facing, driven by a combination of state and local policies and customer preferences.

But public power and co-ops don’t have the resources to move as quickly to build more low-carbon renewable energy resources and are much more dependent on coal because of their locations.

The assessment comes as Energy Secretary Rick Perry ponders the use of a Cold War-era law to help coal and nuclear plants from closing prematurely.

First Energy is asking Perry to use his authority under section 202(c) of the Federal Power Act to order grid operators to keep its fleet of coal and nuclear plant afloat.

Although Perry has indicated he is not likely going to issue a 202(c) order, he is examining the use of the obscure 1950s Defense Production Act to order the plants stay open as a national security priority.

Source: Washington Examiner