BV: Utility leaders losing faith in future of coal, but liking solar

A report from Black & Veatch said that the way the electric utility industry operates is beginning to shift thanks to factors such as renewable energy growth, water supply issues and changing beliefs in the future of coal-fired generation in the U.S.

The report, “Strategic Directions in the U.S. Electric Utility Industry Report,” is based on an industry survey and analysis. It said that economic and environmental regulations will remain the primary motivator for utility leaders’ investment decisions, and electric customers will pay for those changes through increased rates. More than 65 percent of utility leaders said customer rates increased in the past year, and more than half said they believed rates will rise “significantly” because of environmental compliance rules.

In the U.S., carbon emissions legislation is the industry’s top environmental concern, followed by water supply. However, in Texas, water supply is the top concern because of drought conditions.

More than two-thirds of respondents said that renewable energy could provide benefits in the form of customer and regulatory relations, investment incentives and future revenue generation. More than 40 percent of utility leaders have begun to modify their service models to account for distributed generation resources, such as rooftop solar projects. Additionally, solar is the top-ranked traditional renewable technology for the second year in a row, the survey said, and was the top-ranked renewable technology in all geographic regions of the U.S.

Utility leaders feel that there is less of a future in coal-fired generation. In 2011, 81.5 percent said they believed there is a future for coal in the U.S. “when fiscal realities are fully considered.” This year, less than 60 percent believe that statement.

“The combination of a persistently sluggish economy, growing environmental concerns and uncertain regulatory outcomes, is creating the greatest earnings pressures in recent memory,” said John Chevrette, president of BV’s management consulting division. “Moving forward, utility leaders must balance the competing needs of sound financial performance and increased regulatory requirements while striving to exceed customer expectations.”

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