May 24, 2018 Read More →

Utilities’ Embrace of Renewables a Big Worry for GE

Reuters:

Vistra Energy Corp and Dominion Energy Inc–which serve about 5.5 million electricity customers in more than a dozen U.S. states–both say they are done building combined-cycle natural gas-fired power plants. Instead, they are building large solar plants, which offer plentiful and inexpensive electricity.

This bearish view of fossil-fuel energy, reflective of a growing acceptance by utilities of renewable power sources, poses a hurdle to John Flannery’s plan to turn around General Electric Co’s $35 billion-a-year power unit.

GE’s chief executive spelled out the difficulty on Wednesday. Power profits will be flat this year after falling 53 percent in 2017, he said, and GE is planning that demand for heavy-duty natural gas power plants will be less than half what it forecast just over a year ago, and will stay at that level through 2020.

GE’s performance reflects the broader trend of utilities shifting to renewables from fossil fuels. Global sales of large natural gas power plants have fallen by half since 2013, according to McCoy Power Reports. Coal and gas-fired plants accounted for just 38 percent of new electricity capacity financed globally last year, down from 71 percent a decade ago, according to Thomson Reuters data. Solar and wind now draw 53 percent of such investment, up from 22 percent, a Reuters analysis shows.

Many utilities share the view that the shift is permanent because it is driven by economics rather than government policy and climate-change concerns. While conventional power plants will continue to be built, sales may never reach the levels seen just two years ago, industry experts said.

Wind and solar can cost as little as $18 a megawatt hour, compared with $40 for a large gas plant, said Mikael Backman, North America regional director at Wartsila Energy Solutions, part of the Finnish company that makes quick-start natural gas-fired generators.  Across much of the United States, some utilities now buy all the cheap renewable power they can on electricity markets and use quick-start gas engines to fill in when wind and sun falter.

More: General Electric’s Power Unit Fights for Growth as Wind, Solar Gain

Comments are closed.