July 7, 2020 Read More →

Gas pipeline setbacks pushing U.S. utilities to embrace renewables, analysts say

Greentech Media:

Legal challenges halted several major pipeline projects across the U.S. in recent days, underscoring a seismic shift facing the U.S. utility industry: the rise of renewables as a potentially less costly and risky alternative to fossil fuels.

Over the weekend Dominion Energy and Duke Energy, two of the country’s biggest utilities, canceled their Atlantic Coast Pipeline project, citing costs that have ballooned to as much as $8 billion and ongoing legal challenges from landowners and environmental groups. The pipeline’s legal challenges include an April federal court decision overturning Nationwide Permit 12, a federal permit authority allowing pipelines to cross waterways and wetlands, which threatens the viability of projects including the massive Keystone XL oil pipeline.

Then on Monday the U.S. District Court for the District of Columbia ordered the Dakota Access Pipeline to shut down its oil shipments from the North Dakota shale fields by next month for failure to meet federal permitting requirements. The decision is a blow to the Trump administration, which reversed an Obama administration decision to deny the permits.

For utilities and energy companies, the mounting challenges to pipeline projects may serve as an incentive to shift from plans to rely on natural gas as a bridge fuel, and toward a less risky role building ratepayer-financed electric infrastructure to serve an increasingly renewable-powered grid, analysts say.

“If you look at the last six to seven years, electric utilities were seeking to acquire gas utilities as a hedge against anemic electric load growth,” Rob Rains, analyst at Washington Analysis, said in a Monday interview. Today, “companies like Duke, Southern Company, Dominion, are moving back to electric, in the face of sustained public policy and consumer interest in low-carbon energy.” 

Beyond public pressure, there may be a growing economic incentive for utilities to shift from natural gas to renewable electricity. “The costs keep dropping” for renewable energy, Rains said. And regulated utilities that earn a guaranteed rate of return on electric infrastructure investments have an interest in expanding that rate base via large-scale projects, he said. 

In a Sunday statement, the CEOs of Duke and Dominion expressed regret for canceling the Atlantic Coast Pipeline, which they said would have brought much-needed reliable and cost-effective energy supplies to their regions. At the same time, both utilities are increasingly looking to renewable energy to supply a significant portion of their future power supplies, both because the states they operate in are increasingly demanding it and because it’s becoming an increasingly more cost-effective alternative.

[Jeff St. John]

More: As fossil fuel pipelines fall to opposition, utilities see renewable energy as safe bet

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