(wsj.com)
Large U.S. utilities are taking advantage of government subsidies to buy and produce more renewable energy in anticipation of tougher new regulations on carbon emissions.
Duke Energy Corp., Southern Co. and the energy unit of Warren Buffett’s Berkshire Hathaway Inc. are among the utility companies that are investing more in solar and wind farms and ramping up purchases of clean power, spurred by renewable-energy mandates in more than half the nation’s states and expected federal limits on greenhouse-gas emissions.
The utilities continue to burn coal—and increasingly natural gas—to provide the bulk of their power. But power companies are investing in more wind and solar farms because they can sell renewable electricity to other utilities at higher prices than conventional coal and natural gas-fired plants, under contracts up to 25 years long. And federal renewable-energy tax credits reduce the cost of buying or building a new wind or solar power facility, as well as help offset corporate taxes, utility executives say.
“It’s a very reliable, sustainable, predictable business transaction,” said Southern Chief Executive Tom Fanning.
Southern plans to invest about $5 billion in renewable energy over the next three years, more than double what it plans to spend on its new nuclear, natural-gas and clean-coal plants.
The Atlanta-based company generates about 2% of its power from solar, wind and other renewables, up from 1% a year earlier. It owns or co-owns 23 solar farms and two wind farms across several states that produce 3,800 megawatts at full capacity, up 46% from the end of 2014.
One megawatt of solar power can serve about 164 average U.S. homes, while one megawatt of wind power can serve about 273 homes, according to industry organizations.
Southern has reduced the percentage of power it generates from coal to about 27% from 33% a year ago. Its overall first-quarter profit of $485 million was down 4.5% over the previous year. But its commercial power unit contributed $50 million, up 52% from the year before, and the company expects new solar and wind farms to help boost the unit’s annual earnings by 40% this year to $300 million.
Duke plans to nearly double its production and purchases of renewable power to 8,000 megawatts by 2020. It expects to invest $3 billion in new wind and solar projects in the next five years, up from the $4 billion it spent on renewables over the prior 10 years. Solar and wind farms generate 2.5% of the company’s power, nearly double their share in 2012.