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Home → Science

Power companies are hindering the transition to renewable energy

Inertia in the system means that fossil fuel investments are still being prioritized.

Fermin Koop by Fermin Koop
September 1, 2020
in Environment, News, Renewable Energy, Science

Power utilities are lagging behind, and even hindering, the global transition to renewable energy, according to the University of Oxford. The findings show that only 10% of the companies are prioritizing clean power investment over the expansion of fossil fuel energy.

Credit Beyond Coal. Flickr (CC BY-NC 2.0)

The study looked at over 3,000 electric companies identified as regulated utilities (including those owned by national or local governments), investor-owned, and cooperative utilities, existing at some point between 2001 and 2018, with gas- and/or coal-based generation assets in their portfolio.

Galina Alova, who led the study, retrieved historical releases of a global asset-level dataset, which she argued offers a unique opportunity to capture changes of plant ownership over time. Alova used a bottom-up approach, looking at portfolio developments of the utilities that directly own the power-generation assets.

“If you look at all utilities, and what’s the dominant behavior, it is that they’re not doing much in fossil fuels and renewables,” Alova told the BBC.

“So they might be doing something with other fuels like hydropower or nuclear, but they’re not transitioning to renewables nor growing the fossil fuel capacity.”

Limits to renewables

Renewable energy has gained a big share of the market worldwide this year. For example, 40% of the electricity in the UK came from solar and wind last year. But many clean energy installations were built by independent producers. Large scale utility companies have so far been much slower to become greener.

The study found that only one in ten companies expanded their renewable-based power generation more quickly than their gas or coal-fired capacity. Of this small proportion that spent more on renewables, many continued to invest in fossil fuels, although at a lower rate.

Most of the companies prioritizing renewable energy were clustered in Europe. Many of the industry’s biggest players are investing in low-carbon energy and green technologies to replace their aging fossil fuel power plants. Meanwhile, those favoring growth in gas-fired plants were clustered in the US and Russia.

This might in part be attributed to relatively higher carbon prices in Europe and by policies in support of renewable energy in some European countries, improving the cost competitiveness of low-carbon technologies, Alova argued.

Only 2% of the companies studied were actively growing more pollutant coal-fired power capacity ahead of renewables or gas, the study showed. This cluster is dominated by Chinese utilities, which alone contributed more than 60% of coal-focused companies, followed by India and Vietnam.

“This study shows that overall the sector is making the transition to clean energy slowly or not at all,” Alova told The Guardian. “Utilities’ continued investment in fossil fuels leaves them at risk of stranded assets, where power plants will need to be retired early, and undermines global efforts to tackle climate change.”

Alova found that utilities dominate global fossil-fuel-based electricity generation, holding over 70% of operating coal and gas capacity in 2018. Most of these assets are far from their retirement age, with a third being added in the last ten years. Unless closed early, thus incurring financial losses, these power plants are here to stay for decades.

Alova said inertia within the electricity industry is a leading cause of the slow transition to renewable energy. Their investment is usually more complex than what is reported in the news, she said, adding renewables and natural gas usually “go hand in hand”. That parallel investment in gas is what dilutes the shift to renewables, Alova concluded.

The study was published in Nature Energy.

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