Dive brief:

• A continued push to expand renewable energy production in the United States could block at least $ 68 billion in investments in coal and natural gas power plants, according to an S&P Market Intelligence report released Thursday.

• Some $ 34 billion in spending on new baseload natural gas generation, and an additional $ 34 billion invested in pollution controls designed to extend the life of old coal-fired power plants, may ultimately have to be written off by gasoline. investors as stranded costs, said Steve Piper, director of energy research at S&P Global Market Intelligence.

• If the pace of renewable energy deployment picks up or if the United States approves a federal clean energy standard, the number of stranded power assets will likely increase further, according to Piper, co-author of the report.

Dive overview:

Recent investments in natural gas and coal, especially those aimed at extending the life of legacy coal-fired power plants, may not deliver the return investors expect, due to the surge, according to S&P Global Market Intelligence, according to S&P Global Market Intelligence. power of renewable energies.

Last week’s report, the first of its kind from S&P Global Market Intelligence, estimated that coal and natural gas production assets could find themselves stranded as renewable energy resources become increasingly competitive. The report found that, coincidentally, some $ 34 billion of each of the two types of assets are already at risk, but for different reasons, according to Piper.

With a few exceptions, most of America’s coal fleet had already passed its useful life when regulators and markets across the United States began offering incentives to utilities to finally take them offline, Piper said. The wasted money tied up in coal-fired power plants, he said, is not really related to the coal-fired power plants themselves, but to pollution controls and other improvements designed to extend their lifespan. useful life. The $ 34 billion in stranded assets identified by S&P, Piper said, represents this “excess pollution control investment” and does not include the handful of new coal-fired power plants that had not aged before. that renewables do not start to compete on costs.

But utilities have built new natural gas plants in the past five years, and that is perhaps where the greatest risk exists now, Piper said. In many cases, he said, the use and therefore the value of these power plants have declined more rapidly in the wake of the growth in renewable energy production than had been expected a few years ago. just a few years, he said.

Although many of the combined cycle gas plants included in the S&P analysis were built with the intention of providing a base load for electric utilities, Piper said many of them were already in operation. downsized or had been downsized to operate essentially as peak power plants.

“You’re probably not going to close these assets because they’re so new and in good shape,” he said, “but they’re going to have to write off a lot of that value.”

Piper said the report’s estimates were based on the current rate of renewable energy deployment. If the Biden administration succeeds in adopting a national clean energy standard, or if states and utilities adopt even more aggressive emissions targets, the cost of stranded fossil fuel assets will likely increase, he said. declared.