SignalHub Quantitative Think Tank Center:Power Giant AEP Talks Up Clean Energy, but Coal Is Still King in Its Portfolio

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When American Electric Power (AEP) announced what it called a significant decarbonization program, a lot of people took notice.

After all, the company was promising to cut its greenhouse gas emissions down to 60 percent of the level they were in 2000, and get there by 2030, then reach 80 percent by 2050. Along the way, it was proposing to build what would be the biggest wind farm on American soil.

AEP is one of the nation’s biggest electric companies, and one of the biggest greenhouse gas emitters in the power sector. Any progress it makes toward reducing its emissions is important, in its own right and as an exemplar for the industry.

But was this as remarkable as AEP made it sound in its Strategic Vision for a Clean Energy Future?

A close examination presents a mixed verdict.

AEP has already achieved a lot of progress. It has cut its emissions 44 percent since 2000. That means it’s already more than two-thirds of the way to its 2030 goal. But that also means AEP expects to slow its rate of emissions cuts going forward, at a time when the world urgently needs to get emissions to net zero.

And AEP’s plan would not close some of its most contested, old coal-fired power plants.

In 2000, coal made up about two-thirds of AEP’s generating capacity. Its current fleet is still almost half coal, while in the industry as a whole, coal provides about 30 percent of power generation and natural gas has surpassed it as the main fuel.

What About Those Coal Emissions?

Activists in the 11-state region where AEP operates said what concerns them is that some of the company’s oldest, largest and dirtiest plants were not slated to close.

“When you look under the hood, it’s a little disheartening to see these public relations pieces out there without someone saying, ‘what are they really doing behind the scenes?’” said Jodi Perras, manager of the Sierra Club’s Beyond Coal campaign in Indiana, Michigan, Ohio and Kentucky, all states where AEP operates.

Perras pointed to the Rockport Generating Station in Indiana—two coal plants totaling 2,600 megawatts that are among the dirtiest in the nation. AEP has fought updating their pollution controls.

“They put out this green report and get all this great press and, at the same time, they’re in federal court in Columbus, Ohio, trying to get out of cleaning up the Rockport plant,” Perras said.

Then there are two sets of coal plants known as Ohio Valley Electric Corporation (OVEC). One set of plants is in Ohio and the other in Indiana. They date to the 1950s, when they were built to service a uranium enrichment facility, and now generate 2,400 megawatts of grid power. AEP is the majority owner and has pushed for Ohio ratepayers to pick up the cost for $2 billion in upgrades.

“Cost recovery for a pair of coal plants that are already 64 years old just doesn’t align with some of what you’re seeing in this report,” said Dan Sawmiller, Ohio energy policy director for the Natural Resources Defense Council (NRDC). “It certainly contradicts a clean energy culture vision.”

Wind Power Promises

Environmentalists are pleased, though, with AEP’s new commitments to renewables and wind.

The company is seeking approval for a 2,000-megawatt wind farm in Oklahoma. It’s planning a 400-megawatt solar project in the Appalachian region of Ohio. It’s also working with electric vehicle charging infrastructure initiatives in Ohio.

“A corporation the size of AEP and the influence of AEP and the heavy coal portfolio within AEP—this can carry a lot of weight,” NRDC’s Sawmiller said of AEP’s plan.

But he said he’d like to see more advocacy from AEP right in its headquarters state of Ohio to help overturn strict wind siting regulations that were inserted into the 2014 state budget, effectively bringing wind development to a halt. The company says it’s waiting for a clearer picture of what replacement legislation will emerge.

Market Forces Play a Role — and Policy

To a considerable extent, AEP’s plan displays the power of market and technological forces that are driving coal out of the power business.

Natural gas prices are low, renewable costs continue to plunge, and many ratepayers and other stakeholders, not just activists, are demanding action to address climate change.

“We still think it’s reasonable to assume there’ll be some type of carbon regulatory regime in the future, and you don’t want to ignore it,” said John McManus, AEP’s vice president for environmental services, who has been with the company for 40 years.

But he also said AEP anticipates fossil fuels will be around for a good long while.

Under AEP’s Plan, Emissions Cuts Would Slow

Even the Sierra Club’s Perras gives AEP credit for the company’s renewable energy investments.

“The main disagreement we have with them is the specific commitments and timing,” she said. “If we’re going meet the Paris goals; 2050 is way too late. We have to eliminate coal by 2030 and then be 100 percent renewable by 2050.”

From 2000 through 2016, AEP’s emissions dropped by 73 million metric tons, or about 44 percent. From 2017 through 2030, the company estimates its emissions will fall by an additional 27 million metric tons, or about 29 percent, to a low of around 67 million metric tons. That means that the annual rate of decline will fall—slower progress, not faster.

And the overall achievement is exaggerated a bit because AEP uses a baseline in the year 2000, when emissions were higher than in 2005, the year most other companies with emissions reduction goals use for comparisons of this kind.

AEP and others say the slowdown is due to how easy it was to pick the low-hanging fruit early on, including jettisoning the oldest and costliest coal plants. Since 2000, AEP has retired 7,200 megawatts of coal plants and sold 2,665 megawatts of coal capacity to other utilities.

Recognizing Profit in the Energy Transition

Environmental advocates said they expect AEP will beat its own expectations.

“I think the reality will be that these numbers will be a lot larger by the time you get into the late 20s,” said David Schlissel director of resource planning analysis at the Institute for Energy Economics and Financial Analysis.

“The U.S. energy economy is in the midst of a major energy transition—a transition that’s unstoppable by the Trump administration and coal industry. And they are reflecting that in their plan,” Schlissel said. “This plan tells me they recognize that they can make a profit and survive the energy transition.”