NEW TOOLS TO MANAGE FINANCIAL TRANSITION FROM UNECONOMIC COAL TO CHEAP, CLEAN POWER

The document outlines a framework for transitioning from uneconomic fossil fuel power plants to cheaper clean energy, specifically addressing the financial challenges faced by regulated utilities. It highlights the need for regulatory adaptation because utilities may attempt to keep uneconomic plants operational to maintain rates of return. The briefing introduces four specific areas of focus: analyzing the financial impact of transitioning from fossil to clean energy (using Colorado as a case study), the 'steel for fuel' concept where capital is reinvested in renewables to improve shareholder earnings, the role of depreciation accounting in determining asset value during early retirements, and the use of debt-for-equity refinancing to reduce the rate burden on consumers when addressing unrecovered investment balances.

• A significant amount of U.S. coal-fired power capacity is expected to retire in the near term, with more than 15 gigawatts (GW) expected to close in 2018 and at least 36 GW forecast for retirement by 2024.
• Regulated utilities may attempt to prolong the operation of uneconomic plants because they can still earn a rate of return on those assets, necessitating an adaptation in regulation to ensure customers benefit from closures.
• The 'steel for fuel' approach suggests that early retirement of uneconomic coal assets can increase shareholder earnings if utilities are permitted to reinvest that capital into new renewable energy generation, provided the cost of new renewables is lower than operating existing coal.
• To mitigate the increase in short-term consumer rates caused by accelerated depreciation schedules during early plant retirements, utilities can refinance undepreciated balances by replacing a portion of equity with corporate debt.

APA

LEHR, R., & O’BOYLE, M. (2018). NEW TOOLS TO MANAGE FINANCIAL TRANSITION FROM UNECONOMIC COAL TO CHEAP, CLEAN POWER. Energy Innovation. https://energyinnovation.org/wp-content/uploads/2018/12/Managing-The-Utility-Financial-Transition-From-Coal-To-Clean.pdf

Chicago

LEHR, RON, and MIKE O’BOYLE. NEW TOOLS TO MANAGE FINANCIAL TRANSITION FROM UNECONOMIC COAL TO CHEAP, CLEAN POWER. Energy Innovation, 2018. https://energyinnovation.org/wp-content/uploads/2018/12/Managing-The-Utility-Financial-Transition-From-Coal-To-Clean.pdf.

Wikipedia

{{cite report |last1=LEHR |first1=RON |last2=O’BOYLE |first2=MIKE |title=NEW TOOLS TO MANAGE FINANCIAL TRANSITION FROM UNECONOMIC COAL TO CHEAP, CLEAN POWER |publisher=Energy Innovation |date=December 2018 |url=https://energyinnovation.org/wp-content/uploads/2018/12/Managing-The-Utility-Financial-Transition-From-Coal-To-Clean.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lehr2018new, author = {LEHR, RON and O’BOYLE, MIKE}, title = {{NEW TOOLS TO MANAGE FINANCIAL TRANSITION FROM UNECONOMIC COAL TO CHEAP, CLEAN POWER}}, institution = {Energy Innovation}, year = {2018}, month = dec, url = {https://energyinnovation.org/wp-content/uploads/2018/12/Managing-The-Utility-Financial-Transition-From-Coal-To-Clean.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }