Utilities: Green tech good for planet, bad for business

February 23, 2010 9:25 AM PST

by Candace Lombardi 12 comments

More than 70 percent of U.S. electric utilities have implemented, or have plans to implement, wind and solar projects within the next three to five years, despite concerns about when they will pay off, according to the results of a survey released this week by Black & Veatch.

About 79 percent of survey participants said their utility had a wind power project already in development or planned within the next three to five years, while 73 percent said the same of solar projects.

The investment choice makes sense, given the fact that wind energy ranked second as the technology thought "best suited to meet environmental standards." Nuclear energy technology was the No. 1 choice.

Not surprisingly, electric utilities cited generating plants among their assets most in need of replacement followed by IT systems. Coal is still seen as a necessary mainstay to keep the country running: when asked if coal still had a place in electricity generation, 75 percent checked off "Yes, when fiscal realities are fully considered," according to the report.

Many, in fact, seemed skeptical that the initial cash outlay for alternative energy and smart grids will pay off in terms of financial gain. Fewer than 25 percent of respondents said the industry would see an annual growth greater than 1.5 percent over the next 10 years.

"The survey responses also indicated that the industry is spending an amount equivalent to about 15 to 20 percent of its pre-tax earnings to get customers to use less of its product," noted the report.

"Utilities are facing increasing demands to spend more money on basic infrastructure, energy efficiency, the Smart Grid, and cybersecurity, " William Kemp, manager of Black & Veatch's management consulting services, said in a statement. "Their expected leading role in curbing carbon emissions would hit utility costs very hard. Yet their sales are declining or relatively flat, and regulatory commissions are reluctant to approve rate increases when the economy is down. Electric utilities will be hard pressed to satisfy both customers and investors over the next few years."

Black & Veatch's 2009/2010 survey included 329 managers from municipal, state, federal, and private utilities.