NEW YORK (

TheStreet

) -- Just a few years ago, utilities around the U.S. saw the boom of carbon cap-and-trade legislation being lowered as a fait accompli, and a dark day for their economic models. How times have changed.

With President Obama saying in his first press conference after the mid-term election losses that carbon cap-and-trade was more or less a dead issue -- it was probably a dead issue before the elections anyway -- the electricity sector breathed a sigh of collective relief.

In fact, amid all the excitement about renewable energy forms like wind and solar, it can be a good reality check -- and sobering for the most gung-ho supporters of green energy -- to take a look at the U.S. energy landscape from the perspective of the utility players. Last Friday, regulated utility and wholesale seller of electricity

PPL

(PPL) - Get Report

held a luncheon for the press here with its CEO, James Miller, which

TheStreet

attended.

Anyone listening in from a nearby table might have been struck by that fact that almost all of the journalists' questions immediately zeroed in on the issue of renewable energy. For all of the focus from the press on renewable energy, the tenor of responses from PPL CEO James Miller was just as striking. The PPL CEO didn't rain on the renewable energy party, but he was frank about the role to be played by renewable energy.

Renewable energy is ultimately a minor affair in the much larger game of developing a utility business that successfully navigates low natural gas prices, decreasing margins, high fuel prices, aging infrastructure, limited opportunity for nuclear power, the political issue of rate cases, and finally, tighter credit markets, and yes, even environmental standards.

The sober reality check from a utility executive about renewable energy isn't hard to understand.

TheStreet

checked in with a few analysts ahead of the PPL lunch to ask about the importance of renewable energy in the utility context. Analysts noted that with power prices being so low, and rate cases in the headlines, it's hard for electricity market players to justify a major ramp up of more costly renewable energy.

PPL CEO Miller even noted that when all the carbon cap-and-trade analysis was being done by the Street a few years ago, PPL was calculated to come out ahead in the new landscape relative to its peers. And yet, Miller conceded that even though the Street was dubbing PPL a potential winner of carbon cap-and-trade, the electricity company was still against the legislation.

"We won't see

cap-and-trade in the next Congress," said Miller. "There's a grave concern about the cost, and there are enough serious issues out there with the economy that this will have to take a back seat."

Based on the most current PPL numbers, coal represents 49% of its generation fuel source, nuclear represents 32%, natural gas and oil represent 11% and renewable and hydropower are the laggard at 8%. It's not just a story about cheap coal, but about the environment still ultimately being seen as a cost and a challenge to overcome for the sector.

Take renewable energy standards, for example. The Miller isn't against the concept of a renewable energy standard. In fact, PPL is already meeting its 15% renewable energy quota in the state of Pennsylvania where it is a major power producer with more than 9.4 gigawatts of generation capacity. Miller said renewable energy standards will move forward even if carbon cap-and-trade doesn't, as the concept is being embraced at a broader level. Yet he noted that while "renewable should be part of the plan, it comes with a great cost."

There's no talk of grid parity just on the horizon for solar or wind when one is talking to a utility executive. Miller spoke about solar being "tremendously expensive" and all of the ancillary costs of renewables, including the transmission costs of getting renewable energy to market. Miller isn't alone in talking about renewable energy costs being passed on to consumers. There have been several recent U.S. wind projects that stalled as a result of rate payer boards balking at the costs to ultimately be absorbed by electricity consumers in the form of higher bills.

"The subsidies that come with renewable come at a great cost," Miller said, alluding to the fact that consumers ultimately foot the bill through the subsidies provided to renewable energy project developers. "Is it fair to socialize the costs of power on a regional basis and then transfer the profit back to the origination point?"

This is not to say that PPL doesn't have its foot in the renewable energy business, though a toe is more like it based on Miller's outlook.

PPL affiliate PPL Energy Services builds renewable energy projects. PPL built a 3.2 megawatt wind project in 2010, and has committed to buy the electricity output from two other wind projects for the next 20 years. All told, it's 132 MW of electricity generation. PPL Energy Services has also constructed solar power projects for companies including

Crayola

and

Merck

(MRK) - Get Report

, and the Philadelphia Eagles.

Talking about wind power not being an economic source of electricity generation, Miller conceded that one "has to consider the greater good argument."

However, he didn't mince words about renewables facing a battery of questions from the press. "Renewable energy is not the answer to energy self-sufficiency for the U.S. It can't fill out the equation and it's going to be a relatively small piece of the equation given its cost. Developing renewable is not the money driver," the PPL CEO said.

Asked about current efforts in California to raise the renewable energy standard to 33%, the Miller said, "It's not a material answer to the energy supply question. In California, there is a lot of talk about higher electricity bills," Miller noted. Pennsylvania's renewable energy standard of 15%, which PPL already has reached, is a reasonable approach, he added.

If it seemed as if the PPL CEO's view of renewable energy made the environment anything but an issue that could force an onslaught for the utility industry to defend itself against, think again.

The issue of clean coal is also one in which the cost argument was made by the PPL CEO. The government is moving ahead with standards to require a cleaner electricity-producing sector. The Environmental Protection Agency last week released guidance for the January 2011 implementation of emissions standards for power plants.

The American Petroleum Institute responded to last week's guidance from the EPA by stating, "The E.P.A. is railroading job killing regulations onto states, localities and America's businesses, during a time of uncertain economic recovery, without giving those affected adequate time to review, provide comments or even implement the new regulations. E.P.A.'s regulations take effect Jan. 2, 2011, but it's already November and EPA is just now releasing guidance documents for permitting."

Miller's take on the cost of CO2 removal and sequestration: "I'm not sure Americans want to bear the cost, and the EPA will be signaled. The cost of clean coal will be an eye-opener," the PPL CEO said.

Miller ended the lunch with a summation of what's to come for the electricity sector. Among the challenges he noted was the coming "environmental onslaught."

After all the talk focused on the limited role of renewable energy, and the dodged bullet of carbon cap-and-trade, the "environmental onslaught" comment is telling. The Environmental Protection Agency is clearly still passing through the minds of utility CEOs, and the utility sector still fears the worst is to come on the horizon every time the word "environment" is spoken.

-- Written by Eric Rosenbaum from New York.

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