Utility IRPs continue to pump renewables

Mike Zaccardi, CFA, CMT

The big news in the utility world this week was an Integrated Resource Plan (IRP) at a Virginia utility that called for huge increase in renewable generation. An IRP is a broad study that helps a utility determine what assets they should buy or sell to arrive at the best portfolio mix. It’s just like an individual investor running some numbers based on risk & return to arrive at the optimal asset allocation.

IRPs happen all the time and with increasing frequency due to the quickly changing energy landscape. The push toward renewables and away from coal is the main narrative. Recently, IRPs have concluded that utilities should buy more solar & wind with storage and maybe a little natural gas. Coal & nuclear -no way.

In fact, MISO’s generation queue is filled with solar projects as investment money continues to flow into the space. Investments come from utility companies looking for physical renewable assets and from power purchase agreements (PPAs) where the utility is simply the off-taker of the power while someone else owns the solar or wind farm.

Big tech is in the game too. We all hear about companies wanting to promote a green agenda. Google, Facebook, Amazon, even Starbucks are huge buyers of renewable PPAs. They make the financial deal, then can say they get all of their energy from green sources. Even though it’s just a financial deal inked on a legal contract – it’s not like the physical molecules are pumping into your local coffee shop.

So this Virginia IRP was big news, but then again, it’s not news. This is the trend. But it’s yet another narrative for the utility media to underscore. 

Chart: https://www.tradingview.com/chart/D/mVItUrEz-Dominion-IRP-for-VA-utility-calls-for-big-solar-buys-D/