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Biden’s renewable energy deadline too ambitious says power boss

Joe Biden’s goal to eliminate carbon from the electricity sector in 15 years would imperil his presidency, according to the head of Vistra, the leading independent power producer in the US. 

Texas-based Vistra, formed from parts of TXU after the biggest-ever leveraged buyout fell into bankruptcy, in September pledged to reduce its carbon emissions to net-zero by 2050. 

Chief executive Curt Morgan said that the president-elect’s plan to reach the same goal for the nation’s electricity by 2035 would be “prohibitively expensive” for consumers. 

“He won’t be in office long if he does that,” Mr Morgan said in an interview with the Financial Times. “I think reality will set in when he has serious people sit around the table talking about what is achievable and what’s not,” he added.

The participation of independent power producers, which sell electricity into competitive power markets, will be critical to greening the energy sector. The companies accounted for two of every five megawatt-hours generated in the US last year, according to the Energy Information Administration.

Power producers and utilities are under investor pressure to clean up their generation fleets. Vistra emitted 106m tonnes of carbon dioxide in 2019 — as much as the Czech Republic — with 36 per cent of its electricity generated from coal and 54 per cent from natural gas. Solar power was 0.2 per cent.

Energy Future Holdings — formerly TXU — filed for bankruptcy in 2014, after growth in natural gas supplies cut electricity prices. The company’s generation and retail businesses were spun out to create Vistra in 2016.

Vistra bought rival Dynegy in 2018, expanding outside Texas and increasing its gas-fired portfolio. In September it said it would retire all of Dynegy’s coal plants in Illinois and Ohio by 2027 as part of a broader pivot to cleaner energy. In California, Vistra is constructing 400MW of batteries to help the state balance surging renewable output with demand.

Yet Mr Morgan said that completely decarbonising power by 2035, as Mr Biden seeks to do, would be aggressive. The Electric Reliability Council of Texas — the grid operator in most of the state — has relied on natural gas and coal for 65 per cent of its energy this year.

Line chart of Change in value since IPO (%) showing Vistra misses out on US stock rally

“We built the current electric grid over 70 years, and it took substantial amounts of money,” Mr Morgan said. “You can do it. I just don’t think it would be in the best interests of the American people and the US economy to do it.”

Mr Biden’s vision, part of a $2tn climate proposal, entails millions of new solar panels, tens of thousands of new wind turbines and continued reliance on carbon-free nuclear and hydroelectric power. A study by the University of California at Berkeley concluded the US could reach 90 per cent carbon-free electricity by 2035 at no extra cost to consumers.

Vistra cited different estimates suggesting that it would cost about $7tn to achieve 90 per cent decarbonisation over 30 years.

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Shares of Vistra have trailed the US stock market this year. Mr Morgan said the underperformance was due in part to being avoided by environmentally conscious investors. “I think it’s now probably the predominant impact on our stock,” he said.

Meanwhile, shares of tech and clean-energy companies have soared. Mr Morgan, who drives a Tesla Model X, said the rally “feels very dot-commish to me,” referring to the millennium tech stock bubble.

Vistra is one of more than two dozen US utilities and power producers to have pledged net-zero emissions in the past two years. By 2030, renewable energy would rise to 18 per cent of Vistra’s generating capacity.

While it will retire coal plants and build solar and battery projects in Texas, Vistra intends to keep a majority of its capacity fuelled by natural gas.

Gas-fired plants are “critical resources to maintain the reliability and affordability of electricity in the US for the next several decades,” Vistra’s climate report said.

Bar chart of Estimated share of generating capacity by fuel type (%) showing Gas to persist in Vistra's fleet

Holly Bender, regional campaign director at the Sierra Club, credited Vistra’s decision to close Midwestern coal plants, but she said its current gas plants had significant emissions of their own.

“It’s not something we can just wait another 20 or 30 years for. It needs to be part of the plan today.” she said.

Mr Morgan said he does not foresee future investment in gas, instead shifting capital towards renewables, batteries and Vistra’s retail electricity business. But he said that gas was necessary to back up intermittent output from solar and wind farms.

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