Boyden Executive Search

America’s energy transition is accelerating, particularly in hydro and wind, but the energy sector is divided on how much to increase renewables, and how soon.

A number of energy companies are embracing the shift to cleaner energy, and making multibillion-dollar investments. There is good reason to see opportunity: The $400 billion U.S. energy sector generated 4.2 billion megawatt-hours of electricity last year, and energy consumption reached a record high. At present only 17% of power generation is from renewable sources, with another 19% coming from nuclear energy.

Growth in renewables is accelerating, due to rising demand, better technology, lower costs, more investment and other factors. Yet energy companies differ on how quickly to make the shift, and to what degree. One of the biggest, Duke Energy, wants to move slowly. In July it proposed large investments in natural gas in Indiana, and plans to keep a major coal plant in the state running for another 20 years. On the other side, Xcel Energy wants to produce carbon-free electricity in the eight states it serves by 2050, and recently proposed large investments in solar and wind.


The energy sector is under pressure to move to clean energy, both from political leaders and asset managers. States led by both major parties have set goals for clean electricity, with 29 setting targets for raising its share of the energy mix. In February institutional investors with $1.8 trillion under management urged utilities to adopt targets for carbon-free electricity.

Perhaps the strongest lever driving energy transition is simple economics: The costs of renewables are falling precipitously. The “levelised” cost of electricity, including capital and the operating costs of generating it over a plant’s lifetime, is now lower for wind or solar power than for coal, The Economist reports. Coal’s share of power generation has dropped from about half in 2005 to 27% in 2018. In April 2019, the U.S. produced more electricity with renewables than with coal for the first time, based on data from the U.S. Energy Information Administration.

As they generate less power from coal, utilities must decide how much of it to replace with natural gas and renewables. This can depend on their location; for example the cost of shipping natural gas and oil to Hawaii is prohibitively high, making renewables more feasible. The states in which Xcel operates are among the windiest, so wind farms are a natural choice. Conversely, in densely populated areas like the Northeast, the land needed for wind farms is often too costly.

Natural gas is another factor, as most investors believe some gas is necessary to compensate for the intermittent nature of wind and sun, at least until storage options improve. Plus, some places have access to an abundance of cheap gas. In Florida, energy giant NextEra owns relatively new, efficient gas plants that offer cheap electricity. Still, as the cost of renewables drops, gas plants become less attractive.

Finally, companies that rely heavily on fossil fuels run the risk of losing green-minded customers, who can install solar panels on their homes. Big corporate customers are also a flight risk. As noted in Deloitte’s 2019 Renewable Energy Industry Outlook, “Corporations are continuing to procure increasing volumes of renewable energy, driven by sustainability goals and a growing variety of procurement options.” To date, nearly 200 corporations worldwide, many in the U.S. including giants like Google and General Motors, have committed to sourcing 100% renewable electricity as part of the RE100 corporate initiative. The list is growing by the day.

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