Dive Brief:

• The uncertainty surrounding the solar sector won’t affect American Electric Power’s overall plan to add about 15,200 MW of renewable energy across its system by the end of the decade, Nick Akins, the company’s CEO, president and chairman, said in an earnings call with analysts Thursday.

• AEP has flexibility in its plans to install about 8,550 MW of wind and 6,630 MW of solar, with the solar additions coming in the 2024-2025 timeframe, according to Akins. “There's time for the solar thing to get resolved,” he said. 

• AEP is open to selling parts of its company, according to Akins. “There's a lot of optimization that can occur,” Akins said. “If we have underperforming utilities that don't figure prominently into the clean energy transformation where we're actually attracting capital and being able to provide higher levels of return, then you know, we have to look at it.”

Dive Insight:

AEP expects to spend about $8.2 billion from 2022 through 2026 as part of its plan to shift its generating fleet to about half renewable energy by the end of the decade, according to the Columbus, Ohio-based company’s earnings presentation. 

To help get there, AEP utilities have pending solicitations for 9.9 GW of renewable capacity, including about 2.2 GW of solar combined with storage. 

AEP has flexibility in putting its clean energy plan in place, according to Akins. If less solar is added, the company will add more wind or some other resource, he said.

Also, with energy prices rising, the plan will buffer AEP customers from fuel price fluctuations, Akins told analysts. “The renewables are a key part of being able to really mitigate costs to consumers,” Akins said.

AEP is preparing to launch a sale of all or some of its 1,600 MW of unregulated renewable energy assets, most likely in August or September, Akins said, noting the company is seeing “robust” initial interest in the wind and solar farms. 

The company has already reached agreements to sell five wind projects that are under development in the Southwest Power Pool’s footprint and a solar project being developed in Ohio, Akins said during the earnings conference call.

The company is also on track to sell Kentucky Power and AEP Kentucky TransCo to Liberty Utilities, an Algonquin Power & Utilities subsidiary, in the second quarter, according to Akins.

The Kentucky Public Service Commission is set to issue a decision on the $2.85 billion deal on May 4, followed by decisions by the Kentucky PSC and the West Virginia PSC on the coal-fired Mitchell power plant, Akins said.

AEP’s deal with Algonquin Power is contingent on Kentucky Power selling its half of the Mitchell plant to Wheeling Power, another AEP subsidiary that owns the plant’s other half and serves part of West Virginia. After the state regulators make a decision, AEP will ask the Federal Energy Regulatory Commission to approve the power plant transaction, Akins said.

On the issue of transmission, Akins praised FERC’s proposed framework for long-range transmission planning and cost allocation, which he said will help “ensure that we are making the right investments in the right places.”

Akins said efforts on inter-regional planning will likely affect AEP’s utilities, which operate across the middle of the continent.

“As you look at some of these aspects, the more renewables that are needed, certainly the more retirements that are occurring across [regional transmission organizations], it is also going to bode well for transmission investment,” Akins said. “If FERC is doing the right thing, which we think they are, it's going to bolster the ability for us to have a more consistent, congruent clean energy type system across the nation, and you can't do that without AEP.”

However, FERC is considering eliminating a 0.5% incentive given to transmission owners that are RTO members. If the incentive is withdrawn, AEP stands to lose $55 million to $70 million in annual pre-tax income, the company said in its latest quarterly earnings report with the Securities and Exchange Commission.

On the financial front, AEP’s first quarter earnings jumped 24% to $715 million from $575 million in the year-ago period, driven by rate hikes, favorable commodity hedges and increased load, according to the company. Fourth-quarter revenue increased to $4.6 billion from $4.3 billion a year ago.

AEP’s load has returned to pre-pandemic levels and is poised to grow more as the economy continues to recover, according to Julie Sloat, AEP chief financial officer.

AEP’s utilities have nearly 5.5 million retail customers in Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia.