American Electric (AEP) To Cut Emission, Enhances Renewables

American Electric Power Company, Inc. (NYSE:AEP) recently announced plans to enhance its carbon-emission target for the next decade. The company’s new target is to achieve 70% reduction in emissions by 2030 from 2000 levels instead of 60%.

The company is hopeful to achieve 80% emission reduction by 2050 and is making considerable investments to achieve the target.

Focus on Modernization

The company serves 5.4 million regulated customers in 11 states and has the nation's largest electricity transmission system and more than 224,000 miles of distribution lines. It is now focused on power grid modernization and expansion of renewable energy resources. Through 2019-2023, the company has plans to invest $2.2 billion in contracted renewable and nearly $25 billion on strengthening its transmission and distribution systems.

American Electric Power is also undertaking initiatives to enhance renewable portfolio via its resource plan, which aims to add 8,600 megawatts (MW) of new wind and solar generation by 2030.

The recent release indicates that the company’s initiatives are yielding. The current electricity generation from coal has been reduced to 45% from 2005 level of 70%. Generation from natural gas and renewables has been increased to 28% and 17% from 19% and 4%, respectively, in the said period. We believe that American Electric is on track to transform into a cleaner and balanced resource mix company soon.

Transition in Utility Space

Per a recent release of U.S. Energy Information Administration (EIA), utility-scale renewable source liked wind, water and solar-based electricity producing units will collectively produce 18% of U.S. electricity in 2019 and 19% in 2020. EIA also forecasts that the share of U.S. electricity generation from coal will drop to 25% in 2019 and further decline to 22% in 2020, from 28% in 2018. Courtesy of environmental awareness and stricter emission regulations, utility operators are investing in renewable resources.

Like American Electric Power, other utility companies are also setting carbon reduction goals and striving to maintain a balanced resource mix in their portfolios. Xcel Energy Inc (NASDAQ:XEL) targets to reduce 80% carbon emission by 2030 from 2005 level. Duke Energy Corporation (NYSE:DUK) has set an ambitious goal to reduce total CO2 emissions by 40% by 2030 compared with 2005 levels. FirstEnergy Corporation (NYSE:FE) set a goal to reduce CO2 emissions by 90% below 2005 levels by 2045.

Zacks Rank & Price Movement

American Electric currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 12 months, shares of the company have gained 15.6% compared with its industry’s growth of 12.5%.

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