Zero Emissions YieldCo

Investor-owned electric utilities have stood in the way of meaningful climate action past the point of no return. FirstEnergy bribed state legislators. NextEra wrote legislation and funded a politician to stifle competition. AEP admitted to lying to investors, but as a standard, business-as-usual practice (and a judge agreed).

The same utilities are simultaneously implementing a “steel-for-fuel” strategy to build renewables instead of coal and gas. The marketing is attractive even if it comes at a 25% or 50% cost premium to ratepayers.

The time is now to spin off zero emissions generation into Zero Emissions YieldCo that pays ratepayers dividends for the renewables utilities would otherwise own. This means utilities can continue to own premium-priced renewables but if they do, the ownership is through a YieldCo. This is not a traditional YieldCo like Clearway Energy and NextEra Energy Partners that own renewables but also natural gas. Instead, this YieldCo only holds zero emissions resources and the shares are either held by the investor-owned utility or by its ratepayers.

For example, Xcel Energy owns zero emissions resources — wind, solar, nuclear, battery storage, pumped hydro — across eight states. The Xcel YieldCo would hold these assets separately from Xcel Energy (similar to NextEra Energy and NextEra Energy Partners) and make shares available only to Xcel ratepayers. The dividend could be paid out of the full value of the revenue generated from selling electricity to Xcel customers or only from the premium paid for these resources as an Xcel-owned resource instead of a lower priced power purchase agreement. The most direct path would be a hybrid: existing resources pay dividends based on total revenue while new resources — which can more easily be compared to market-based power purchase agreements — would pay based on the premium.

The challenge is to develop the ratepayer share purchase model. Is it a percentage of annual bill? Is it simply offering shares at a discount? Is it a voluntary offering — similar to community solar or a REC purchase product — that, instead of offering bill savings or premiums that may or may not reduce emissions, customers can instead directly invest in, own and earn returns based on a full portfolio of zero emissions resources. What if customers could invest the same amount they otherwise would in rooftop solar or community solar or a REC purchase product and trade the bill savings for equal value of shares in the YieldCo?