AEP Prioritizes T&D Amid Push for Renewables, Wrestles with Coal's Decline

---

Researched by Industrial Info Resources (Sugar Land, Texas)--American Electric Power Company Incorporated (AEP) (NYSE:AEP) (Columbus, Ohio) is on the front lines of the changing U.S. Power Industry, as the utility seeks to upgrade its aging transmission infrastructure and add renewable energy sources--all while trying to determine which coal-fired plants can continue to operate as most face long-term closure. Industrial Info is tracking more than $4.5 billion in active projects from AEP, about 53% of which is related to power-generation projects and the remainder to transmission & distribution (T&D).

Click on the image at right for a graph detailing AEP's active projects, by U.S. state.

In conjunction with the U.S. Army and Public Service Company of Oklahoma (PSO), AEP is exploring a pair of proposed energy-generation projects near the Fort Sill U.S. Army post in Lawton, Oklahoma: a $55 million natural gas-fired plant that would generate 36 megawatts (MW) from four turbines, and a $50 million solar power plant that would generate 14 MW from photovoltaic (PV) panels. If approved, the projects could begin construction as early as fourth-quarter 2021.

PSO filed a request with the Oklahoma Corporation Commission for approval of the two projects in October. The facilities would be built near the Army post, but the energy generated would serve most PSO customers in the area, according to PSO, although Fort Sill would be first to claim energy in an emergency. For more information, see Industrial Info's project reports on the gas plant and solar plant.

In the coming years, AEP's investment in energy generation will take a back seat to T&D investment. In November, AEP announced it was planning about $37 billion of capital expenditures over the 2021-25 period, more than 70% of which will go toward the company's T&D business. For more information, see November 23, 2020, article - AEP Capital Investments Remain Focused on T&D Business.

In a recent earnings-related conference call, Nicholas Akins, the chief executive officer of AEP, said the Biden administration's push for an eventually carbon-free U.S. power-generation sector will require a massive T&D buildout that would require AEP's input.

"They're probably more aggressive than what the industry feels like they can do at this point," Akins said about Biden's goals. "But certainly, in order to do that and aggressively meet the kind of targets that are being placed out there, transmission will play a critical role--and that means AEP."

Among AEP's many T&D projects across the U.S. is the Three Rivers Transmission Line Rebuild Project along the Texas Gulf Coast, which is dedicated to replacing outdated infrastructure in one of the busiest places for energy and chemical development. AEP is seeking permits for a $44.3 million line from near Three Rivers to Beeville, which runs 28 miles, and a $39.5 million line from Beeville to Tuleta, which runs 43 miles. For more information, see Industrial Info's reports on the Three Rivers-to-Beeville and Beeville-to-Tuleta lines.

AEP Vows to Keep Some Coal Plants Alive
"Overall, we're seeing evidence of faster recovery in the industrial sector, which supports our projected growth in industrial sales for 2021," said Julia Sloat, the chief financial officer of AEP, in the earnings-related conference call. "We anticipate improvements across most sectors, with the exception of the coal-mining sector, as the industry faces headwinds with the shift toward reduced carbon dioxide emissions."

Indeed, many of AEP's highest-valued projects are related to the closure and long-term dismantlement of coal-fired power plants. These projects, which are planned years in advance and often take years to fully execute, must meet stringent requirements from state and federal environmental regulators. AEP has vowed to remove 1,633 MW of coal-fired energy generation by 2028.

On the other hand, AEP plans to keep the Mitchell Power Station in Moundsville, West Virginia, and the Mountaineer Power Station in New Haven, West Virginia operational, while complying with the U.S. Environmental Protection Agency's (EPA) Coal Combustion Residuals and Effluent Limitation Guidelines. This includes the closure of aging ash ponds at these sites, the relocation of existing ash to regulated landfills, and the construction of new ash ponds that are more in line with state and federal guidelines. Related projects include the:

• $334 million ash pond and landfill closure at the Mountaineer Power Station; see project report
• $80 million ash landfill closure at the Mitchell Power Station; see project report
• $40 million bottom ash pond closure at the Mitchell Power Station; see project report
• $80 million upgrade to the bottom ash-handling system at the Mitchell Power Station; see project report

AEP's Clifty Creek Power Station near Madison, Indiana, faces a more daunting future. Last year, the company was reported to have donated $350,000 in "dark money" to a pair of campaigns in support of Ohio's House Bill 6, which granted about $1.3 billion in subsidies over seven years to keep open two uneconomic Ohio nuclear plants, two uneconomic coal plants in Ohio and Indiana, and six Ohio solar farms. One of the coal plants is Clifty Creek, which is slated for a series of projects over the coming years to comply with EPA rules:

• $60 million closure of a landfill run-off pond; see project report
• $90 million closure of the station's West Boiler slag pond; see project report
• $150 million closure of an ash landfill; see project report

The dark money scandal has ensnared several high-ranking Ohio politicians and has led to numerous calls to repeal House Bill 6, including from some of its initial supporters. For more information, see September 9, 2020, article - Corruption Cases Not Over for Electric Companies in Ohio and Illinois, and July 30, 2020, article - Dark Money: Ohio, Illinois Officials Allegedly Raked in Fortunes from Energy Company Bribes.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.