If you’re worried about your personal carbon footprint, you might choose to replace your lightbulbs with energy-efficient LEDs, even though your incandescent lights are still in good shape. But if you run an electric utility, the decision to close your coal-fired power plant early and switch to solar is much more complicated. Solar farms, wind farms, and energy storage are getting cheaper every year—so should you invest now or wait until the costs drop even more?
"There is a degree of risk in investing in new technologies that are evolving quickly," says Robert Stoner, the deputy director for science and technology at the MIT Energy Initiative. "The risk that you're in is that your investment will lock you into a cost point that will make you look foolish in a couple of years."
Utilities almost always fund large infrastructure projects with loans that are paid back over time. This means even as a technology improves and becomes less expensive, the investor will still be paying yesterday’s prices. Utilities are also usually subject to regulations that limit what they can charge customers for electricity. This makes it riskier to take a chance on a new technology that will reduce a utility’s carbon footprint, because higher costs of making electricity can’t be fully passed on to customers.
