For more than two decades, climate change has been a key issue for us and our stakeholders. Investors and non-government organizations (NGOs), as well as other stakeholders, ask us about the pace of our transition to cleaner energy resources, the financial and physical risks associated with early retirement of fossil-fueled power plants, the potential reliability risks to the electric power system if we move too fast, and the importance of working with regulators and other public policymakers to arrive at the best solutions for our customers and the environment.
Our position is that there are unmistakable changes occurring to the climate but that the speed of change and the future effects of those changes remain uncertain. We have experienced it in the form of extreme weather events across our service territory, from extreme heat and droughts to more intense and frequent events such as heavy rain, flooding and hurricanes. These are some of the visible impacts that have occurred.
In 2020, we initiated a climate scenario analysis because it gave us an opportunity to expand our understanding of how various scenarios can affect the company now and in the future. This informs our strategic planning, risk management and how fast we can go. We have long believed that our clean energy transformation strategy is aligned with the Paris Agreement. Our analysis reminds us that the transition must build resilience into the system to handle extremes. It also shows us that there are still many uncertainties about technology, resources and the pace and cost of the transition. Our path forward will evolve, and, as it does, we will continue to engage our stakeholders.
As we transition to a clean energy future, our decision-making is informed by:
- Customer preferences for clean energy, particularly those with carbon-free energy and fleet electrification goals;
- Availability and cost of advanced technologies, such as energy storage and modular nuclear;
- New resources, such as green hydrogen;
- Market demand and prices;
- Low natural gas prices; and
- Regulatory innovation, including alternative ratemaking mechanisms and deregulation.
AEP’s Climate Scenario Analysis is a first step toward gaining clarity on actions, timing, physical and financial impacts, and possible outcomes. It is not a prescriptive, definitive path to net-zero, but it gives us valuable insights into the work that still lies ahead. Read the full Climate Impact Analysis Report.