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DTE Energy Transformation On Track, to Shut Coal-Fired Units

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Detroit, MI-based diversified energy company, DTE Energy Company (DTE - Free Report) , declared that it will shut down eight coal-fired generating units at three sites in Michigan over the next seven years. The move reflects a transformation in the way DTE Energy will produce electricity in the state.

The River Rouge facility, the St. Clair facility in East China Township, and the Trenton facility are all scheduled to close between 2020 and 2023. Notably, these three sites together generated 25% of the total electricity produced by DTE Energy in 2015. DTE Energy has already shut down three coal generating units earlier this year; the company’s announcement of closing further units will result in the retirement of 11 out of 17 coal-fired units by 2023.

Why the Shift to Renewable Energy Sources?

Based on the Clean Power Plan, the U.S. Environmental Protection Agency (EPA) has mandated a reduction in CO2 levels from that in 2005. Hence, the companies need to achieve 28% lower CO2 emission levels by 2025 and 32% reduction by 2030. A prudent means to get the desired outcome is by increasing electricity generation from natural gas and renewable sources. DTE Energy plans to replace the aging coal-fired generating units with a mix of cleaner resources, such as wind, natural gas and solar energy.

Given that renewable sources of energy are non-perishable and can be constantly replenished, these are undoubtedly a preferred choice over fossil fuels. These power sources are sustainable, abundant and environment friendly. However, the transition from fossil fuel to renewable energy generation calls for significant capital spending and end users are forced to bear the cost burden. Nonetheless, increase in population has been translating to higher demand for energy and emission free renewable sources are becoming a preferred choice of utility operators to meet the increasing demand for electricity.

The Green Energy Move

DTE Energy, the largest developer of solar power in Michigan, started installing panels at two solar projects in Lapeer last month. The solar power generated from these projects will be capable of powering more than 9,000 homes. The projects involve the installation of about 200,000 panels and are scheduled to be completed by year-end 2016. (Read More: DTE Energy Starts Panel Installation at Lapeer Solar Parks)

Per Michigan’s renewable energy mandate, companies are required to generate 10% of the power from renewable sources. Interestingly, DTE Energy has already met the goal and is on track to increase investments in renewables. We expect these initiatives will support the company if stricter federal limits on carbon emissions are implemented.

Zacks Rank & Key Picks

DTE Energy currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the same space include Spark Energy, Inc. , Avangrid, Inc. (AGR - Free Report) and Black Hills Corporation (BKH - Free Report) . While Spark Energy sports a Zacks Rank #1 (Strong Buy), both Avangrid and Black Hills Corporation hold a Zacks Rank #2 (Buy).

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