AEP locks in 13 GW of gas turbine capacity, power generation business becomes core growth driver

Bill Fehrman, chairman, president and CEO of American Electric Power (AEP), said on Thursday's quarterly earnings call that the company locked in 3 gigawatts of gas turbine capacity in the second quarter, bringing its total supply of turbines available for deployment by 2031 to about 13 gigawatts.

Fehrman also revealed that AEP has secured options for an additional 10 gigawatts of turbine capacity through 2035. The turbine deals were reached with GE Vernova and Mitsubishi, respectively.

AEP Chief Financial Officer Trevor Mihalik noted that the delivery timeline for these 10 gigawatts of turbines aligns with the lifecycle of the company's existing aging plants, "laying a good foundation for us to continue replacing some coal plants and retired gas plants in our vertically integrated utilities."

In addition to locking in turbines, AEP Ohio has reached an agreement to acquire the 710-megawatt coal-fired Longview plant near Maidsville, West Virginia, according to a Financial Times report last week. The Columbus, Ohio-based utility also purchased the rights to build a 1.2-gigawatt gas plant at the same site. The report did not disclose the purchase price for the assets.

The Longview plant is owned by Mountain State Energy Holdings. AEP did not immediately respond to a request for comment.

AEP has a five-year capital plan of $78 billion from 2026 to 2030 and plans to unveil the next version of that plan this fall.

Fehrman said: "New generation investment will play a fairly central role in driving long-term growth, as we look to deploy these 13 gigawatts of turbine capacity within our regulated businesses."

He added that turbines are "a scarce resource and will become increasingly valuable. We will continue to be aggressive in this area and keep working closely with key suppliers. We are very confident that not only with the capacity we've locked in, but also through channels such as specific framework agreements, we have clear visibility to secure everything we need to continue delivering for our customers."

According tothe company's earnings presentation, AEP's utilities expect to add 27.2 gigawatts of capacity by 2035. Its resource plan includes: 15.3 gigawatts of gas, 6.4 gigawatts of solar, 5.1 gigawatts of wind, and 500 megawatts of storage. The presentation shows that the utilities have a total of 7.8 gigawatts of pending requests for proposals.

Improved PJM outlook

Three months ago, Fehrman said AEP was considering leaving PJM Interconnection due to concerns about the grid operator's governance, its ability to interconnect large loads in its region, and resource adequacy.

Fehrman said the outlook for PJM has improved since then. "The pace and intensity of productive dialogue with PJM has increased significantly," he said. "We see very positive engagement from all parties, including the PJM team, FERC, and other key stakeholders."

FERC held a technical conference on July 23 to explore possible reforms to PJM's governance framework.

"We are very optimistic that parties will come together on certain solutions," Fehrman said. "As these issues continue to evolve, any framework proposed must ensure fairness for all participants, protect customers, and appropriately allocate costs to the party causing them... So I am hopeful about the progress so far."

Large load pipeline growth

According to Mihalik, AEP's contracted large load pipeline capacity has grown to 69 gigawatts, up from 63 gigawatts in the first quarter.

The data center and other large load pipeline includes: 45 gigawatts in Texas, 12 gigawatts in Ohio, and a combined 12 gigawatts in Oklahoma, Indiana, Kentucky, Louisiana, and Virginia.

Mihalik said AEP utilities' large load rate mechanisms require customers to make long-term commitments and support the investments needed to serve those customers.

"These rate frameworks also provide strong protections against project delays and changes in development timelines, giving us confidence to capture this growth opportunity while appropriately managing potential risks," he said.