Aug

3

Most investment is currently directed to the most profitable asset: Renewables. It's so voluntary that non-utilities and utilities alike are jumping into the game. This includes Exelon, Southern, Duke, Dominion, NextEra. Google, Apple, Microsoft, Berkshire and several new players.

Today, renewables are the industry's cost leaders. Everyone wants margins. Few are willing to risk billions in marginal assets (new coal, new nuclear, new gas boilers, new oil burners).

Keep in mind, that the nation has surplus capacity. The market for that capacity is clearing, but it will take several more years to reach stability.

Also, keep in mind that the nation's utilities all received 100% government guarantees when they build existing coal, nuclear and oil-fired power plants. Some utilities, like Southern, are capturing more than 100% government assistance. Others, like Exelon and Entergy are capturing a second round of government guarantees on fully depreciated power plants (New York). However, for the most part, government tired of these guarantees and told utilities that (1) they would be compensated for any stranded costs, (2) after receiving payment they are on their own and (3) they must rely on the free market for future revenues. Apparently, the free market valued these depreciated assets so low that owners are now begging for new government support (Exelon, Entergy, Dynegy). Renewables never received the same level of government assistance as their larger cousins and they are not needing additional financial support.


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  1. FTR on August 4, 2016 8:37 pm

    Except renewables are not profitable for many. The CNIs (Google, Apple, etc) do as-gen deals with an Apex sleeve so they can avoid taking the mark to market losses. (Rather than going to BNP/Morgan Stanley/Citi for a fixed volume.) They use ginned up forward curves from Ventyx et al to “make money” on the deals in the press release but they’re all losing on those deals but do it for the green attributes/keep the enviros happy.

    Berkshire is using ratebase. Not a hard investment strategy.

    Come on.

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