US Electricity
Figure 1: Delivered Energy Consumption by Sector, 1980-2035 (quadrillion Btu)
Figure 2: Electricity Generation by Fuel, 1980- 2035 (billion kilowatt hours)
Sources: AEO 2010, EIA
• Is the economy really on the foothills of recovery, or strolling on the edge of a cliff?
• How did the recession impact electric utility focused equity values?
• What is the post-recession outlook for energy consumption and price?
• How will changes in the global energy picture impact electricity?
• What do electric utility industry executives think? • How will electric utilities deploy capital? • What is in store for the future?
The information that follows is largely drawn from the US
Energy Information Administration’s Annual Energy Outlook for 2010 (AEO 2010) and Black & Veatch’s most recent Strategic Direction in the Electric Utility Industry survey. This material is then benchmarked against other information garnered from the author’s day-to-day interactions with energy market participants.
Foothills of Recovery or Strolling on the Edge of a Cliff? The emerging economic consensus is that the recession appears to have ended, but the pace of economic recovery in the next few years will be slower than the V-shaped recoveries following previous deep recessions. This slow pace is triggered by the financial nature of the crisis having resulted in lost wealth reaching far down into the general population. In addition, low income growth and lost home equity values have put constraints on consumers’ ability to borrow, plus still recovering investment portfolio values have caused discretionary income to be placed into a variety of savings and retirement accounts. Longer-term, AEO 2010 states that real gross domestic
product (GDP) grows at an average of 2.4% per year from 2008 to 2035 with the nation’s population, labour force and productivity growing at annual rates of 0.9%, 0.6%, and 2% respectively. Compared with 2009 forecasts, these new projections represent marginally slower GDP growth, steady
20
Sources: AEO 2010, EIA
population growth but decreased labour growth coupled with an increase in productive. These indicators imply a slower recovery for employment than for the overall economy. Figure 1 illustrates how the above assumptions impact energy
use by sector. Figure 2 shows electricity generation by fuel, taking existing legislation that is currently in favour of renewable generation and demand side efficiencies into account.
How Did the Recession Impact Electric Utility Focused Equity Values? The recession has had an impact on all market sectors.
This impact is apparent in the stock prices for electric utility focused energy companies tracked by the Rudden Energy Index for the trailing 12 months. The Rudden Energy Index (published by Black & Veatch) consists of 93 electric utility focused energy stocks. For comparisons, we divide the index into five subcategories, each indicating a strategic bias. These subcategories are Regulated Local, Regulated Regional, Diversified Regulated, Diversified Competitive and Merchant Competitive. In 2009, the Regulated Local, Regulated Regional, and
Diversified Competitive companies under-performed the S&P 500 (Figure 3). In part, this is because revenue growth for these companies is restricted by regulated, volumetric rates. Recovery for electric utility focused stocks will likely track load recovery, and could be enhanced by new rate filings. Diversified Competitive did better than traditional regulated models because of the merchant components of their business (Figure 3 – which illustrates that Merchant Competitive companies outperformed both the S&P 500 and traditional regulated utility models, with low gas prices a benefit to this sector).
What is the Post-Recession Outlook for Energy Consumption & Price? Energy efficiency policy, coupled with rising energy prices,
is forecast to have an ever increasing impact on the energy intensity of the US economy, decreasing by 40% (measured as primary energy use per dollar of GDP) from 2008 to 2035.
worldPower 2010
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140 |
Page 141 |
Page 142 |
Page 143 |
Page 144 |
Page 145 |
Page 146 |
Page 147 |
Page 148