Analyst Report Argues Impending Demise of Utilities on Par with “Sharknado”
On January 15, 2014, Macquarie Equities Research compared the hype around the demise of the centralized electric grid analogous to the exaggeration found in Sharknado, a movie depicting hurricane-propelled sharks terrorizing Los Angeles. Over the long term, the analysts argue renewables will have a meaningfully bigger impact on competitive power markets than on regulated T&D businesses.
Excerpts from the report include:
- The growth in renewable power installations in the United States should be proportionally more gradual than what we saw in Germany, giving conventional power producers time to adjust their business models to the new renewable reality
- The ongoing decline in distribution volumes that should result from the growth of distributed solar in the United States cannot be fully solved by decoupling mechanisms, but rather T&D surcharges that could take time to implement
- NextEra Energy and NRG Energy are best positioned to benefit from the renewable growth as NextEra Energy keeps adding to its wind farm backlog, and NRG keeps growing its renewable power assets and dropping them to its YieldCo
Despite the intense focus on the “utility death spiral,” Macquarie Equities Research strikes a measured tone about the future of the electric industry. The analysts also find that companies embracing these new technologies, such as NextEra and NRG, are poised for growth as the industry evolves. This outlook is similar to ScottMadden’s point of view, which is that the death of the electric utility has been greatly exaggerated and there is an opportunity for utilities to begin to integrate new resources in a way that leverages existing infrastructure and ensures reliability.
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