Power

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The reserve margin imbalance for electric energy supply as forecast by IPP Calpine is found below. With only one grid in supply balance, the need for added generation throughout the US is evident. With new generation projects slowing in development due to financing difficulties, the outcome is higher electric energy prices going forward. Add to the supply imbalance the projected infrastructural improvements, and their accompanying rate increase requests from the regulated utilities, and one must conclude that electric rates are going much higher almost everywhere across the continental US. *
090216 projected market equilibrium

Who will benefit? Certainly the utilities that can produce merchant power at the lowest rate. This is the nuclear utilities. Another beneficiary will be providers of electric reduction technologies and solutions, as enterprise and non-profit customers seek to lower energy bills through conservation.

The nuclear utilities have been “on the move” over the last five days. Below is the five-day chart of the common stock of Entergy, with the utility index VDE included for comparison. A similar move has taken place in the common stock price of another nuclear utility, FPL. Besides their nuclear facilities, FPL have a considerable renewable energy portfolio; they are the largest wind generation developer in the world.

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Is the stock market telling us something about the utility industry as a profit-generating sector, or is this recent development a tell on coming Cap and Trade rules and their relationship to clean power producers? Or are the increased market values of Entergy and FPL just part of the “bear market rally”?

* The imbalance for the Pacific Northwest results from its percentage of hydro generation and the variability of that energy source.

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