Cap-ex plans raise the stakes for utility mergers.
Investors historically have been skeptical about merger synergies in utility mergers, assuming that regulators will insist that most or all economic benefits flow to customers. However, recent transactions suggest utilities are taking a different approach to valuing synergies that might strengthen the case for mergers — not just for the merging parties, but also for investors and regulators.
Not your father’s feed-in tariff.
The industry has struggled to craft a feed-in-tariff (FiT) structure that works for solar generators and utility customers, with mixed success. But now, the California Public Utility Commission might have found an approach that other states can replicate. CPUC’s FiT mechanism recognizes the value proposition of solar energy, and uses market forces to drive economic improvements, especially for distributed solar projects.
Weighing green energy’s costs and benefits.
Policies aimed at promoting one good thing can diminish a better thing, for a net loss to the overall public welfare. Raising prices to promote renewables, for example, makes electricity less affordable and hurts the economy. But artificially low prices can themselves create social ills — by preserving an unsustainable status quo.
In May, PJM Interconnection conducted its annual auctions to secure electric capacity three years from now. As expected by most analysts, the base residual auction (BRA) for delivery year 2014/15 electric capacity cleared with lower volumes versus the prior year, due to lower demand. Prices were lower in the typically constrained eastern Mid Atlantic Area Council (MAAC) region, and higher in the rest of the regional transmission organization (RTO).
Tree limbs and power lines don’t mix. That was the final verdict after overgrown trees caused blackouts immobilizing major swaths of the East Coast in 2003. (See Federal Energy Regulatory Commission (FERC), “Utility Vegetation Management (UVM): Final Report,” March 2004.)
Exelon to buy Constellation Energy, Williams Partners buys interest in Gulfstream interstate gas pipeline system, Macquarie Energy enters purchase agreement for Oak Solar project, and others.
(June 2011) Duke and ATC team up to build transmission lines; AEP installs bioreactor to control selenium emissions; NextEra buys 100 MW of wind from Google; Ocean Power Technologies awards contracts for wave power array; Kansas City picks Elster; BC Hydro picks Itron; plus contracts and developments involving Tres Amigas, Ioxus, Opower and others.
Preparing the grid for large-scale renewables.
With large solar arrays and wind farms being proposed to connect to transmission and sub-transmission systems, are utility companies sufficiently prepared to handle the challenge of integrating these large intermittent resources? The industry now must decide whether transmission reliability factors — most notably dynamic voltage support and system frequency management — need to be resolved by renewable generators, or whether they should become a cost of doing business for transmission providers and reliability coordinators.
Utilities prepare for a bumpy road.
Electric vehicles promise major benefits for utilities, including increased electricity sales and accelerated transformation of passive energy consumers into collaborative stakeholders. But EV integration faces major challenges, from transformer overloading to the complexity of managing mobile transactions. Addressing these challenges in a collaborative way will allow the industry—and the country—to realize the benefits of a healthy market for electric transportation services.