Utilities are eager to expand and innovate. And like any other business, they will seize any opportunity to increase profitability. These goals are common. Utilities are unique though, in that they provide an invaluable service and face far more scrutiny. Soon, more utilities will need to shift their focus in order to reduce emissions and meet environmental goals. Companies like NextEra are taking definitive steps toward 100% clean energy by doubling their existing inventory of renewable power. Thanks to federal aid, utilities can now embrace climate goals that were originally too daunting. “We can put more capital to work at a good return,” said Rebecca J. Kujawa, the president of NextEra Energy Partners. Nick Akins, the chairman of American Electric Power, agreed tax breaks will accelerate expansion. “Partners in the federal government can enable this industry to move much more quickly than we would have otherwise, particularly with the tax provisions,” he said.
The Vanguard Group intends to purchase more than $10 million in shares of public utility companies. The attorneys general argued that greenlighting the massive utility purchase by Vanguard would be “contrary to the public interest.” How so? Some say its efforts to address climate change threaten investment profits for pension funds and other clients. Others believe they can double their return by investing in Vanguard Growth ETF. These growth stocks are the stocks of companies that are expected to increase their profits at faster-than-average rates. The Vanguard Growth ETF contains 250 stocks from multiple industries, and the largest holdings include Apple, Microsoft, and Amazon. “I think Vanguard, Blackrock, and State Street are going to be the three dominant players for a foreseeable period of time,” VettaFi’s head of investment research, said Todd Rosenbluth. In a statement, Vanguard insisted it remains committed to collecting higher profits for its customers. FERC must approve or deny any large stakes in public energy companies.
DTE and an increasing number of other utilities have joined forces to speed the transition away from fossil fuels. Not everyone is convinced their motives are centered on reversing climate change. “Let’s be honest — these guys can say all they want about the environment and how we are all aligned,” said Shahriar Pourreza, utilities analyst for Wall Street firms. “But you strip back the layers of the onion and this is also a major long-term growth opportunity for these utilities.” Motives aside, the potential for growth, profitability and reduced emissions are promising.
“For many years we would be sitting in a room and we’d be on opposite ends,” said Joe Nolan, the chief executive at Eversource, who was among the industry executives celebrating the legislation’s passage in September. “Now, they got to get on board. They can’t deny climate change.” In the not so distant past, people were doing just that, denying its existence and any human involvement as the catalyst for climate change. What extreme measures has your company employed to reach clean power generation?